Detroit optimism takes a decided upturn

When Steve Jackson dropped by a Ford dealership the other day, he was looking for a new car to replace a '79 Fairmont on which the miles were beginning to pile up.

Thousands of other ''tire kickers'' are in a similar mood.

''We think it's beginning to crack open,'' one Detroit executive says, pointing to the spate of good economic news of the last few days.

With their cars fast wearing out, an 11.9-percent factory-supported interest rate on new-car loans, inflation apparently under control, and gasoline prices on the way down, the sales outlook for Detroit is brighter than it's been in a long time.

Even so, domestic new-car sales in February were off 3.3 percent from a year ago although they were up 1.5 percent in the last 10-days period of the month. Hopeful of a spring upturn, US automakers are increasing car production by 21 percent in March.

A good measure of a reviving auto industry was the Washington's Birthday weekend.

''It was fantastic,'' says John C. Simcox of Tom Chevrolet, Norwood, Mass. - ''the best in 8 to 10 years at least.''

Peter Patalano, who runs a Ford dealership in Franklin, Mass., says he sold 14 new cars on Friday and Saturday, and the Feb. 21 holiday itself was ''just great.'' The small-town car dealer sold 500 new Fords in 1982 and predicts 600 in '83.

''The emphasis is on power and options this year, compared to a year ago,'' he reports.

Charles Colter, general manager of Central Chrysler Plymouth, Norwood, Mass., says the firm sold 33 new cars on the holiday this year compared with 22 a year ago.

And that's the way it is as domestic car dealers look for the best new-car year since 1978 when sales hit 11.3 million units, including imports. At the same time, however, they're tempering their enthusiasm with reality, having been burned too many times in the last several years.

The tone of the National Automobile Dealers Association (NADA) annual convention in Las Vegas last month, for example, was guardedly upbeat. Instead of mere survival, more and more dealers are focusing on recovery after nearly four years of poor sales and, in many cases, near disaster or total shutdown.

Thousands of new-car dealers have thrown in the towel in the past five years.

William C. Turnbull, the new NADA president, says he ''hopefully'' sees an end to the four-year automotive depression.

Surprisingly perhaps, the big, high-priced luxury cars - Cadillac, Chrysler's New Yorker Fifth Avenue, Buick LeSabre, and Mercedes-Benz are examples - are going out the showroom door in high gear, while some of the small cars are just bucking along. Even so, more and more people are touring the showrooms - and that is good news to Motor City.

Ford chairman Philip Caldwell sees 1983 as a ''turning point'' for Detroit.

To keep the market on the move, carmakers are maintaining their 11.9 percent rates on car loans while Chrysler has taken the rebate route as a customer option to a low-rate loan. The special financing deals, which are due to expire at the end of March, could run deep into the spring or beyond as carmakers show reluctance to disturb the sales rebound.

Indicating the changed market conditions, automakers, for the first time in years, are recalling production workers instead of laying them off - 27,000 since Jan. 1.

To help keep the sales ball rolling is Detroit's big emphasis on Quality - quality with a big Q.

Looking ahead, the long-term revival in domestic new-car sales hinges on a continuing economic recovery in the United States, plus the continuation of plentiful gasoline supplies and a stable price.

Falling fuel prices, the result of disarray in the ranks of the oil producers , are favoring the big car. This is causing some concern in the corporate boardrooms of Detroit because of the heavy shift to small-size cars, often with front-wheel drive.

Of course, if interest rates start to climb again, it could have a negative impact on car sales.

''A lot of people are still confused about what they want in an automobile,'' says Robert A. Arena, general manager of Sherman Chevrolet in Franklin. ''They're confused not only by the dealers,'' he asserts, ''but by the factory as well.''

The below-market interest rate on loans is a case in point. With the factories supporting an 11.9 percent rate on loans, some dealerships are advertising 6.9 percent and even less.

The old adage that ''there is no free lunch'' could apply.

Meanwhile, some very good news for the car buyer may be just down the pike, according to Arvid Jouppi, a Detroit-based auto-industry analyst with Rooney, Pace Inc.

''I expect that by June we will be well into a price war, but it will be fought at the dealer level rather than at the direct-customer level,'' says Mr. Jouppi. Rebates go directly to the customer, but the factory incentives go to the dealer.

''I do not expect the rest of the industry to follow Chrysler on rebates,'' he asserts. ''Rebates didn't work in 1982, and I don't see any reason why they will work in 1983.'' Car buyers apparently buy when the rebates are turned on and stop buying when they're turned out.

If a dealership price war develops, new-car dealers may try to outprice the competition with the buyer in the driver's seat.

The purpose of a price-incentive program is to stablize production by providing a dealer with the ammunition to woo the customer. The domestic auto industry urgently needs to increase the operating rate of its plants.

At 55 percent of capacity last year, US car production was the lowest since 1958.