K-F Slows Down

While the rest of the auto industry picked up speed, the newest producer suddenly eased up on the throttle. Kaiser-Frazer Corp. announced that it had laid off some 3,500 night workers, cut production from nearly 1,000 cars a day to around 750.

The cutback, said General Manager Edgar F. Kaiser, represented "an economy drive in the face of mounting costs that have forced several auto manufacturers recently to raise prices." It was more than that. The company's failure to get new financing (TIME, Feb. 23), with which it hoped to boost output to 1,500 cars a day, had left it in a tight spot.

In anticipation of bigger production, K-F had tied up too much cash ($30 million) in inventories of parts and materials.

While it got its money out (by making cars), K-F also had to cut the overall cost of producing them. By eliminating the night shifts, it hoped to reduce costs at the expense of total production. To ease the financial squeeze, K-F borrowed $10 million last week from the Bank of America.

Others gave another reason for the cut back: Kaisers and Frazers were not selling too well. Edgar Kaiser said "not so" : the cars were going to dealers as fast as produced.

Last week, the Wall Street Journal reported that K-F's 4,000 dealers had about 20,000 cars in their showrooms, compared to fewer than 8,000 last November. They were not oversupplied if sales, which have been lagging, should pick up in the spring. But some dealers were already selling cars for less than list prices.

K-F sounded as cocky as ever. "We earned in excess of $22 million in the last nine months of 1947 on a one-shift operation," said Edgar Kaiser, "[and] we should do as well this year." But Wall Streeters, who had shown their hopes and fears about K-F in the ups & downs of the stock, were worried again. Wall Street thought that Cyrus Eaton of Otis & Co., an old K-F friend turned enemy (TIME, Feb. 23), was dumping 45,000 shares of K-F stock he held. It helped drive down the price to 8 7/8 at week's end, a drop of almost six points in one month from the high of the year.

This file is automatically generated by a robot program, so reader's discretion is required.