Monday, May. 12, 1958
On the Slow Road
(See Cover)
At Hollywood's imperial-sized Palladium ballroom. 1,850 members of the Los Angeles Motor Car Dealers Association gathered for a $5-a-plate breakfast and a lecture from one of the industry's top salesmen. After the ham and scrambled eggs, Chevrolet National Advertising Director William G. Power, as fervent a car salesman as ever lived, gave the dealers representing every U.S. make his considered opinion of the current state of the U.S. auto business. Said Bill Power: "Gentlemen, for 30 long years I've spent my life trying to kick hell out of Ford and Plymouth--and here we are all together. Brother, we're in trouble."
Detroit's trouble in 1958 is only too evident on the sales graphs. Last week's reports showed a slight upturn in the last ten days of April. But for the first four months of the year, the industry is down a crushing 33%--and there are few signs of the traditional spring upsurge. Across the nation, automen frantically poured on the oldfashioned, hand-pumping hard sell, hurled themselves into door-to-door sales drives and marathon "cold turkey'' telephone campaigns. Chicago salesmen sported handkerchiefs hopefully--but falsely --embroidered "Business Is Good." In St. Louis, Milwaukee, Dallas, Atlanta. "You Auto Buy Now" campaigns assaulted the public pocketbook. With an assist from Chevy Salesman Power, New York dealers kicked off their campaign with Ringling Bros. circus acts at a monster Madison Square Garden rally. In Los Angeles, a parade of new cars led by a show girl in a pink, fur-trimmed Thunderbird implored everyone to buy, buy, buy. But the air was also filled with discordant notes. As the "You Buy" cavalcade rolled down Hollywood Boulevard, a motorist cruised up in a weary 1955 Chevrolet sedan that was equipped with a loudspeaker blaring angrily: "It's too late now! You're too far gone! Get your prices down! Get your prices down!"
"Hate-Autos Year." If prices are part of Detroit's trouble, they are far from all of it. For a nation on wheels, the plight of the auto industry is a matter of intense popular concern. Many a U.S. male prizes his auto above all other possessions--sometimes even his wife. Since there are 80 million drivers, there are 80 million experts on cars--and naturally, on the industry that produces them. Thus Detroit has become the center of a vast family argument. Everyone has something to say about the 1958 cars. Some of the charges are right on the beam; others are wildly exaggerated. President Eisenhower shot a thinly veiled barb at the industry. Senator Estes Kefauver, no man to watch the votes go by, loudly proclaimed that he, for one, was not buying a car because everyone knew that prices are too high. Drivers who have never peeked under the hoods of their cars are sure they know precisely what ails Detroit.
Is there too much chrome? Or not enough? Are the fins too fabulous? Or just fishy? Everyone debates the case of the small car v. the big car, argues the merits of the U.S. car v. the invading import. There are gags for every occasion. At the sight of a new 1958, the sidewalk humorists are solemnly asking, "Where do you put in the nickel to make it light up and play?" To Detroit, all this is as shocking as if a Saint Bernard had bitten a lost missionary. "This," said Ford Stylist George W. Walker sadly, "is 'Hate-Autos Year.' "
Some pet peeves:
P: "My real gripe," says Minneapolis Physician George Riley Martin, who swapped his 1954 Chevy for a small Simca, "is that American cars are getting too complicated. They're too full of gadgets that are always going wrong. My windshield wipers kept breaking, and they practically had to tear out the dashboard to get at the things. You're getting fins and chrome, and every time that you bash a fender a little bit, the whole side of the car has to be replaced."
P: "Small cars are just a phase," says Atlanta Medical Technician Jewell Mitchell, who drives a well-cared-for 1956 Cadillac. "They're not comfortable, and I'm afraid I'll wind up under somebody's front bumper. Why, the other day I saw a small foreign car with a sign saying: 'Don't run over me. I squash bugs.' "
P: "I think the new designs are beautiful," says Cleveland Housewife Hermogene Mott, who drives a 1958 Buick. "But one thing I will say about American cars is that they're too expensive. Those TV ads list a price that sounds reasonable. But by the time they get through adding this and that, what you pay goes way over."
