Auto Outlook

The automobile industry finds itself in a peculiar dilemma this Spring. Under the extraordinary past purchasing of cars in the U.S., production facilities of the leading car manufacturers have been greatly increased. This has in turn led to stiffer and stiffer competition and a tendency to cut prices on the basis of quantity production. As long as more and more cars could be sold, this policy of expanding plants and reducing unit profits is, of course, perfectly sound.

The real trouble with the industry, however, is in its distributing end. Dealers, owing to competition, have been forced to accept used cars at fairly high figures in selling new ones and in addition adopt part-payment systems. In consequence, purchasing expensive motor cars on a shoestring has become a commonplace habit throughout the country.

This Spring many dealers found themselves loaded with second-hand cars which they could not sell, and were forced to curtail orders for new models. This has seriously shaken up the tremendous production program of many car companies and, owing to low prices set, has reduced, if not removed, profits, despite the considerable volume of business.

Leading makers are now casting about for a solution to their dilemma. John Willys endorses higher prices and probably many will follow his lead later this year. However, unless buyers can be found for used and new cars, this is only a palliative. If the automobile makers' dilemma continues, the only answer is to shut down the weak companies and form consolidations among the stronger ones.