Car Makers Say They Want to Cruise

Flat is good. That is the auto industry’s mantra for 1996.

Flat sales. Flat production rates and a steady stream of profits. No boom, no bust, just cruising along on a historically high plateau.

“It’s a slow-growth market, but there are some advantages to that,” said Harry J. Pearce, executive vice president of General Motors Corp.

Some critics say that’s putting the best face on a less-than-desirable situation--like sticking a Cadillac grille on a Volkswagen Beetle. Flat means projected sales and leases of 15 million new cars and trucks this year, down from 15.1 million in 1995 and 15.4 million in 1994.

Pearce said the advantages of flat will show up primarily in production planning. In more volatile times, say in the late 1980s and early ‘90s, auto makers continually adjusted production plans and lost money in the process. Sales spiked and tumbled, causing the companies to produce too many passenger cars when people were beginning to demand trucks, or to build too many small cars for a market in which gasoline was cheap and plentiful.

Flat creates “a much better environment for us to operate,” Pearce said, echoing comments by executives at rival Ford Motor Co. and Chrysler Corp. “We can plan better” and also do a better job of weeding out development and production problems that continue to haunt GM and its competitors, he said.

But in an industry in which more traditionally is better, Pearce’s assessment butts into the skepticism of analysts.

There are 39 major brands of vehicles sold in the United States today. Each of those brands (such as Chevrolet) has sub-brands (i.e., Chevrolet Cavalier), and many of the sub-brands have sub-sub-brands (as in Chevrolet Cavalier Z28). At the North American International Auto Show here, domestic and foreign car companies are introducing 55 models, many of which will go on sale this year and in 1997.

Crowd those brands and models into a market that is growing a scant 0.5% to 1% a year, and you have problems, said J. Ferron, a partner and automotive consultant with accounting firm Coopers & Lybrand.

“The auto makers aren’t saying it, but many of these new cars you see around you will soon be carrying consumer rebates,” Ferron said, surveying the glistening array of new cars and trucks at Cobo Center here.