P: "Detroit isn't solving our problems--it's creating them," says San Francisco Social Worker Janet Pence, who recently retired her 1951 Hudson in favor of a pale blue Volkswagen. "When it became difficult to park downtown, we were greeted each year with a longer car. When the price of gas and oil went skyhigh, we were asked to buy gas guzzlers. Well, we plan to become a two-car family soon, just as Detroit advises. But we're getting another Volkswagen."
P: "The automobile as a badge of success is fading out," says Chicago Sociologist Reuel Denney. "Too many people are wearing the badge, and it doesn't mean anything any more. The buyer also has the feeling that he's not getting enough out of it because of this obsolescence in styling. There's not enough rarity and not enough enjoyment."
P: "I don't particularly object to chrome and wild colors," says Alexander P. Gest Jr., president of the small Mitchel Oil Corp. in Mamaroneck, N.Y. "But the thing I can't stand is that you can't tell the present-day cars apart. They all look alike. I honestly can't tell a Plymouth from a Cadillac when they go by fast."
Three Frowns, One Smile. While the experts are having their say, auto sales are poking along at a rate of 1,200,000 units behind 1957's pace, and dealers have 800,000 unsold new cars on their hands. A few hardy optimists still talk of a 5,000,000-car year. But the industry's realists are prepared to settle for much less, possibly only 4,200,000 cars, thus making 1958 the worst since the steel-strike year of 1952.
With his own sales down 33% (for Ford) and 65% (for Mercury), Ford President Henry Ford II showed stockholders a first-quarter ledger with earnings off 77% to $22.7 million. Chrysler Boss Lester Lum ("Tex") Colbert had to face up to a $15.1 million loss--the biggest ever--with sales down 53%. Only General Motors President Harlow H. Curtice has anything to crow about. Chevy has bumped Ford out of the No. 1 spot; G.M.'s overall first-quarter sales were off only 11.6%, its earnings down 29.1% to $185 million; G.M. cars, though down in volume, have captured another 5% of the market to boost the company's share back up to about 50%.
The one man with a big smile is American Motors President George Romney, whose boxy Rambler is the only U.S. entry in the small-car race and whose sales are racing ahead. Says Romney: "We are in the beginning phase of a real revolution in the automobile market. Finally, the big-car mentality has disintegrated." This week Romney pushed production up another 6% to put it 26% ahead of 1957. American's first-quarter sales were the greatest in its history (31,260 cars), and, after years of red ink, it reported a handsome $2,380,895 profit. Yet Romney's gain puts little cake in Detroit's lunch basket. Some 84% of the industry's 807,000 workers are Big Three employees, and an estimated 450,000 are laid off; millions more workers in thousands of supplier plants spread across the entire U.S. economy are dependent upon the major auto companies.*
Strategy & Strikes. The ill wind has blown some good for the automakers. In labor relations, they have fewer problems than they had expected this year. At the start of negotiations for a new contract last month, Walter Reuther's United Auto Workers asked for a 35-c--45-c--an-hour wage package and tried a familiar whipsaw strategy to get it. The U.A.W. fired off contract termination notices to Ford and Chrysler but not to G.M., obviously hoped to force the two smaller companies to settle, then use the settlements to pressure G.M. into line. But when the industry formed a united front and showed no signs of giving in, Reuther was forced to modify his position. Last week, in a "four-part antirecession campaign," he offered to extend the current contract for another three months while differences were worked out. Detroit's answer: a flat no. Said G.M.'s Curtice with a snort: "A transparent maneuver to stall negotiations until the 1959 model changeover."
