Detroit - big profits, high prices
THE American auto industry may not yet be in passing gear - leaving its aggressive Japanese competitors in the dust so far as the car-buying public is concerned. But by every measurement Detroit is now roaring along a roadway that - for 1984 at least - will mean popular new high-quality products, solid retail sales, and hefty corporate profits.
It is now time for Detroit to pass along to the American car buying public the results of its new-found financial and sales well-being. That should mean providing lower prices and expanded competition. Reaching that objective would logically mean that Detroit must be willing to give up current quotas that restrict the numbers of Japanese imports allowed into the United States, while also working flat out to consummate as many joint ventures with overseas firms as possible to produce smaller, leaner, cheaper cars that are in sharp contrast to the expensive products of $8,000, $9,000, $10,000 and up now typically found in auto showrooms.
For Detroit - which dominated the world as well as the American car market for most of this century up until recent years - the recent financial and sales turnaround has been dramatic and welcome news. By the late 1970s it seemed as though a number of US firms - most especially, Chrysler - were in genuine danger of either being gobbled up by overseas firms in mergers, or bankruptcy. Now, one need only look at Chrysler's record $706 million first-quarter 1984 profits to see how well most of the US firms are doing. Sales of new US-made cars were up by 33 percent for early April. Ford's Escort continues to be a hot seller. Chrysler's new minivans are sold out months in advance of delivery. General Motors continues to dominate the US market overall - and is just announcing a new line of front-wheel drive large cars.
And look at bonuses and pay levels for some Detroit executives. It was recently announced that the chairman of Ford was paid $1.42 million in salary and bonuses for 1983, while exercising stock options worth almost $6 million. Such examples will obviously make it more difficult for Ford and GM to ask auto workers to show wage restraint in their contract negotiations later this year. The contract issue is crucial because Japanese manufacturers already have a price advantage of about $1,500 per car because of lower wage and benefit levels for their workers. US auto workers are expected to seek to regain wage and benefit concessions given up during the recession.
Meantime, Detroit's present affluence is spilling over into corporate planning. Chrysler's chairman now talks about that firm buying - would you believe? - a bank.
What needs to be clearly recognized in all this new-found well-being for Detroit is that the United States car-buying public is more than paying its share in financial support.
The current ''voluntary'' quotas on Japanese imports were meant to be temporary - a two-year pact to enable Detroit to retool its product mix to compete against smaller, more fuel efficient Japanese imports.
The quotas, although upped slightly from l.68 million units annually to l.85 million units, are now going into their fourth year.
They should be allowed to expire after that. The quotas have worked against genuine price competition. Japan used the quotas to sell high-priced products in the US. And Detroit used the quotas to help boost prices of US cars - up nearly 40 percent in three years, according to the US Commerce Department.
US manufacturers argue that if the quotas are lifted, Japan will flood the market with cheaper imports and capture 30 percent or so of the market, instead of the 27 percent now held by imports in general.
But does that have to happen?
The major US firms are now turning a profit - and turning out high-quality cars. There is no reason to believe that Detroit could not match its competition.