What Price Competition?

One of General Motors' most pressing concerns is keeping Washington pacified. As the world's largest manufacturer, the company has long fretted over the possibility of antitrust action, even though it has taken over no domestic passenger-car firm for 50 years. Sensitive to the Administration's inflation worries, G.M. Chairman James Roche recently played the part of a diplomat in meeting with White House economists be fore announcing price increases (aver aging only 1.6%) on his 1969 models.

Last week General Motors delivered two bulky, fact-filled statements to two Senate subcommittees currently investigating whether competition really ex ists among U.S. automakers -- or whether G.M. calls the turns for the entire industry.

"No producer, regardless of size, has been able to control the market," said the report. "Automobiles are bought and sold on the basis of customer choice in a setting of intense rivalry. This rivalry has produced a steady improvement in quality, safety and value and a greater variety of choices for the auto buyer than at any time in history." To support its case, the company pointed to the historic fluctuations in its share of the U.S. auto market: under 14% in 1921, 38% in 1946, a high of 52% in 1962, and 48% for the first eight months of 1968. By contrast, Ford accounted for 60% of auto sales in the early '20s, 19% in 1948, 31% in 1954, and 24% this year. Chrysler, with 26% in 1946, fell to less than 10% in 1962, but rebounded to 16% in 1968.

As for sales rivalry, G.M. pointed to "intensely competitive" incentive plans, dealer bonuses and product promotion allowances offered by all automakers. For the industry as a whole, said G.M., dealer allowances ran "as high as $422" during the 1968 model year; in July Chevrolet incentives reached $150 on some cars.

Refuting a Critic. Much to Detroit's surprise, General Motors carried its defense of competition to the point of providing a peek at some of its costing policies, normally a matter of utmost secrecy. The company estimated that its labor costs average about $1,000 per car, or 32% of each sales dollar. It put tooling costs at $134 per car, for styling and other changes. The figures were aimed at refuting charges by Auto Critic Ralph Nader, who in July asserted that "the direct and indirect labor in a medium-priced car doesn't exceed $300." He claimed that styling costs account for "at least $700" of the price of a new auto.

G.M. also took a swipe at claims that its own gigantic size menaces small businesses. During 1967, said G.M., it paid $9.4 billion, or 47% of its revenues, to 37,000 suppliers, three-quarters of whom employ fewer than 100 people. As for profits, G.M. freely conceded that its return on invested capital has been more consistent than that of other auto manufacturers in recent years. Nevertheless, the company noted that a 1966 Dun & Bradstreet survey found that companies in 19 of 71 categories had a higher return on "tangible net worth" than G.M.

Image Building. General Motors' statement plainly showed the imprint of Chairman Roche, a onetime Cadillac publicist who has been laboring since he took command last November to brighten the company's public image.

During September's auto-pricing controversy, he not only went to Washington but broke tradition by holding a press conference, with tour of his six top officers, to explain why the company had raised its '69 prices. This month he departed from tradition again by announcing plans for a small G.M. car (a foot longer than the West German Volkswagen) two years before it will be introduced. When G.M. opened its new 50-story Manhattan headquarters, Roche quipped that he had learned with "great relief" that the tower was only the twelfth tallest in town.

Despite such becoming modesty from G.M., other automen still consider the company nearly invincible in organization and talent and unbeatable in manufacturing efficiency. Still, G.M. last week made an impressive point: as long as other companies hustle, there will presumably be plenty of competition in U.S. automaking.

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