What the automen offered instead was a two-year extension of the current contract, which would include an automatic annual wage boost of 7-c- an hour. Then, to emphasize its solidarity with the other companies and prevent whipsawing, G.M. pulled a surprise. It canceled its contract as of May 29. The move astounded and infuriated the U.A.W., which is now faced with an industry-wide shutdown if it strikes one of the companies, since all can refuse to operate without contracts. Roared Reuther: "They can't make us strike. We are not going to accommodate the industry by striking to deplete their inventories. I can assure you they are not going to get away with it." But chances are that the auto industry can get what it wants, thanks to the sales slump.
From Every Direction. What caused that slump? There is no one cause. A complex set of factors bore in on the industry--and hit it all at once.
The recession played a large role. Said G.M.'s "Red" Curtice: "The automobile industry did not cause this recession. It is a victim of it. The recession began six months before it got to us. It is historically the case that a small decline in gross national product produces a much sharper decline in automobile sales. This is true because the automobile is a postponable purchase. The modern car is built not for one but for two, three and four buyers. Most of the cars on the road have a large reserve of unused mileage. People are using up that reserve instead of committing themselves to a new car."
What happened to autos, say the manufacturers, is essentially the same thing that happened to other consumer durable goods such as refrigerators, home freezers, TV sets, home washers and dryers. All were riding the boom-time surge in consumer credit as families tried to catch up on buying held back by World War II and Korea. This year the buyers finally caught up. Autos, along with other big-ticket items, were bound to slow down as debt-burdened consumers decided to hold off and pay their bills. After increasing 23% in 1955, installment credit increased only 10% in 1956, another 7% last year. This year overall consumer credit has dropped sharply, and auto buyers are actually paying off more than they are borrowing for the first time since the 1954 recession.
Automen admit that they may have sold too hard in 1955's 7,200,000-car year, and borrowed too heavily from this year's market. They also feel that they made it easy to postpone getting a new car by producing cars more durable than ever. Since World War II, engineers have learned to build engines that run twice as long without an overhaul; brakes have twice the stopping power and twice (40,000 miles) the life; lights, springs, tires, steering, seats and upholstery are all vastly better. "It has become fashionable not to buy a car," says a G.M. salesman with some bitterness. "Then, to prove you are really chic, you find something wrong with all cars--maybe one word, 'Horrible.' That shows everybody you have good taste--and it conceals the real fact: you don't want to commit yourself to paying off a car for the next two years because you don't know if you will have a job next month."
Love That Chrome. Despite all the yowling about chrome and size, the experts scoff at the notion that Detroit's problem--or even a major part of it--is a mere matter of style. "This industry grew because we have made it our business to find out what people want," says a G.M. economist, noting that his company surveys 2,000,000 potential buyers each year. They are dissected for their likes and dislikes, like frogs in a laboratory. Thousands of lengthy questionnaires are sent out; microphones are hidden in new cars in showrooms to catch comments; salesmen carry wire recorders tucked in their pockets. In fact, automakers have studied the public so carefully that they have inspired sociologists and motivational researchers to draw weighty--and often silly--conclusions about the U.S. public by merely studying their cars.
Dr. Ernest Dichter, high priest of the motivational researchers, argues that convertibles are bought, not because buyers like fresh air and sunshine, but because somehow they regard the convertible as the mistress they dare not have. With equal solemnity, Sociologist David Riesman (in an article co-authored by Auto Expert Eric Larabee) proclaims that "many can safely sample the jet-age aura by having a design 'based' on the Sabre jet--as the 1956 Plymouth. So, too, can the consumer be in tune with the future through his dashboard, which looks like an intergalactic control panel."
Whatever psychological forces are at work, the trend ever since 1946 has been to longer, wider, more futuristic cars--and more chrome ("jewelry" to automen). Those who bucked the trend usually rued the day. Henry Kaiser's small, chromeless Henry J. was a dismal failure. So was the drab 1954 Plymouth, which was 4 in. shorter than the year before. Sales dropped nearly 36% to only 381,000 cars a year. A year later Plymouth rolled out the longest (204 in.) car among the low-priced three and promptly boosted sales back up to 647,000 cars.
