Buying Up but Selling Down

"There said is a pause in the auto market,"said Ford Motor Group Vice President Lee Iacocca last week.

"There's uncertainty about a tax increase and the Viet Nam war -- but there's nothing to get alarmed about."

There was nothing for the automakers to get very happy about either.

Compared with the equivalent periods of fabled 1965, sales of the new models were off 6% in October and 5% in November's first ten days. Detroit in siders estimated that fourth-quarter production will decline from last year's 2,600,000 to 2,400,000. American Motors scheduled production cutbacks, and General Motors reported that it will reduce the current rate of output by 3.7% in December and by still an other 4.4% in January. Though G.M.

carefully broke that word after the stock market closed late last week, there was enough disquieting news about autos and other sectors of the economy (see THE NATION) to cause all auto stocks to sink to 1966 lows.

Slow Trio. Some strange things are happening in the nation's most influential industry. G.M. has actually increased its share of the industry's sales, from 50.1% a year ago to 51.3% last month, but its volume is down because of a 10% lag in its Chevrolet Division, which accounts for half its output.

Chevy Division Manager Elliott ("Pete") Estes has fallen behind his competitor (and Bloomfield Hills neigh bor) Don Frey, whose Ford Division in October outsold Chevrolet 194,000 cars to 192,000. None of the regular "lower-priced three" cars are burning up the track, but racier, higher-priced models are doing splendidly, and auto economists point out that "the sales mix is very rich."

During the first third of November. Cadillac, Buick and Pontiac shattered sales records. The tendency of customers to trade up from lower-priced cars cheers most automakers because costlier cars bring fatter profit margins. But what worries the auto companies' big-picture men is that once a customer hankers to trade for something fancier, he may jump to the other firm's line. In October, sales of Ford Motor's middle-priced Mercurys fell 11%, to 33,000, and its Lincolns dropped 18%, to 7,300. For that reason Ford shifted drivers at its Lincoln-Mercury Division: to another job in the company went Lincoln-Mercury Division Boss Paul Lorenz, and in came Vice President E. F. ("Gar") Laux, an aggressive protege of Iacocca's.

Nailed to the Floor. Of course the pattern of trading up has two sides. While sales of the bread-and-butter Chevy tumbled in October from 172,000 to 135,000, the breezier-looking Chevelle rose from 24,000 to 33,000. Sales of the regular Pontiac declined by 4,000, but the fancy Tempest increased 7,000, and the Grand Prix and GTO were also way up. The standard Ford slipped from 114,000 to 99,000, but Fairlane and Mustang both increased.

G.M.'s new Camaro has not exactly taken off with a Mustang gait, partly because of some shortage, which G.M. is curing with overtime production. Sales in November's first ten days were just under 5,000, or 371% of Mus tang's rate, and Pete Estes' prediction of 100,000 Camaros built by year-end 1966 will probably be a shade high. As for the other Mustang-like new car, Mercury has sold 12,500 Cougars so far, and supplies are so short that any Cougars in dealers' hands are practically nailed to the floor. Almost the entire industry's inventory is healthily lean, running to an average 33-day supply. Glaring exception: American Motors, whose Ambassador is at 57 days' supply and Rambler American 87 days (including leftover '66 models).

Still Very Good. Going against the higher-priced trend is the surprising surge of lower-tagged imports, which are racing 27% ahead of last year and should easily crack the record of 614,000 sold in 1959. In the first nine months of 1966, Volkswagen spurted from 277,000 sales to 308,000, while G.M.'s "German Opel climbed from fifth place to second among imports, with sales of 25,000, followed by Sweden's Volvo, Britain's MG and Japan's Datsun. The Japanese cars are rising fast: Toyota is now the second best-selling import in California, where the Japanese are driving hard prior to a nationwide push, and Honda will soon introduce a car in the U.S.

Behind the slight fall-off in industry sales are many factors: the armed forces' draft of almost 400,000 young potential buyers, the stock market drop, the slower expansion in consumer credit caused by tight money. Detroit's experts figure that, excluding imports, production will dip from last year's 8,700,000 to 8,350,000 this year, and to 8,000,000 in calendar 1967--which would still make it a very good year.

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