Where Are the New Fall Cars?
By Edward E. Scharff
In showrooms already, as Ford races to build small models
Late September used to be the time when Detroit rolled out its shiny new models and then gloried in the predict able "oohs" and "aahs" of an auto-obsessed public. The Big Three American automakers this season are tooting their horns, but it hardly sounds like a traffic jam. After two straight years of sagging sales and giant losses, the car manufacturers are introducing only an autumnal handful of fresh models.
New car sales in mid-September were up nearly 10%, as compared with last year's extremely depressed levels, but industry observers say the increase was mainly due to rebate programs and consumer fears that new models would be even more expensive. Auto analysts expect U.S. car sales in 1982 to top 10 million, about 1 million more than estimated 1981 sales but still far fewer than the 11.4 million cars sold in 1973. Domestic manufacturers lost $4.2 billion in 1980 and $600 million in the first half of 1981.
As for 1982, Analyst Arvid Jouppi of Rooney, Pace Inc. says that it will be a battle of "demo graphics and rust vs. interest and inflation." There are plenty of potential buyers among the large group of consumers born just after World War II, who are now reach ing their peak buying years.
And since the average car on U.S. roads is 6.6 years old, many autos are in need of replacement. But the typical cost of a new car, $10,500, and auto loans at 17% interest are apt to hold down sales.
Detroit's paucity of new models this fall is a by-product of the marathon race U.S. manufacturers are running to catch up with Japanese and European companies in developing small cars. High interest rates have also hurt foreign car sales, but those manufacturers continue to make inroads. About one of every three new cars sold in the U.S. is now a foreign model, and in California, Oregon and Washington imports have 50% of the market. To keep the situation from becoming worse, American automakers about two years ago abandoned the traditional fall introduction and now rush their new fuel-efficient cars onto the market as fast as they can, whenever they are ready.
General Motors' most important new entries, the mid-size A-and F-body models, will roll into dealers' showrooms around the first of January. Chrysler is introducing new luxury LeBaron and Dodge 400 models, which are extensions of the K-car line, at the end of October.
The longest line of new cars this fall belongs to Ford. The No. 2 carmaker is adding four-door versions of its small E cort and Lynx cars, as well as a scaled-down model of the Lincoln Continental that will sell for about $21,000. The trim new luxury car, which gets 17 m.p.g. in city driving, is intended to draw drivers away from sporty foreign cars like Mer cedes and BMW. Beams Ford Chairman Philip Caldwell: "I've personally sold half a dozen of them already."
Ford's most surprising move is the re-introduction of the 1960s-style "muscle car." An optional turbocharged, V-8 en gine (17 m.p.g.) will power some Mustangs and Capris from 0 m.p.h. to 60 m.p.h. in 7.5 seconds. That kind of dragstrip macho has been virtually extinct since the end of the era of 300-per-gal. gasoline.
Ford's array of new models, however, is a sign of the firm's weakness rather than its strength. Ford lags behind General Motors and Chrysler in the area of frontwheel-drive, gas-efficient cars. Ford's troubles date back to a blunder in 1975, when then Chairman Henry Ford II overruled President Lee lacocca, now Chrysler's chairman, and slowed the development of the firm's front-wheel drives.
That decision has cost Ford plenty.
Its share of the new car market slipped from almost 24% in 1978 to about 17% in 1980. The company lost $2.1 billion on its North American operations last year and $402 million in the first six months of 1981.
Ford hopes to sell 1.9 million cars in 1982 and capture about 19% of the U.S.
market. But few industry watchers share its optimism. Most think that the firm faces another difficult year and will get by mainly because of drastic cost-cutting measures that have pared the company's white-collar work force in the U.S. by 22% since 1979.
While Ford does not need a Chrysler-style Government bailout, it still requires large quantities of cash in order to rush the new small cars into production. But right now that cash is hard to get. Slow sales have decreased Ford's normal money flow, and the company's bond rating, a sign of its borrowing power, has slipped from Aaa to A. So far, Ford claims it has CHARLESTERNES not been forced to cut spending on new car development, but David Healy of Drexel Burnham Lambert Inc.
points out that the company has quietly lowered its 1981 budget from a planned $3.6 billion to $2.5 billion. That will make it even harder for the company to catch up in the small-cars sweepstakes.
Still, Ford's future has its bright spots. The firm has a 32% share of the highly profitable U.S. truck market, and a small new Ranger pickup model, which will be introduced next spring, should boost sales. By 1983 Ford will finally be able to bring out its full line of small cars.
The most important new autos on the boards are efficient-looking compacts to replace the Fairmont and Mercury Zephyr. Cars in the new line, code-named Topaz, have a four-cylinder engine, front-wheel drive and a sloping hood. They are designed to compete head-on with the Chrysler K-cars, the Dodge Aries and Plymouth Reliant, and the General Motors X-body models: the Chevrolet Citation, Pontiac Phoenix, Oldsmobile Omega and Buick Skylark.
But the fate of the American auto industry now depends more on the state of the U.S. economy than on new models from Detroit. Only a substantial decline in interest rates is likely to spur auto sales. Until then, the Big Three will probably continue chugging along in first gear. --By Edward E. Scharff.
Reported by Christopher Redman and Paul A. Witteman/Detroit
With reporting by Christopher Redman, Paul A. Witteman/Detroit
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