Detroit's Sale: Everything Goes!

Few sights more dramatically mirrored the alarming slump in the nation's most important industry in recent months than the seemingly endless rows of spanking new unsold Chrysler cars cramming Detroit's huge Michigan State Fairgrounds. Then, two weeks ago, in a desperate move to boost sales, Chrysler began temporarily offering cash rebates to buyers of its new models--and set the stage for what amounts to one of Detroit's rare full-dress fire sales. Within a week, Ford rolled out a rebate plan of its own, and now the industry's giant, General Motors, and its pygmy, American Motors, have joined the price-cutting parade.

It is still too early to gauge the effect of the price reductions, but the early returns are encouraging. The industry disclosed last week that during the latest ten-day sales period ending Jan. 20, Americans bought more than 130,000 cars. That was a decline of "only" 15% from the same period last year--and thus a marked improvement. During the month's first ten-day sales period, sales totaled just 93,235 cars, and were down 33% on a year-to-year basis, the worst performance ever recorded.

Chrysler was the only company to start its plan early enough to have an appreciable effect on the midmonth sales total. It posted sales of 23,608 cars, up 90% from the horrendous decline in the first ten days of January-- but still 8% down from the same period last year. Says Chrysler Sales Chief Robert McCurry: "It's like the old days, when new car introductions made people excited and enthusiastic."

No Deal. Generally, the price cuts are focused on the industry's glut of small cars. Typically, models carrying a list price of about $3,000 bring a $200 rebate, and those costing $4,000 or more a refund of up to $600. Under the GM plan, customers will get a rebate of $200 on compacts and subcompacts, including Chevrolet's Vega and Oldsmobile's Omega. Buyers of Chevrolet's sporty new Monza 2 + 2, or Buick's Skyhawk will receive $500. Ford is offering $200 on small economy cars such as the Pinto and $500 on small luxury cars such as the Mustang II Ghia. American Motors will pay rebates of $200 on Hornet compacts and Gremlins and up to $600 on certain Matador models. Chrysler will pay rebates of up to $300 on big as well as small cars, but the models eligible for refunds change every few days. In addition, Chrysler is offering an extra bonus of $100 to customers who trade in certain designated models. Chrysler's program ends on Feb. 16, and the rest on Feb. 28.

Besides offering direct rebates to buyers, the companies are continuing their standard programs of cash incentives and bonuses to dealers, which are designed to enable salesmen to knock a substantial amount off sticker prices and still turn a profit. The willingness of dealers to deal is heavily stressed in the companies' ads. Already, however, car buyers are beginning to grumble that in some isolated cases dealers are using the company-rebate promotions as an excuse to dig in and insist on the full list price.

At the same time, the automakers' sales drive has picked up some surprising outside support. Dozens of companies, some of them suppliers of automotive parts, others located in the hard-hit Detroit area, are also paying rebates to their employees who buy new cars. Sperry and Hutchinson is offering 50,000 Green Stamps (nominal value: $125) to car-buying employees. Gulf + Western, Libby-Owens-Ford Co. and Budd Co., among others, are offering $100 sweeteners.

Still Dismal. Sharply skidding car sales have played a major part in tipping the economy into its present deep recession. Production cutbacks have closed 20 auto plants; almost 300,000 workers--one-fifth of the industry's total--have been laid off. Automen complain that sales have been depressed by shrinking consumer confidence caused largely by Washington's inability to cope with the nation's inflation, recession and energy crisis. Another explanation comes from Auto Analyst Alfred Nelson of the Wall Street brokerage house of Cyrus J. Lawrence. Says he: "The sticker price went up an average $1,200 on domestic cars in less than two years. Nobody should expect that a broad range of customers will pay those kinds of increases."

So far, auto firms have given no indication that the rebates might be extended. Nor are actual cuts in list prices likely. Part of the reason is that the industry wants to have those hefty sticker prices in effect in case wage and price controls are imposed later on in the year. In addition, the automakers still contend that the high prices are justified by increased material and labor costs. In view of the still dismal state of the business, however, they may have to make yet another agonizing reappraisal of their position. Reason: unless auto sales pick up appreciably this year, chances for an economic recovery are dim. And if the economy does not start rebounding, the chances for a long-term boost in auto sales are even dimmer.

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