Detroit Revs Up Its Sales Engine

After two years of slumping sales, plunging profits, massive layoffs and a drastic scaling down of the size of its products to meet demands for greater economy, the U.S. auto industry is showing strong signs of recovery. In mid-October, traditionally a flat car-buying period, sales for the Big Four were up 37% over the same period a year ago. American Motors, its Pacer "wide bodied" small car a runaway bestseller, led the way with a 53.5% increase. General Motors followed, with its new subcompact Chevette off to a fast start, with a jump of 43%. Chrysler's sales soared 33% and Ford's 28%.

Last week there was still another indication of Detroit's returning health, as two makers reported sharply increased profits for the third quarter. General Motors' net was $243 million, a dramatic increase over the $16 million figure of last year, when auto sales were skidding toward their lowest point in a dozen years. Ford's earnings were $56 million, an increase of $9 million.

Turned Corner. Though the sales figures represented only the second consecutive good ten-day reporting period, they signaled to auto executives that Detroit was rebounding along with the U.S. economy. "Our business turned the corner with the introduction of the 1976 models," declared Ford President Lee lacocca. Chevrolet General Manager Robert Lund noted that early October truck sales were also significantly higher: 34% above the 1974 figure. "Trucks are always a weather vane for business," he said. "People buy them to make money with them."

Buoyed by the upward turn, G.M.

Chairman Thomas A. Murphy foresees industrywide sales of 12.7 million cars and trucks during the 1976 model year, an increase of 21% over last year, despite average price increases on 1976 models that range from $178 to $268. In the rising market, prospects look good even for troubled Chrysler Corp., which last week reported a staggering $79 million loss for the third quarter. John Riccardo, Chrysler's chairman, predicts that the company will run in the black in the fourth quarter, paced by sales of its Cordoba, a mid-size Chrysler introduced last year, and its new Plymouth Volare and Dodge Aspen compact models.

Despite the upturn, no one in Detroit believes that the nation's largest industry is really back in high gear. November production schedules are conservative, amounting to the lowest in 16 years.

Better Shape. Ford plans a modest 3,000-car increase in November over October but intends to put on-line workers on overtime instead of recalling laid-off employees to man the assembly lines. That strategy does not sit well with union leaders. Despite Detroit's improving fortunes, the auto industry's work force has shrunk by 100,000 people in two years; 70,000 are still on indefinite layoff.

Yet everyone agrees that the industry is in far better shape than it was just ten months ago, when car inventories were high enough to supply buyers for 110 days at the prevailing sales rate (v. a 53-day inventory now) and to frighten the industry into a rebate plan to stimulate business. Just how long the upward pace will continue depends on the strength of the recovery, which so far appears to be maintaining most of its momentum. The Government's index of leading indicators--which portends economic trends--was off nine-tenths of a per cent in September, its first drop in seven months. But analysts did not see the slight drop as an omen of a turnback toward recession. The stock market was rattled by President Ford's decision not to aid financially pressed New York City; the Dow Jones industrial index slumped to 836.04, down 4.48 for the week. At week's end First National City Bank lowered its prime rate from 7 3/4% to 71/2%, the lowest since August 7. Citibank's cut signified that cheaper money would soon be available to fuel the recovery in autos and in other industries.

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