"It's a Jungle Out There"

By Barbara Rudolph

It was not much of a birthday present for Lee Iacocca, Chrysler's celebrated chairman, best-selling author, television pitchman and, now, syndicated newspaper columnist. He turned 61 on Oct. 15, and less than 24 hours later some 70,000 American and 10,000 Canadian members of the United Auto Workers walked off their jobs at Chrysler. It was the company's first major U.S. strike since 1973.

The top demand by Chrysler employees was wage-and-benefit compensation comparable with that of their counterparts at Ford and GM. When Chrysler teetered on the edge of bankruptcy in 1979 and 1980, unions made concessions worth approximately $1 billion. But last year the company earned $2.4 billion, and workers want some of the benefits of the good times. Says Charles Ryan, 59, a janitor at Detroit's Jefferson Avenue plant who joined the company in 1951: "The workers never got credit for saving Chrysler." Echoes William Bon, president of U.A.W. Local 122 in Cleveland: "We have made a great sacrifice to keep Chrysler afloat, and we don't want to get thrown out of the lifeboat." The company's semiskilled assemblers now make $13.23 an hour, 6 cents an hour less than their colleagues at GM and Ford. Management says it has already agreed to parity for its Canadian employees and plans to do the same in the U.S., but no final accord has been reached.

Another issue could be tougher. The U.A.W. wants to protect workers' job security and is trying to restrict Chrysler's freedom to buy parts from nonunion producers. The company is eager to keep control over the selection of suppliers and the location of plants.

Although both sides hope to avert a long strike, the walkout is still sure to hurt. Wall Street analysts estimate that the firm could lose more than $60 million in after-tax profits for every week workers are out. The company hardly plays down the threat. Says Thomas Miner, Chrysler's vice president for industrial relations: "This whole company is paralyzed, and we'll start to bleed to death." U.S. negotiations recessed for the weekend, although talks continued in Canada. The Chrysler strike comes just as the U.S. auto industry is completing a banner year, projecting sales of 15.5 million new cars and trucks for 1985. Strong auto business helped the economy grow at a 3.3% annual rate for the three months ended Sept. 30, up from 1.1% for the first half of the year. Small-truck sales in particular are booming, and dealers are looking forward to buyer reaction to new models.

Nonetheless, the road ahead for General Motors, Ford and Chrysler could prove as rocky as a potholed city street. The first sign of trouble came last week, even before the strike was called. Manufacturers reported that new-car sales for the first ten days in October fell by 10.1%, as compared with the same period last year. During September, more than 800,000 Americans rushed to buy cars because of the special 7.7% and 7.5% financing offered by the major carmakers. The lower interest rate saved a consumer $1,056 on a four-year loan for an $11,000 car. But once the offers expired at the beginning of the month, sales stalled dramatically.

The biggest worry for domestic producers right now is foreign competition. This year imports are expected to snare 25% of the total U.S. car market, up from 23% in 1984. There is every indication that imports, especially those from Japan, will grow even more popular with American consumers. Last year Japanese auto exports to the U.S. were limited by a so-called voluntary restraint agreement to 1.9 million, but in March those restrictions were removed. More models produced by smaller Japanese firms, including Daihatsu and Suzuki, will soon be sold in the U.S.

The Japanese, like domestic carmakers, are expected to make a push to woo young, upscale buyers, many of whom currently drive BMWs, Saabs and Volvos. A new Honda sports car, code-named HX, is aimed at this group. It will sell for about $17,000 to $20,000 when it is introduced next spring.

In addition to boosting their exports, the Japanese are also building more factories in the U.S. Mazda will open a plant in Flat Rock, Mich., in 1987, and Mitsubishi will soon break ground in Bloomington-Normal, Ill. Toyota is expected to announce the site for a new American plant by the end of the year. Nissan has had a plant in Smyrna, Tenn., for two years, and Honda, now the fourth-largest producer of cars in the U.S., has a factory in Marysville, Ohio.

Auto imports, though, are not limited to the Japanese. Today 22 foreign car companies from seven countries sell models in the American market, and another seven more companies from an additional five countries are preparing to jump into the business. Concedes Bennett Bidwell, Chrysler's executive vice president: "It's a jungle out there."

