The "Blue Denim" Boom

WHEN President Nixon announced his New Economic Policy last August, he made Detroit the hub of his recovery program. The Government eliminated the federal excise tax on U.S.-made cars, saving buyers an average of $200 an auto, and effectively wiped out the price advantage that foreign autos had enjoyed in American showrooms --first by slapping a surcharge on imports, later by campaigning successfully for revaluation of the German mark and Japanese yen. Since last fall the strategy has been paying off. Sales of imported cars so far this year have slumped to 14.5% of the total, down a percentage point from 1971; Volkswagen volume is off 23%. But sales of American-made cars are speeding up so sharply that some automen believe that the total this year could whiz to close to 11 million vehicles, v. 10.2 million last year. The auto spurt has helped to push overall U.S. retail sales about 10% ahead of a year ago.

More surprising than the figures has been a drastic change in the mix of cars bought. Traditionally, medium-priced, standard-sized cars, such as the Chevrolet Impala or Ford Galaxie, have been most popular. This year, drivers are switching en masse to the three smallest and least expensive lines: the intermediates, compacts and subcompacts. Last month, for the first time, these cars accounted for a full 50% of all cars sold in the U.S.

The so-called minicars--Vega, Pinto, and Gremlin--in turn are leading

Detroit's selling spree. American Motors' Gremlin is in short supply, forcing some customers to wait an extra five weeks for delivery. For the past two months, production of the Vega at Chevy's recently struck Lordstown, Ohio, plant has been at a peak level of 101 cars an hour. Ford's Pinto is the speediest seller of all: 175,000 in the first five months of 1972 v. 131,000 in the same period of 1971. Pinto benefited especially from the introduction early this year of a mini-station wagon that resembles Ford's successful full-sized Country Squire. One auto industry wit unsuccessfully suggested to Ford executives that the Pinto wagon be named the "Country Squirt."

New Model T. The small-car surge has at last convinced automen of an idea they long resisted: that the U.S. motorist is buying a functional car mostly for transportation rather than status, and will no longer automatically buy a larger and larger car as his salary rises. Chrysler Vice President Robert McCurry sees a "blue denim society" developing among drivers, and adds: "The fact that 80% of all the small cars are two-doors shows the demand for personal transportation." Detroit has adopted this theme in its marketing. Ford touts the Pinto as a "new Model T," presumably to suggest economy and durability. American Motors is even offering optional blue denim upholstery on its. 1973, Gremlins^^Qmplete with Levi-like copper rivets instead of tufted buttons.

The blue denim society has not totally triumphed yet, however--and auto profits are benefiting because it has not. Enough status-conscious buyers remain to boost sales of luxury cars, such as Cadillacs and Imperials, to record levels. Even minicar purchasers, while shunning big-car prestige, are choosing comfort and convenience along with transportation. Although prices of stripped-down minicars cluster around $2,000, the average price of those sold is considerably higher because motorists are selecting fancy options. Roughly 81% of the cars sold today contain power steering; 63% have factory-built air conditioning; 58% come with vinyl tops; and 3.6% have stereo tape players.

Prices will go still higher for the 1973 and future model years, because of federal regulations governing auto safety and pollution from exhaust fumes. Chrysler already has announced increases ranging from $14 to $120 on 1973 cars to cover new ignition design and larger standard engines. These price increases average $8.38 across Chrysler's entire car line, within the 4.5% average price increase approved by the Price Commission on the 1972 model cars.

Industry estimates are that by 1975 pollution and safety requirements will add at least $750 to the price of an average car. General Motors Chairman Richard Gerstenberg, for one, wonders "whether the car-buying public is willing to pay a lot of money for a little extra protection." That is a worry for the future, however. Right now, automakers are discovering, somewhat to their own surprise, that they can make luxuriously high profits even in a blue denim market.

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