Detroit Looks Outward

In the five decades since Henry Ford put the nation on wheels with his Model T, Detroit's automakers have worked on the assumption that their domestic market would continue to grow healthily. Now a subtle but profound change of thinking is taking place. No auto executive goes so far as to say that the domestic car market has reached a plateau, but most of them agree that dramatic sales jumps in the future will come less in the U.S. than in foreign markets.

There are already 61 million cars on U.S. roads--more than one for each family. The old dream of two cars in every garage has become a reality for 18% of U.S. car-owning families. And. as other things--TV sets, dishwashers--gleam brightly in the consumers' eyes, Detroit's economists predict that new-car sales for the next few years will grow about 2.8% annually, not much more than the expected population growth of 1.8%.

Big Shifts in Europe. Foreign markets, of course, have a lot of catching up to do. Western Europe's middle class is broadening, and its working class, though still woefully underpaid by U.S. standards, is rapidly working up to the point where, as General Motors Chairman Frederic G. Donner says, "the bicycle rack is being replaced by the parking lot."

In the past decade, while the number of cars on U.S. roads increased by 43%, Western European car registrations jumped by 280%, from 6,000,000 to 23 million. The market has just begun to be tapped. There is one car for every three Americans, but only one" for every 13 Europeans. Continental economists forecast that there will be one car for every six or eight Europeans by 1970--which means a market, with replacements, for some 35 million new cars.

Detroit's new drive is to get a bigger share of that market--as well as the smaller, fast-expanding markets in Australia, Asia and Africa. U.S. automakers realize that their U.S.-made cars are generally too big, costly and thirsty for countries where import duties, taxes and gasoline prices are skyhigh. Last year, in the world's increasing markets, the U.S. exported only 117,000 cars, little more than half the 1955 total. Detroit has come to believe that the best way to compete abroad is to build foreign cars, with foreign workers, in foreign plants. Says Henry Ford II, president of Ford Motor Co.: "If we want to share in those markets, we are going to have to do so from the inside--from their inside."

Into the Common Market. Ford and General Motors are leading the inside drive. Items:

P: In Britain, Ford's fast-rising subsidiary, Ford Motor Co. Ltd., has become the No. 2 car seller, after British Motor Corp. (which makes Morris, Austin, M.G.). G.M.'s Vauxhall Motors Ltd. is No. 3. From their British bases, both sell widely within the Commonwealth. P: In West Germany, G.M.'s Opel and Ford's Taunus are outpaced only by Volkswagen, which, however, is far out front. The two subsidiaries now have the entire six-nation European Common Market open to them.

P: In Australia, G.M.-Holden's Ltd. commands 48% of the continent's car sales, while Ford's subsidiary pushed its share to 18% last year, after introducing the compact Falcon--with 94% Australian-built parts. From Australia, Ford and G.M. export throughout Southeast Asia.

Ford's overseas profits have risen from $19 million to $72 million in the past decade and now account for 17% of its total earnings. Ford's direction, in fact, is to become more of an international than a domestic producer, steadily integrating its global facilities. As a first step, it recently--in the face of considerable criticism--acquired virtually all the stock of its partially owned subsidiaries in Britain. G.M.'s foreign profits have increased steadily and last year brought in $134 million, or 14% of its total net. Aiming for more, both companies have launched record expansion programs abroad: Ford $220 million this year, G.M. $500 million this year and next.

Other U.S. companies are striving to catch up either by opening their own plants overseas, buying into established foreign automakers, or licensing foreign companies to assemble U.S. cars. Chrysler has begun assembling its Valiant compact in Australia, plans to do so in Argentina; it has also bought 25% of France's Simca auto works and assembles and sells Simcas in Europe and Australia. American Motors Corp. has licensed 21 foreign producers to turn out its compact Ramblers. Studebaker-Packard cars are being assembled in South America, South Africa, Belgium, Israel and Australia--in its own plants and those of licensees.

Parts & Jobs. By respecting local customs and hiring local talent, U.S. automakers thus far have managed to avoid incurring nationalistic resentment in most countries. Australia and several others openly court Detroit's automakers for the jobs and tax revenues that they bring.

Foreign carmakers obviously do not relish the new U.S. competition--especially in Western Europe, where 109 automakers already vie for the business. France's Pierre Dreyfuss, president of state-owned Renault, pleaded with Detroit not to make a bug-sized car for Europe in direct competition with Renault, Volkswagen and Italy's gnatty Fiat. Henry Ford called Dreyfuss' plea "disgraceful," and is going ahead with plans for a Volkswagen-sized Ford, now dubbed the Cardinal.

Detroit insiders expect that, beginning next year, little Cardinals will be hatched in Ford's West German plant, and that some of them will be shipped in pieces for reassembly in other countries, including the U.S. The United Auto Workers, complaining about the export of U.S. jobs, worries about the Cardinal and fears that other U.S. automakers will make similar moves outward. As anyone can see, the day may not be far off when U.S. auto companies will produce parts for all their cars at whichever of their plants can turn them out most economically.

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