The Millionth Compact

The U.S. auto industry turned out its millionth compact in 1960 two weeks ahead of schedule. To mark the occasion, American Motors President George Romney, the small-car apostle who forced Detroit into the compact market, finally laid to rest rumors that had buzzed around Wall Street for three years: that American Motors would merge with Chrysler Corp. Romney feared that the persistent reports were damaging American Motors' future as well as the price of its stock, which is now about 30% below its 1959 high. Said he: "They are not only completely untrue but unfair to everyone who has a stake in our plans for continued growth." Added Chrysler Board Chairman Lester Lum ("Tex") Colbert emphatically: "There is absolutely no truth to such a report."

Romney sees no need to join with any other company, since he has a top management staff and such a low break-even point that he can make far more per compact than the Big Three, whose invasion of the market has not hurt him. Rambler sales have risen from 6.3% of total industry sales just before the advent of Falcon, Corvair and Valiant to 7.1% today --and are still climbing. Last week Rambler delivered its 300,000th unit for the 1960 model year, is running two months ahead of last year's record production and chalking up sales 25% over the last model year. In two years Romney has doubled production. By fall, American Motors will be able to turn out 625,000 compacts a year. Romney expects to need every bit of capacity: though he first optimistically predicted 1,750,000 compact sales in 1960, the industry now thinks the figure may reach 2,000,000.

The success of the compacts stirred up controversy right in their own back yard. Said Michigan State Highway Commissioner John C. Mackie: "They may be socially desirable in some parts of the country, but I think they are a nuisance. If they really take hold--and I don't think they will--then it is inevitable that gas and weight taxes will have to go up, both for the federal and state government."

The compacts not only threaten tax revenues, said Mackie, but are also highway hazards. For example, he argued that compact and smaller car headlights are too close together, thus give other drivers trouble judging the distance from such approaching cars at night. The Michigan Good Roads Federation shares Mackie's concern, and Michigan State University's Highway Traffic Safety Center is studying traffic flow and safety questions involving the compacts.

American Motors was the first to snap back at Mackie. Said President Romney: "In the matter of compact-car safety, 400 major U.S. insurance companies do not agree with Mr. Mackie. They offer a 10% lower rate for compact cars. Such compact factors as relative power, headlight and seating arrangement, etc., do not differ significantly [from the big cars]. The big-size differential is in the elimination of extensive front and rear overhang, which reduce vision and decrease handling ease. As to long-range car use and tax revenue, the compacts have greatly stimulated the automobile business."

On the last point Secretary of State James Hare released figures that backed up American Motors. He announced that revenue from weight taxes in the state jumped $2.2 million over last year, indicated that there are 100,000 more vehicles registered in Michigan in 1960 than in 1959.

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