Too Many Cars?

To the automakers, now enjoying their biggest year in history, the future looks bright indeed. They see a constantly expanding market. To meet the increased demand for cars, General Motors President Harlow Curtice last week announced a $500 million expansion program, G.M.'s third major expansion in 18 months. It brought to $4 billion the company's postwar investment in U.S. and Canadian capital improvements. (Only two months ago Ford boosted its $1.7 billion postwar expansion program by $625 million; Chrysler is spending an estimated $625 million for expansion.)

G.M. will build a new 1,776,000-sq.-ft. Fisher body plant in Mansfield, Ohio, convert a wartime tank factory near Flint, Mich, to body-parts stamping. Oldsmobile will expand its engine plant capacity 50%; Buick will boost annual capacity from 750,000 cars to 1,000,000 cars, while other G.M. divisions will install new machines, new tools, new automation processes.

Most of G.M.'s expansion program will be completed next year, in time to help out with production of 1957 models. Said President Curtice: "This program is a measure of our faith in our country. It is evidence that we have confidence both in the immediate future and in the long-term growth of the market for our products." The

Record-Breakers. G.M. and the other automakers have already turned out 4,240,000 cars this year, a figure that was not reached until late August in the biggest previous production year, 1950. Sales have been at a record clip of 26,200 daily. At June's end, new-car registrations reached 3,500,000, a big 25% above last year's registrations at this time.

Inventories of stocks on dealer lots and in transit reached 841,853 last month v. 565,719 a year ago. Yet some dealers complained that stocks were too low. Chicago's Z. Frank, who bills himself as the biggest U.S. dealer, is selling almost three times as many cars this year as he did in 1954, has less than a ten-day supply of Chevrolets on hand. Dallas dealer inventories averaged 25% below last year's, and Seattle's Totem Pontiac Co. had on hand only half its normal 65 new cars. Said a Washington Buick dealer: "We sold 136 cars in May, expect to sell 170 in June. June will be the best month we ever had."

Paris, Anyone? But in this bright picture there were plenty of dark spots. Many a dealer called the boom "profitless prosperity," as he cut his profit as low as $25 per car. New sales gimmicks blossomed every day. Miami's Colonial Pontiac Agency offered a weeklong, all-expense-paid trip to Paris for every new-car buyer, had 20 takers in the first week. With each Studebaker sale Washington's Lee Butler gave out one share of Stude-baker-Packard stock, free gasoline for the first 1,000 miles. Los Angeles dealers brought in customers by offering a stripped-down model at rock-bottom price, threw in a radio for $1 extra, white sidewalls for a second $1, automatic drive for a third $1.

In Cleveland, Ford dealers knocked off up to $1,000 from the highest-priced mod els on a "clean deal," i.e., no trade-in. Plymouths were selling at $450 off list in New York; Oldsmobiles at $1,000 off in Dallas. Manhattan's Max Lasko (Stu runs," debaker) and even allowed $1.000 Cadillacs on were "any car selling that at discounts in Cleveland, Dallas and Miami. As a result, the National Automobile Dealers Association does not believe that dealers can even maintain the low (3%) profit margin on sales that they averaged for the first quarter. Said H. W. Robin son, general manager of Atlanta's Harry Sommers Inc. (Chrysler): "I haven't seen any profits for so long that I wouldn't know what they look like. All we are doing is working for the factory."

Buy Now, Pay Later. The factories showed no slackening in their pace. Last week production was up to 155,000 v. 139,600 the week before. Nevertheless, most dealers thought they could unload all their 1955 models before changeover time in September and October. One reason is that buyers believe, rightly, that the industry's recent wage increases will push up prices for 1956 models.

But many dealers are deeply worried about next year and after, feel that credit is too easy, that the production pace is forcing them to borrow against future sales. In most U.S. cities a buyer can drive off in a new car with little or nothing down, and three--or even five--years to pay. Such practices give conservative dealers the jitters, since the car depreciates faster than it is paid for. They fear that even a temporary slump in employment would touch off a chain reaction of defaults among buyers who have little equity in their cars, thus lose almost nothing by repossession.

Last week Executive Director Frederick Bell of the National Auto Dealers asked Federal Reserve Chairman William McC. Martin to join him in asking Congress to restore the old wartime Regulation W, which until 1952 required 1/3 down payment for autos, no more than 18 months to pay the balance. Martin was cool to the idea, but Bell wants the Government to slap on such controls again.

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