This year's best seller among higher-priced cars is what the trade calls "the jewelry-box special"--Oldsmobile, with more chrome (44 Ibs.) than any other car in history. Now fourth, it is pushing Plymouth for third place. Among the low-priced three, the fancy Chevrolet Impala and Ford Fairlane 500 outsell less chromy models by three to one. On Ford's custom line, there is a decorative gold-anodized-aluminum strip (along with an armrest and cigarette lighter) that costs $20 extra; 76% of Ford's customers demand it on their cars. Says Ford Stylist Walker: "I fought so hard against chrome I nearly lost my job. But I was wrong, and the others were right. People can buy austerity any time they want to. They don't want to."
Nor do the people seem to be intensely interested in safety. Ford spent $10 million trying to sell the public on padded dashboards, deep-dish steering wheels and safety belts, priced its equipment so low that in 1956 it lost money on each unit. Result: only 45% of its customers order crash padding, only 2% order both padding and seat belts.
A Matter of Prestige. One factor that automen are not sure about is a shift in American living that is apparently changing the traditional role of the auto. Years ago the automobile was a national symbol of success. Everyone wanted a car, not only for transportation but also as a mark of prestige, and the bigger the car the better.
In recent years the industry has built so much prestige into the once low-priced three that it is no longer necessary to buy more prestige with a middle-priced car; this market has tumbled from 37% to 26% of all sales in a little over two years. Moreover, as consumers' incomes have risen, the U.S. public has developed new wants to compete with cars. While cars slump, other industries are booming. The man who used to tinker with his car now installs a do-it-yourself tile bathroom; his auto is too complicated to fuss with, anyway. He may spend his money on a swimming pool (home pools will grow to a $400 million business this year) or join the hi-fi boom (now rocking along at $1.3 billion a year). He can take to the water (boat industry sales are up to $2 billion) or travel (up to $20 billion). With fly-now-pay-later plans, he can make the down payment on a three-month. $6,000 trip round the world for less than the payment on a Chevy sedan.
Says a Denver matron, Ann Sink, who recently decided not to turn in her 1954 Dodge station wagon on a new one: "Americans are getting bored pouring time and money into their cars. There are too many better things to entertain yourself with--outboard motors, new kinds of fishing tackle, skiing, travel. People are just getting too sophisticated to worry about cars."
Packs & Power. Because the consumer has so many other wants, the price of cars has become a big factor. In ten years the list price of a two-door Buick Super sedan has risen from $1,800 to ,$4,000. Now that Walter Reuther is backing down on his wage demands (manufacturers argue that 80% of every new car's cost is wages), the industry hopes to hold the price line in 1959; manufacturers would also like an end to the auto excise tax. which adds 10% to the price of each new car. But they want it soon. All the talk in Congress, where there are nine bills pending to cut or eliminate it, only tends to slow sales still more. Finally, there is so much razzle-dazzle and price-packing in the auto salesman's spiel that list price is a joke. Ford, Plymouth and Chevrolet, for example, all post about the same factory list price on their cars. But by the time all the extras have been tacked on, the actual delivered price is much more. List price and extras for a four-door, six-cylinder Ford Custom 300 in Manhattan:
List price $1,930.00
Federal tax 154.00
Freight 72.50
Dealer handling 44.72
Automatic transmission 179.80
Power brakes 37.10
Power steering 68.70
Radio 77.10
Heater 70.80
Undercoating 12.80
Two-tone paint 21.60
Total at delivery $2,669.12
Oklahoma's Democratic Senator Mike Monroney, strongly seconded by both G.M. and Ford, is pressing for a bill requiring dealers to tag all cars with the list of extras and delivered price so that customers know precisely what the factory price is and the price of all extras they are getting. Says one Manhattan businessman: "These car dealers have no idea how much distrust they have built up."
