Show j In Auto Industry In predicting the shape of things to come in the auto it seems advisable first to look back at what happened during a year packed with THE early months a Teamster strike hampered the flow of goods and ultimately resulted in increased freight settlement terms of a rubber strike boosted the price of rubber products and toward year's end a strike by the against GM curtailed over 50 per cent of domestic auto SHORTLY before year's a agreement marked a cutoff point for the poor and profits which the auto industry had experienced in For the full the industry produced close to million U. S. With the start of the first quarter of the industry came alive and output surged well above the meager pace set in WITH- THIS stronger rate and the improved near-term outlook because of President Nixon's new game the Research Department of Babson's Reports looks for a 1971 total of about nine million domestic up one and a half million units from the levels of last For the first six months of a production gain of 18 per cent was run up over similar SO FAR in 1971 sales of U. S. autos have shown vigor and demand should be even stronger through the rest of the due in part to the reduced com edge of the foreign car This does not an end to the slow gains being made by imported The sales of foreign cars which last year were close to million unit are expected to increase to million units in 1971 despite a 10 per cent import THIS represents a potential per cent increase over last At this estimated imports will account for some per cent of 1971 auto only a fractional change from last year's per cent and primarily a reflection of Nixon's A trend toward the purchase of smaller cars is not new to the but it does seem to be gaining strength month by In sales of the smaller vehicles v captured 39 per cent of auto sales during it is not difficult to cite the outstanding adverse factors in the auto industry at this high prices for both labor and raw continued foreign competition although somewhat reduced and stringent and expensive safety But it should also be noted that there are many favorable a number of them new to the FOR the elimination of the 7 per cent excise tax at per should spur demand for autos to a the increasing use of automation and space-age materials should reduce the pressure of climbing production The imposition of a 10 per cent surtax on imported cars will certainly serve to place domestic auto man- in a considerable stronger competitive THE PRESIDENT'S pro- to restore the investment tax credit initially at 10 per cent and then at 5 per cent on a permanent basis should also aid the although admittedly the auto makers have their share of the overall outlook is We expect that the satisfactory quarter-to-quarter earnings comparisons turned in so far this year will THE STOCK market appears already to have recognized the generally improved and thus we feel at present that the equities of the auto manufacturing firms are fully But for investors who wish to participate in the improved industry the Research Department of Babson's Reports favors purchase of the common stock on the of or both supplying the auto makers with original |