In the crowded small-car market, the toughest new competition is anticipated from Korean manufacturers. In January, Hyundai will introduce a sub-compact, the Excel, likely to be priced at $5,000 to $5,500. Detroit is apprehensive. Some 18 months ago, Hyundai introduced the Pony, a predecessor of the Excel, in Canada at a price of $4,400 (U.S. dollars). The Pony is now that country's best-selling automobile. Says Chrysler's Bidwell: "Hyundai went through Canada like Sherman through Georgia."

Other low-priced models are already in the U.S. or on the way. The Yugoslavian-made Yugo went on sale last month. Detroit auto executives say the quality is poor, but the few cars available so far are selling briskly at $3,990, or $1,390 less than the nearest rival, Chevrolet's Japanese-made Sprint. Yugo America, the car's American importer, might sell stock in the U.S. early next year.

Meanwhile, a new model Volkswagen that will be made in Brazil and priced under $6,000 will be coming to the U.S. in 1987. Detroit executives made the mistake of underestimating new imports in the 1960s, when they blithely dismissed the first poorly designed Datsuns and Toyotas that came ashore. They are not complacent this time. Says Ford Chairman Donald Petersen: "We need to watch Korea and Japan. Very soon we'll need to watch the rest of Asia."

Detroit, though, is hardly frozen in its tracks. Executives are hopeful, and with some good reason, that their 1986 models will sell well. Ford has great expectations for, of all things, its new line of family cars. Five years and $3 billion in the making, the Ford Taurus and Mercury Sable cars will go on sale the day after Christmas. These sedans and station wagons, priced around $10,000, replace the Ford LTD and Mercury Marquis. The new models have rounded contours and superior handling like luxury European cars. Yet they are aimed squarely at the suburban set. Ford's vice president of sales, Louis Lataif, predicts annual sales of 315,000 models next year.

General Motors this fall will introduce a new line of large cars with old names: the Cadillac Eldorado, Buick Riviera and Oldsmobile Toronado. Maryann Keller, an auto-industry watcher for Vilas Fischer Associates in New York City, criticizes the auto giant by saying that almost all GM models look too similar. The most innovative auto GM has produced in the past five years is the Pontiac Fiero, a sports car that was a major break with General Motors styling.

Another industry bright spot is truck sales, which now constitute the fastest-growing segment of the auto market. This year Detroit should sell 4.6 million trucks, up 11% from last year and just ahead of the 1978 record of 4.3 million. Says Denis Hartigan, a Los Angeles car dealer who sells about 120 small trucks a month: "It's the hippest thing in the supermarket." Hardy and handsome, these trucks (price range: $6,000 to $15,000) are also favored by young professionals who may work hard for their money but want to project an outdoor, leisured look. The Chevrolet Blazer, Jeep XJ and Ford Bronco are current strong sellers.

Minivans, classified as small trucks, are popular with suburban parents who are weary of station wagons but must still squeeze the whole neighborhood into a car pool. Chrysler's hottest products are the Dodge Caravan and the Plymouth Voyager minivans. Demand is so strong that the company did not have to offer any special financing deals on them in September. Ford this fall is finally jumping into this market with its Aerostar.

Detroit is in a fighting mood these days. The atmosphere was perhaps best revealed two weeks ago in Washington. The unwritten social compact among carmakers dictates that top executives never directly criticize a competitor. The rule was broken when GM Chairman Roger Smith lambasted Chrysler's Iacocca at a congressional lunch. Smith said that Chrysler had "walked away from half ^ the families in the U.S." by producing only small cars. He added that Chrysler was responsible in part for the U.S. trade deficit with Japan because it imported so many components from them. Chrysler quickly responded that it was GM that was walking away from markets because its share of sales has been dropping. Chrysler also claimed that it uses more domestic parts in its cars than any other American manufacturer. "It was amazing," said a key Ford executive. "I can't believe it." Thanks to the Japanese, Koreans and Yugoslavs, as well as the American carmakers, competition is alive and well and living in Detroit.

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With reporting by Paul A. Witteman/Detroit