Back to 'More Car per Car'

That familiar economic harbinger, the open-walleted American tire-kicker, a year ago seemed on the way to extinction. But this spring the species is flocking into auto showrooms in greater numbers than almost anyone had expected. Industry figures released last week showed that May sales rose 37% over a year earlier, and automakers are scheduling for June the heaviest production in 30 months.

The continued surge has surprised even Detroit's inveterate optimists. Late last year, when the industry was just beginning to grope its way out of its worst slump since the 1930s, General Motors Chairman Thomas Murphy guessed that 1976 sales, including imports, might rise to 10,250,000 cars. Since then, he has raised his forecast to "at least 10,500,000." Other auto executives foresee sales of 10,600,000 this year. Either prediction would place 1976 far above 1975's dismal sales of 8,600,000 and make this year the industry's third best ever (the record is 11,350,000 cars sold in 1973).

The new boom has already wiped outmost vestiges of the deep downturn that hit the industry about the time of the Arab oil embargo in late 1973. At the bottom of the slide early last year, about one-fifth of the industry's work force--some 273,000 assemblers, draftsmen, accountants, middle managers --were out of work. Now auto joblessness is down to 30,000 and still dropping. Even so, the industry cannot produce the most popular models fast enough to satisfy demand. Inventories that for some makes hit a 150-day supply in early 1975 are now down to an average of 52 days, well below the 60-to 70-day supply automen like to maintain; some '76 models already are becoming scarce.

Bourke's Law. While a sales rebound some day was inevitable--car purchase can be postponed, but not forever--the shape as well as the strength of the comeback has caught Detroit off guard. The main reason for the upswing seems to be that buyers are shedding their recession-bred fear of spending. Now that the inflation rate is dropping (see box) and "real" incomes are rising, Americans are reverting to an old habit. As Ford Executive Vice President William Bourke puts it, "They often buy 'as much car' as their budgets allow, and 1976 budgets allow a greater mix of higher-priced cars than last year."

Bourke's law explains the big surprise of 1976: the sales flop of the once-vaunted subcompacts. Detroit invested heavily in these small, $2,900-to-$3,400 cars as an answer to the import threat. Imports have indeed been suffering this year; their share of the U.S. auto market, more than 18% last year, has skidded below 14% so far in 1976. But the foreign makes have been hurt more by their own rising price tags than by any bumper-to-bumper competition from their U.S. rivals. American subcompacts, which captured 10% of the U.S. auto market following the 1973 oil crisis, are down to 7.1% today.

Luxury cars, including Cadillacs, Lincolns and Chrysler New Yorkers, are selling briskly. And now that gasoline prices have leveled off, at least temporarily, some full-size models, among them the $6,500 Buick Electra, are regaining favor with family buyers. But the big winners so far are the fancier compacts and small, sporty cars that promise buyers both economy and plenty of options and pizazz.

Back to the Black. So far, the big winner from the U.S. motorists' post-recession tendency to buy small--or at least smaller--and spend big has been General Motors. Its rise in sales this year of some 622,000 cars has been larger than the increases at all the other automakers combined. Among GM's leaders: the Chevrolet Monte Carlo and the Pontiac Grand Prix, both carrying base prices of $4,600 to $5,200, and its compact Chevy Nova and Oldsmobile Cutlass, which lists at $4,500 and has been the industry's top seller for two years running.

Ford's high flyers are its mid-sized Granada and Lincoln Mercury Monarch models. At Chrysler, which has rebounded smartly into the black this year after losing $260 million in 1975, the sales stars are the mid-sized Cordoba and the popular new Aspen and Volare compacts. All of the Big Three are also getting a substantial lift from surging sales of vans and pickup trucks, which are up 40% this year, mostly because of their popularity in what some auto executives describe as the "blue denim" market. Says Chrysler Executive Vice President Richard K. Brown: "They used to be just work vehicles. Now they are among the most popular forms of modified, personalized transportation." At still-struggling American Motors Corp., rising sales of Jeeps, another favorite of the blue-denim crowd, are the company's main hope of staying in the black this year after heavy losses in 1975.

Despite the poor showing of the subcompacts, Detroit must steadily trim car size and weight if it is to meet a congressionally imposed gas economy standard of 27.5 miles per gallon by 1985 (v. an average of 17.6 m.p.g. for the 1976s). GM plans to introduce smaller, more fuel-efficient versions of its heavy standard-sized models this fall. Chrysler is currently offering a Japanese-made sub-compact called the Plymouth Arrow and intends to produce its own domestically built subcompact next year. Whether or not American motorists can ever learn to love them, smaller cars appear to be firmly in their future.

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