Back into Top Gear

West Germany's auto industry, after two years of flagging sales and profits, is racing out of the valley of despair like a supercharged Porsche showing its paces in an Alpine rally. Output rose 47% in January from a year earlier, and many executives view 1976 with something akin to euphoria. Predicts Robert A. Lutz, head of German Ford: "It will be a fantastic year."

Two years ago a combination of higher oil prices, recession and consumers' lack of confidence depressed industry output 22%, to 2.8 million cars. Volkswagen lost $312.5 million, and German Ford $68.3 million; General Motors' Opel subsidiary, thanks to nimble financial management, was able to stay in the black with a profit of $2.4 million on sales of $1.8 billion. "The big producers were all stuck with high breakeven points [largely because of high labor costs and excess plant capacity] when the recession struck," says Lutz, who moved to Ford from Bayerische Motoren Werke (BMW) in 1974. "Now the arithmetic is coming right."

With the cooperation of West Germany's union leaders, VW, Ford and Opel have been able to reduce their labor force, by offering workers up to $6,000 to quit. All three companies are offering new and revamped models, and Ford is raising capacity from 980 to 1,500 cars a day at its Saarlouis plant to meet expected demand for the Fiesta minicar that will go on sale in the fall. Opel and Ford are now profitable again, and VW says that last year's loss will be far smaller than 1974's.

As the German automakers see it, with gasoline at $ 1.33 a gallon, double its 1973 price, there is a strong demand for small, economical cars, while wealthy drivers will continue to buy expensive quality autos. But the market is less buoyant for medium-sized, medium-priced autos. That, in part, explains how Daimler-Benz and BMW managed to steer through the recession with barely a falter. Sales of Mercedes-Benz cars rose from 331,682 in 1973 to 350,098 in 1975. Buoyed by that performance as well as by rising truck and bus production (229,-303, up 11.7% from 1974), Daimler-Benz is now Europe's largest automotive manufacturer, with sales of $8.1 billion in 1975, compared with VW's $7.4 billion.

BMW remains Pinto-sized by comparison, with sales of $1.2 billion in 1975, but output of its fast, sporty cars soared to 217,458, from 184,681 the year before. Like Daimler-Benz, BMW did not have to lay off a single worker during the recession and remained profitable, making $16.2 million in 1974. Even little Porsche, which sells a mere 180 cars a week (price range: $9,120 to $26,600), is confident enough to have embarked on a $55 million expansion program.

Faltering Rivals. The ebullient mood of the auto industry in Germany is in sharp contrast to that in its European rivals. Britain is scissored by falling domestic demand and chronic labor troubles, which have brought the auto industry to the brink of bankruptcy. Italian domestic sales in 1975 fell 17.6%, the sharpest drop in 30 years; but recovery has started, with January 33% above the same month last year. Though not so precipitous, the 3% French decline in 1975 output was bad enough. One industry spokesman views prospects for 1976 with "guarded optimism."

Auto executives in Germany remain convinced that even if all around them falter, they face a bright future. John P. McCormack, who is moving from Opel to head General Motors' European operations, believes the energy crisis and recession have strengthened the car's appeal: "People realize more than ever how important the car is for the economy and for most transportation needs."

This file is automatically generated by a robot program, so viewer discretion is required.