Motown's Blues

Some billion-dollar losses

The fashion industry has flourished for decades by staying ahead, periodically changing styles to shorten hems or narrow lapels. But Detroit's automakers are sinking knee-deep into red ink, as energy-conscious buyers increasingly switch their taste in cars to lighter, fuel-efficient models. Surprised by the speed of that change, manufacturers cannot turn out enough small autos to satisfy public demand, while outmoded big cars gather dust in dealer back lots. As a result, in the first ten days of November, Big Three sales plummeted 26% from last year's levels.

The most shocking news comes from Ford Motor's upper reaches, where glum executives are circulating a confidential memo projecting that the firm will lose just over $1 billion on its North American auto operations this year and probably the same in 1980. The estimated losses had been raised by $160 million in just the past few weeks. Ford will stay in the black only because of its healthy foreign and nonautomotive business, but in the auto trade at home, it is losing almost as much as Chrysler.

The memo suggests that Ford might increase profits by loading well-selling models like the subcompact Fiesta and Courier minitruck with expensive options that customers would be forced to accept, and putting on less costly tires. Ford is also attacking internal costs by cutting executive business travel by 50% and symbolically dropping free coffee at company business events and eliminating all magazine subscriptions.

Other automakers are also doing poorly. Leading Detroit's bad news bears again is Chrysler. Fears of buying a car from a company that may go bankrupt and a temporary halt in the rebate campaign combined to sink sales by 44.5% in early November. Chrysler has yard-long waiting lists for the popular front-wheel-drive Omni and Horizon models but cannot make them fast enough.

Meanwhile, Chrysler's rescue plans move sluggishly. Under the Government's $1.5 billion loan guarantee plan, the company must come up with an equal amount of outside help. But banks are showing reluctance to sink more money into the troubled company. Chrysler thus last week was asked by the Government to step up its so far futile efforts for a possible joint venture with a Japanese or European car firm in order to raise additional cash.

Detroit's gloomy mood even extends to mighty General Motors, which lost $100 million on operations in the third quarter. Still stuck with 330,000 of the 1979 model autos and trucks, GM has started its own incentives of $100 to $400 per vehicle for dealers. Yet no come-ons are needed for small models. People attempting to buy the gas-sipping Chevrolet Citation and other GM "X-cars" have waited six months or more for delivery.

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