Automakers look to Washington to rev up sales
An early crucial test for the Reagan administration's economic policy will be whether it can help rev up stalled US auto sales this spring. The car industry lists itself as a chief casualty of President Carter's economic policies. Now it is gearing its production both to President Reagan's campaign promise to revive United States industry and to the economy responding to a quick supply-side rescue.
One sign of how much a swift rescue is needed is Ford Motor Company's 1980 performance. Last week Ford reported a loss of $1.5 billion on last year's sales, setting a new record for US corporations. Ford's losses topped $2 billion on domestic sales, but were offset by overseas profits.
An expected $1.8 billion Chrysler Corporation loss, added to $763 million lost by General Motors and $198 million lost by American Motors, will bring overall industry losses for the past year to more than $4.2 billion.
Ford chairman Philip Caldwell spoke for the troubled industry last week when he blamed the losses on "economic recession in the US, record high interest rates, and Japanese encroachment into the US market.
"No year in the history of the US automobile industry," said Mr. Caldwell, "was more difficult or challenging."
Industry spokesmen explain that the solution for the industry's problems lies in changing consumer attitudes. The industry blames past government policies for putting the brakes on consumer spending. It banks on President Reagan inspiring a new mood of confidence -- and spending.
Meanwhile, Detroit itself is doing what it can to push-start stalled out auto sales.
Domestic carmakers have come to the Chicago Auto Show this week with a few flashy $50,000 models. But their main pitch centers around squadrons of high-mileage economy cars which the four US automakers hope will attract buyers.
They also have come loaded with handsome cash rebates. Detroit's theory is that once the rebates start sales engines turning over, within a few weeks business will pick up enough momentum to turn losses into profits. The industry sees rebates as a gamble that the whole US economy will pick up speed.
Ford officials admit that GM's $500-to-$700 rebates forced them reluctantly to match that offer with a 10 percent "cash incentive" of their own. Ford hopes the 10 percent discount will boost sales at least 20 percent. Yet officials admit that a 20 percent sales increase will simply enable Ford to break even as increased volume offsets reduced unit revenue.
The real cost of the Ford-GM rebate battle, however, is expected to fall on Chrysler, which is being forced to extend its own rebate program longer than planned. Industry spokesmen say this added burden could end Chrysler's chances for recovery or at leastadd to its need for government support.
Recovery for the industry as a whole, a top Ford executive explains, depends on "external pressures on consumers," such as the overall inflation rate and fuel price hikes. But Philip Benton, Ford's North American operations sales vice-president, argues that the right combination of government and private moves could unleash an auto sales surge.
Mr. Benton says he believes that 2 million potential customers deferred car purchases over the past two years. He feels these buyers need a push to get them to trade in their dated gas-guzzlers for more fuel-efficient cars.
"The new administration and its economic policies, our new cash incentives, a drop in interest rates, and availability of lower-cost financing, as well as the pent-up demand for all types of goods and services, have got to make the future look bright," Benton said.