As for workmanship, the tales of the lemons are legion. Cars arrive from the factory with unwelded cross braces, drill bits broken off in screw holes, leaky windows, poor body fitting, the wrong parts--or missing parts. When customers complain, they get little sympathy. The stock answer to every automotive woe from leaky trunks to loose air vents is, as one Milwaukee owner sadly reports, "Can't fix it; they all do that." Says a Los Angeles dealer: "Labor better get smart as to what's happening in the auto business."
One of the things that sold cars during the 1950s was the horsepower race. Everyone piled on the power, not only for speed but also to run all the new gadgets that consumers enjoyed. Though the higher horsepower makes passing on highways safer, many a critic says that perhaps Detroit should not have bowed to public taste, since the horsepower cuts gasoline mileage. But the industry can cite figures to show that ton mileage has actually improved 5.8% in the last ten years.
Rise of the Midgets. One big sales argument for small, less powerful European cars is economy. But the midgets are beginning to catch on for reasons a lot more complex than good gas mileage. "Our company has been testing this market by importing Ford of England products ever since 1949," says Benson Ford. "For years the experiment was a flop, with sales averaging only about 3,000 a year." Now the foreign cars are the hottest thing on the market. In five years imports have grown from 28,961 annually to 206,827, a healthy 3.46% of the total auto market. Forecast for 1958: a gain to 300,000 or more cars, 7% of all U.S. auto sales.
In barely two years West Germany's front-running Volkswagen has doubled sales to 64,000 cars annually. France's second-place Renault, which sold 22,586 cars last year, has sold almost that many in the first four months of 1958; Italy's Fiat, here only since last June, has already sold 15,000 cars, converted four freighters into auto carriers that can bring in 1,000 cars at a clip. Behind the leaders range a dozen other makes from Britain's boxy Hillman to Sweden's Volvo. Years ago foreign cars were rare outside metropolitan New York and Los Angeles. Today they are almost as popular in New Orleans and Chicago, Denver and Dallas.
Reverse Snobbery. Though small cars are far from as comfortable as "Detroit's Dinosaurs," people who buy them like their chromeless functionalism, relatively low price and low upkeep. Says Cleveland Suburbanite Cornie G. Scheid: "It's silly to use a 4,000-lb. machine to carry a 110-lb. woman five blocks for 10 Ibs. of groceries." And those with their eyes on the gas gauge find 30-35 miles per gallon a welcome relief after U.S. cars. One Los Angeles lawyer traded his Cadillac for a Volkswagen, and figures that he saves $39 a month in operating costs.
What really sells small cars is not so much their utility as their "style." The small car has its own inverted snob appeal, which rubs off on every buyer. Many of the first buyers were hot-rodding eggheads, members of a mechanical intelligentsia who wanted something different. Most small-car buyers, said Los Angeles Renault Dealer John Green, who is aiming at selling 25,000 cars annually, "are people who can afford a larger car. We have a map, and there are hardly any pins in the poorer section of the city. It's like Bing Crosby wearing a sweat shirt to a party. Everybody knows he has a tuxedo if he wants to wear it."
Detroit's Big Three all have stripped-down models selling for little more than $2,000, only $200 or so higher than most small cars. Yet these models find comparatively few takers because buyers fear friends would think this was all they could afford. But the man who pays only $1,800 for a Volkswagen automatically becomes a member of the intelligentsia--and a very shrewd judge of a dollar. As San Francisco Dealer Clarence Krieger says: "When a man buys a foreign car, all he needs is an Ivy League cap, and he becomes a sport."
The mere idea of owning something that is new and different is often enough to send people hurrying off to the foreign-car dealer. Chancy A. Forrester, a 79-year-old retired druggist in Adel, Iowa, recently bought a $12,000 Mercedes-Benz 300-D, which he describes as "purty near perfect. This is the first of its kind in Iowa, and only the 14th in the United States." Says Amanda Berls, a 62-year-old Manhattan woman, who bought herself a 120-m.p.h. Jaguar XK-150: "Men look on you with a great deal of awe and respect. Owning one has given me a sort of superiority complex. I wouldn't give two tulips for a Cadillac."
