Seasonal Tremors

A ripple of cutbacks in industry gave Wall Street another scare last week. In two days of selling, the Dow-Jones industrial average lost 5.77 points, closed the week at 259.71, the low for the year; the rail average dropped 3.95 to 92.97. In the first day of this week's trading, industrials dropped another 4.22, rails 2.41. What set off the newest break in stocks was bad news from the auto industry, particularly that Studebaker was laying off 5,000 workers and cutting production by a third to help clear out dealers' inventories. Said company President Harold Vance: "This is a constructive thing to do ... Over a period of time it will result in more cars being built and sold."

Studebaker ran into more than its share of troubles with its radically new cars this year. While advance demand was big, production was stalled when Studebaker found flaws in its body stampings, took months to correct them. Then the Borg-Warner strike cut off Studebaker's supply of standard transmissions. For ten weeks, Studebaker had only automatic transmissions, which went into its higher-priced cars. By the time the company could build cars in quantity in early July, many of the prospective buyers had tired of waiting and bought other makes.

Elsewhere in the auto industry, things were slowing down, but mostly for seasonal reasons and retooling for new models. Chrysler laid off 8,000 workers, but planned to call them back soon, after the model changeover. A few auto suppliers cut payrolls, and there were also some defense cutbacks (see below). But automakers, who have turned out more cars (4,546,923) in the first eight months of this year than in all of 1952, were not perturbed. They expect sales to level off next year, then, according to surveys they have made, turn up sharply within the next three or four years to break all previous records.

There were other scattered signs of easing up in business. Steel production dropped below 90% for the first time in more than a year, due largely to the Labor Day holiday and a strike in a Bethlehem Steel plant. Business inventories, which usually go down in July, were almost unchanged at $77.3 billion.

But compared to the total number of people employed, such cutbacks were still picayune. And surprisingly heavy orders for paper and paperboard, used to package many of the products that industry ships, indicated that businessmen were still pretty confident about the future.

The Army last week announced a $200 million contract award to General Motors for building M48 medium tanks, now being built by both G.M. and Chrysler. G.M.'s bid was 12% below that of Chrysler, which will continue building the tanks at Newark, Del. until next April. In line with Defense Secretary Charles E. Wil son's "single, efficient producer"concept, G.M. will become the nation's sole producer of tanks by next spring, having al ready won the bidding for the M41 light tank. Future orders for heavy tanks, such as the T-43, will also go to G.M. as a re sult of its low bid on the M-48. G.M. also got a contract for $85 million in 2 1/2-ton trucks, and Reo Motors, Inc., whose bid was slightly higher than that of G.M., got a contract, for $61 million.

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