Auto industry can revive US prosperity, GM chief says
Optimism springs eternal in the hearts of automobile company executives. So even though an expected spring surge in car sales has not yet materialized , General Motors Corporation chairman Roger B. Smith says, ''I really believe the auto industry can lead us out again [from recession].''
In the middle 10 days of April, auto industry sales rose only 5.8 percent from the depressed daily sales rate of a year earlier. And GM sales fell 0.6 percent from the same period in '82.
Besides expressing high hope for the economy and car sales, at a dinner with reporters, Mr. Smith offered some bold talk about the ability of United States carmakers to match Japan in costs and quality.
The lesson GM learned from being forced to endure three years of sagging sales was ''to use [workers'] talents more than we had'' to boost product quality. ''The attitude of workers when they get turned on is just phenomenal,'' Smith said.
But the sandy-haired, ruddy-complexioned auto executive admits that ''some plants have (this attitude), and quite frankly some plants don't have it.''
In addition to trying to motivate workers, GM also expects to rely on new technology to cut quality problems. For example, a Pontiac midsize-engine, fiber-glass sports car slated for introduction this fall will be built using new assembly methods. The system is designed to ensure that only major body parts which are within 1/64th of an inch of design specifications will fit on the car. ''That is something you don't see in Japan or Germany,'' Mr. Smith asserted.
''The consumer products we are building today are two to three times better in reliability than models produced four years ago,'' he claimed.
Four years ago, General Motors introduced the so-called X-cars, which have been subject to a spate of recalls. The last such recall was to correct rear brakes, which in some cases have locked, causing the cars to skid. GM appears to have made more progress in boosting quality than in narrowing the Japanese manufacturers' edge in production costs.
Smith said GM, the second-largest industrial enterprise in the US, has a project under way to develop methods for building a subcompact car which can be sold at a profit.
''The reports have been very encouraging. We know we can do it, but it is going to take more time than we thought.'' GM expects to produce such a car ''before 1990.''
Currently Japanese manufacturers can produce a subcompact model for at least and often forces US companies to sell small vehicles at a loss.
A desire to learn more about Japanese production methods is one reason GM is seeking permission from the federal government to enter a joint venture with Toyota Motor Corporation to produce a car at GM's idle Fremont, Calif., plant.
If approved, the car - which is based on the Toyota Corolla II - would go into production in the 1985 model year carrying a Chevrolet nameplate. The joint venture would produce 200,000 of the vehicles annually for up to 12 years. ''We are not too proud to learn from anyone,'' Mr. Smith said.
The deal with Toyota is one sign that GM does not expect small cars to fade from the scene despite recent disappointing sales. Since gasoline prices have fallen because of excess supplies, sales of big cars have rebounded. Last Friday GM raised prices on its intermediate and full-size cars with rear-wheel drive in the face of tight supplies for certain models, including the largest Chevrolet, the Caprice Classic. At the same time, GM is offering discount financing on its slower-selling small cars.
''I don't think'' the appeal of smaller cars has ended, Mr. Smith said. ''The big-car surge is not coming from people trading Chevettes in on Cadillacs, it is coming from people trading old Cadillacs in on new Cadillacs,'' now that the big-car buyer is convinced fuel is available at a reasonable price.
Still, a recent study by the California-based marketing research firm J.D. Power & Associates reported that the number of individuals planning to make their next purchase a smaller car has slipped to 32 percent this year, vs. 46 percent in 1980.
Predicting what mix of car sizes the public will want in coming years is extremely complex, Mr. Smith admits. ''We are still learning from the marketplace.''
In a joking way GM's chairman argues that carmakers are relatively powerless to change car buyers' preferences. Smith says that when he was studying business administration at the University of Michigan, an advertising professor told him that GM ''could get people to buy any car they wanted'' because of the millions of dollars the automaker spends on advertising. ''I have been back to college four times and I can't find that old guy,'' he quipped.
As the US auto industry battles to become cost competitive with foreign manufacturers, the Midwest will become increasingly important to the industry. When transportation and inventory financing costs were less expensive, automakers scattered plants in locations far from the industry's Midwest base.
Mr. Smith points to ''Buick City in Flint [Mich.]'' as one way to overcome the soaring transportation and inventory costs. It is a production complex with a goal of purchasing 99 percent of the required parts from suppliers within a 300-mile radius, or a one-day drive, of the plant.