Too Many Cars?

In Grand Rapids last week, auto deallers heard some grim news from Admiral Frederick J. Bell, executive vice president of the National Automobile Dealers Association. In the last year, reported Bell, a total of 1,757 auto dealers have gone out of business in 40 states, and the number is growing each day. The main cause: auto bootlegging, by which some dealers sell new models to used-car dealers for resale below list price, thus undercutting the market.

Bootlegging has grown so serious that Bell's N.A.D.A. has asked the Justice Department in Washington to help stop it. But both Bell and the 47,184 U.S. new-car dealers know that it is more an effect than a cause. The real trouble is that automakers are producing more cars than dealers can sell. Even dealers in areas where bootlegging is unknown are having trouble clearing their showroom floors. Detroit, which has little bootlegging, has lost 30 dealers in the last year. Illinois, with strict laws against bootlegging, lost 125 in 1953. In Washington recently, 70 have gone under; in Oklahoma, 150; in Kansas, 78; on New York's suburban Long Island, 20. Many others are operating in the red, and overall first-quarter profits are down to a bare .8%, v. 4.3% last year. Said one disgusted Los Angeles dealer: "You can put your money in a savings account and get more than that."

Most dealers blame overproduction for their troubles, chiefly because of the race between Ford and Chevrolet for first place. Others blame dealers themselves for the wild & woolly sales blitz last fall to clear out 1953 stocks to make room for new models. The result: customers got the idea that they could almost name their price, and they are still trying to do it. Old-line dealers think that the trouble is due to lack of sales savvy on the part of new dealers.

Ford and General Motors were for the most part able to steer clear of such get-rich-quick newcomers. But many independent automakers were forced to take them on, and now they are in trouble. Said a Chicago dealer: "The weak sisters shouldn't have been in the business in the first place. They came in during the good years and made their pile, and now they're squawking."

Although both Ford and General Motors have issued stern warnings against bootlegging, they are not anxious to bail out their dealers by cutting back production or lowering prices. For one thing, the Justice Department is already looking into the auto industry, worried because Ford and G.M. have gobbled up 83% of the auto market in their production race. Any price cut would only hurt such staggering independents as Studebaker, Hudson and Kaiser even more, and bring antitrust agents to Detroit at a dead run.

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