After the automobile sales rebates: what next?
After the rebates, what? The United States auto industry faces some hard-nosed decisions on how to keep any sales momentum going after the giveaway programs end.
General Motors' rebate program, for example, ran out March 10. Ford Motor Company's goes till the end of March.
Historically, the period after a sales-stimulation "push" is often a disaster. Sales fell off precipitously, for example, after the last rebate go-around in the mid-1970s. Will the same thing happen this time around?
Pooh-poohing the idea of a collapse after the rebates, Philip E. Benton, general manager of the Ford division, says: "I don't think history is much of a teacher in this new game we're playing." Even so, Mr. Benton admits that he sees to quick return to the year-ago level of domestic car sales.
"But having said that," he observes, "I think the key to a resurgence in domestic car sales are the new products coming along." Ford Motor Company will replace the aging Ford Pinto and Mercury Bobcat in the fall with the Escort and Mercury Lynx.
Chrysler, too, has its replacements to the Dodge Aspen and Plymouth Volare. A year from now GM introduces its J-car successor to the Chevrolet Nova.
Clearly, despite a severe disadvantage with the imports now, all domestic carmakers are planning an avalanche of new competitive cars over the next few years. Ford will bring out a significant new car about every six months for the next four years, spending $4 billion a year in the process.
Mr. Benton affirms that Ford now has no plans to extend the rebates beyond the end of March, relying instead on what he calls some "product-freshening actions" in the spring, plus heavy advertising.
"We felt we needed something dramatic a few weeks ago because the domestic auto market had almost come to a halt," he adds. Thus, the rebate bottle was uncorked.
What have the giveaways done for ford division? Despite sharply boosted sales for some makes, such as Thunderbird and Fairmont, total Ford Motor Company sales were off a whopping 31 percent in February as compared with the same month a year ago. Chrysler was off 26 percent and GM 7.2 percent.
At the same time, the imports took a record 27 percent of the US car market for the month. Volkswagen, which builds Rabbits in Pennsylvania, near Pittsburgh, was up 24 percent over February 1979.
While Ford has not been hurting to the same degree as long-harried Chrysler Corporation, Ford nonetheless has lost its longtime footing in the marketplace either to GM or the imports and is losing hundreds of millions of dollars on its North American automotive operations. The only thing that keeps the company in the black is its highly profitable operations overseas.
Will Ford, which had a slim 17.4 percent of the car market in February, be able to regain its historic position in the marketplace?
Mr. Benton thinks it can. "This is a very fluid industry,' he says. "The only thing that Ford can do is to bring out the products that are now in demand." This means more small, highly fuel-efficient automobiles.
William O. Bourke, head of all Ford North American automotive operations, declares that the company is in the small-car business to stay.
"For the first 20 years that I was in the auto business," notes Mr. Benton, "you had to strain mightily to pick up 1/10th of a percentage point in penetration, but now it is swinging by 3 or 4 percentage points at a clip."
"If we come out with the right products I think we can get back a lot of buyers," he adds.
Ford's loyalty rate is no more than 60 percent today. In other words, about 60 percent of all the people who buy a Ford product are almost sure to buy another ford car the next time around. GM's rate is significantly better.
"Many people today are not the loyal stick-with-GM or stick-with-Ford type of buyers," notes Mr. Benton. People usually buy what they like. If they want high mileage, they go with the makers that build the high-mileage automobiles.
Meanwhile, the Ford division's share of market is off drastically from a year ago: 12.5 percent compared with 15.6 percent in 1979. Pinto is down from 2 percent of the total car market a year ago to 1.7 percent now. As a percentage of the subcompact segment, however, it is down from 9.7 percent to 6.2. "This is down sharper than I though," reports Mr. Benton.
The Ford division chief says he isn't too bullish for the year. "I'd be more bullish if I were named Toyota, Nissan, or something like that," he sighs.
"I don't think the domestic industry is going to come back before the fourth quarter, although I hope that in the spring we will see some uptick."
The automan concludes: "I've never seen the industry go down and then come back significantly before the advent of the new models."