Moving on a Fast Track into 1977

AUTOS Moving on a Fast Track into 1977

They are accorded no separate listing on any of the official indexes of the nation's economic health. Yet no other single category of commercial activity more acutely reflects the state of the nation's economy than auto sales. Last week, as the year-end figures were added up, the results provided strong proof that the U.S. is in fact coming out of the prolonged business "pause" of late summer and fall. After flattening out disappointingly in October and November, in December new-car sales jumped 16% above those of a year earlier. That surge made 1976 the domestic industry's best year since 1973: U.S. automakers wound up selling 8.6 million cars, or 22% more than in 1975. What is more, most automen believe that this year will bring even better results. They predict that sales of American cars will come close to the 1973 record of 9.7 million and, since prices are much higher, the industry will enjoy its first $100 billion sales year ever.

Love Affair. Meanwhile, the 1976 figures are especially pleasing to auto executives for several reasons. First, they reversed two years of disastrous sales decline that had led some critics of Detroit to believe, mistakenly, that the American public's longstanding love affair with the auto was ending. Second, buyers turned away from foreign cars to snap up the American makes. Import sales actually declined in 1976 to 14.3% of the total market, their smallest share in four years. Two reasons: imports are heavily concentrated in no longer popular small cars, and the rising value of the German mark and the Japanese yen has pushed prices up sharply.

Finally, the surge in American-made cars was strong enough to benefit each of the Big Three--General Motors, Ford and Chrysler--though to very different degrees. The sole exception to the industry's prosperity is fourth-ranked American Motors, which offers a limited selection of models, the majority of which are small cars. A.M.C. suffered a 23% drop-off in 1976 sales, and piled up losses for the business year ending in September that were large enough to cause its accountants to raise a gingerly question as to whether it could stay in business. Actually, the company has reduced its debt and break-even point so greatly that no one expects it to go under. Nonetheless, A.M.C., pleading poverty, last week asked the United Auto Workers to extend its contract until Sept. 16, rather than shooting for a wage boost now.

Each of the Big Three had something special to brag about. GM increased its already top-heavy share of the domestic market to a record 55.8%, from 53.1% in 1975. To get an early start on meeting federal reg-ulatioris that require U.S.-made autos to average 27.5 m.p.g. by 1985, GM has ' taken a multi-billion-dollar gamble in shrinking the size and weight of its cars. The public's approval of the lighter and crisply styled autos has delighted GM executives. Cadillac, which brought out its Mercedes-size Seville, experienced its best year ever in 1976. For the first time, Oldsmobile's intermediate-size Cutlass shoved aside Chevrolet and Ford to become the nation's bestselling single make (514,593 cars). Pontiac, which also concentrated on intermediate lines, scored an impressive 49.5% increase in sales.

Chrysler, which had been ailing for several years, made a spectacular comeback. Its total car sales last year leaped 31% over 1975, exceeding even GM's 28% gain. The company's revival rested largely on three handsomely styled, scaled-down autos: the Volare, which sold 311,000 and the Aspen (232,000), which are both compacts, and the intermediate-size Cordoba (175,500), which packs a lot of luxury into a fairly small package.

Ford, though its market share fell, could take comfort from the way it came through a strike by the U.A.W. that choked off its production completely for four weeks in September and October,'at the start of the 1977-model run. The walkout cost sales of perhaps 200,000 cars--yet Ford's 1976 volume still rose by almost 14%, to 2,256,000 autos. The company's strategy has been to put an almost equal marketing push behind restyled intermediate-size cars and standard-size cars, and they sold almost equally well. The boxy Granada compact was the company's top make, selling 387,423 cars, yet that was only a hair ahead of the standard Ford.

Starting off 1977, the industry's only real problem is excess capacity to make small cars. Both GM and American Motors have been offering rebates to tempt buyers into ordering models like the Vega and Pacer, and Ford Chairman Henry Ford II has complained publicly that his company must build more small cars than it wants to in order to keep the average gas mileage of its fleet within federal standards.

Few Clouds. But that difficulty hardly even clouds a mood of euphoria in Detroit. Last year total car sales, including imports, hit 10.1 million. GM Chairman Thomas Aquinas Murphy predicts 11.25 million in 1977, barely under the 1973 record; Chrysler guesses 10.8 million and Ford 10.6 million. There are sound reasons for optimism. For example, though the unemployment rate is high, the number of Americans who do have jobs is rising strongly, and most lenders will now make 48-month loans to car buyers, v. 36 months formerly; that lowers monthly payments. GM and Ford are also scheduling record spending on new plant and equipment this year. Thus the auto industry seems likely to continue to reflect the nation's economic recovery--and to give that revival a powerful push.

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