OCR Text |
Show Auto Sales Up Auto sales, after chalking up 1977 totals of slightly over 11 million units, have been experiencing a stop-and-go pattern in early 1978, with the volume trailing the comparable compara-ble periods of last year. Although car manufacturers have remained quite bullish in their forecasts for full-year 1978, two adverse factors have dimmed early hopes for an advancing pattern to continue. con-tinue. THE WILD winter weather in many parts of the country and the difficulties connected with the coal strike have certainly cer-tainly worked to the detriment det-riment of the automotive industry. in-dustry. Also in a negative vein, inventories in-ventories have moved up sharply and are serving to restrain current production of certain models. ONE THING is sure, prospects pros-pects for the full 1978 year have become far less promising promis-ing as a result of the sudden increase in inventory totals and the more lethargic sales pace to date. We are in a critical time period in terms of reversing the sales trend for the industry. in-dustry. The burden rests on Detroil auto moguls in this important spring selling season. THERE ARE, of course, several favorable factors to stimulate sales, including the relatively healthy economic situation, the availability of credit, the gains in employment as . unemployment unemploy-ment diminishes. Overall, prospects are comparatively good, but we do not expect to overtake last year's spectacular spec-tacular showing. It should be remembered that 1977's sales total was second only to I973's all-time high of close to 11.5 million car sales. On the other hand, we do not anticipate that selling for the present year will be anywhere near so low us it was during the energy crisis slump. BEST GUESS is that some shrinkage will be seen, about on the order of 10 percent to 12 percent year to year, but the final results should be quite favorable for autos as a whole. Therp are several things about the new cars that can be troubling to potential buyers. There are the sizable price increases over such a short period of time. There is some public uneasiness over the apparently unending climb in labor and raw materials costs, plus the constantly rising ris-ing outlays for government-mandated government-mandated safety devices. ' NEVERTHELESS, the new models with their improved gas mileage capabilities are a strong sales plus for the industry. in-dustry. Also, the tremendous rise in the cost of replacement parts could easily sway someone whose auto is in need of major repairs to consider con-sider a brand-new model. It has been plain even to the casual observer that for years Detroit has loaded up its products with expensive and fancy options. Even though consumers have always been able to purchase a plain or stripped down model, history bears out that the typical auto buyer definitely desires to have all the "goodies" in spite of the higher costs. FOR EXAMPLE, one of the costliest options is air conditioning. condi-tioning. In the 1977 model year, some 82 percent of U.S. cars came equipped with factory fac-tory installed air conditioning. condition-ing. The auto makers are, naturally, na-turally, quite aware that this option, like many others, is a very profitable add-on for their product. There's no question but that a large amount of optional gear will hike car maker's profits in 197S. OF COURSE, extended labor difficulties and the adverse ad-verse effects of inflation, and consumer resistance to rising prices could upset the final tally- But the Research Department Depart-ment of Babson's Reports does not look for a long-term numbing effect. Rather, we do feel that 1978 may well turn out to be a transition year for the auto industry, with reasonably good expectations expec-tations for final results. HENCE, the staff of Babson's Bab-son's is of the opinion that the common stocks of the major automotive companies may well be retained in investors' portfolio for their longer-term longer-term potential for appreciation. |