Designs & Dealers. A few diehard Detroiters still regard the small car as more of a nuisance than a competitor. They argue that it is a fad, that the glamour will wear off as they become more popular. Detroit does not agree that chromeless designs are the coming rage. Nor could automen change if they would. The lead time on design changes is 17 months, and the 1959 models were frozen long before the complaints started. For 1959 the automen will pile on even more chrome; lines will be even more sweeping. Chrysler will be finnier than ever, with tails that zoom up, out and rearward; Cadillac's fins will be higher, the car itself lower and slightly wider. Chevy will be wider, lower and almost as long as a small Cadillac. Only Ford will hold the line with a modest face lifting, mainly ornaments, and a return to the traditional round taillights instead of 1958's oval design.
Detroit may be right that small-car sales will soon level off. But one of the reasons sales are climbing so fast is that more and more U.S. car dealers have taken on small cars until there are 11,088 agencies spread round the U.S. Detroit grumbles about dealer loyalty. Yet loyalty comes hard to many U.S. dealers, who have had troubles with the factory. Says Los Angeles' Mel Alsbury, one of the industry's most respected dealers and a 30-year Chrysler-Plymouth veteran whose cars have added to Chrysler's fame by winning the Mobilgas Economy Run three times: "My biggest complaint is that when the 1957 line was going fast, I just couldn't get stock. Then I took on the Renault line. If it wasn't for those little cars, I don't know if we could stay in business."
1,000,000 a Year? How big the market will grow is anyone's guess. Some small-car importers put the potential as high as 1,000,000 cars annually. Detroit doubts it. Nevertheless, the Big Three are taking a long, fresh look at the possibilities. General Motors already imports its Vaux-halls and Opels at the rate of 23,000 annually; Ford is deep in the market with 27,350 English Fords this year, will soon start importing the German Taunus at the rate of 8,600 a year. Despite all rumors, neither Ford nor G.M. nor Chrysler plans to produce a small car in the U.S.--at least right now. The market is still too small, must be at least 500,000 cars.
What the industry has done is survey the field to discover what the U.S. would want in an American-built small car--just in case. Findings: the average U.S. auto buyer is ready to invest in a U.S. small car, but he is unwilling to give up the accustomed miracles of Detroit engineering. He wants automatic transmission, power steering, smooth, American-type riding qualities, plenty of gadgets, loads of interior and luggage space and lots of horsepower. In effect, the desire is for everything the U.S. car already is, only 10 ft. shorter, and somehow a lot cheaper. In any case, a U.S. model would probably be a "compact" car, something like the Rambler, rather than a small car. Nor will it be cheap. Volkswagen learned that fact of life. It planned to manufacture in the U.S., but found that it cost at least $100 per car more. There was one overriding difference--labor cost.
If and when the Big Three put out a compact car, the U.S. may see a complete reshuffling of its autos. Sales of today's medium-priced models, which are taking the worst sales licking, may shrink further, and some cars may drop out entirely. In their place, bigger, flashier Fords, Chevies and Plymouths may move up to fill the gap between low-priced and high-priced autos. At the bottom will be a new market for utility autos, simply for transportation.
Whatever the problems of the U.S. auto industry, Detroit is confident that they will be solved. The automen at General Motors, Ford and Chrysler have been through all these troubles before. Gambling hundreds of millions each year on their new cars, the industry's leaders know that auto tastes are almost as fickle as those in women's fashions. But they also feel that since they are turning out what they are sure 93% of the customers want, they will start selling again when the consumers get over recession fears. Says General Motors' Red Curtice, a careful man with a prediction: "It is my belief that we will see an upswing in automobile sales with the introduction of the 1959 models in the fourth quarter."
* Detroit uses 17.4% of the nation's steel, 65% of its rubber, 70% of its plate glass, 33% of its radios.
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