U.S. MOTOR INDUSTRY

Hokitika Guardian, 25 November 1929, Page 2

U.S. MOTOR INDUSTRY

A PRODUCTION PROBLEM

STRAINING BUYING ACTIVITY.

Enlargement of the production schedules of automobile manufacturers has presented the industry in tlie United States with a serious problem which not onty threatens the welfare of dealers but which may react unfavourably against the economic structure of tlie business, according to a statement by Mr AV. A. Miller, president of the AA 7 il!ys-Overlaud Company, piintod in the "New York Times.”

"The industry is faced with a. serious problem,” said Air Aiiller. "Year after year motor-car manufacturers have set their production schedules at higher figures. The company that produced 200,000 cars last year set its mark at 250,0(X) tor the current year; since last .year’s sales totalled 350,000, the goal for the .year was set at 400,000 and so on

"The ability of the public to absorb an indefinitely increasing number of cars is constantly over-estimated. As a result, from the first month of this year v\e have seen automobile plants running at record production. Dealers have had cars shipped to them in excess of ; the purchasing power of their communities, creating a problem of meeting Joans fiom banks and finnn e companies. Long trades with the selling of cars at a net loss to the dealers is the. result And dealers find that while they have done an increased volume of business, their profits have dwindled or losses-have been sustained. The user-car problem of to-day. isa direct result of this policy of overbuilding on the part of mamiiacturers. UPWARD TREND OF COSTS.

"This has !>een done on the theory that increased volume meant decreased costs. Up to a certain point this is correct in so far as ■ manufacturing economics are concerned, but tlie theory fails when the volume is not maintained. Sales forces are expanded, plants equipped and tooled, materials bought-to>carry out these' increased productimiMschedules. •’ H H "In these closing months every Wear manufacturers usually find a"iWaikefc unable to 'absorb the mini bet df cars they intend to build. Output’is 'curtailed, with the result'that at the end or tlie year a- considerable lessdr ’riumber of units have actually on which the average overhead I 'expense has taken a decided'upward trfeilddtfrid materially affected the producer's prbfits per car for the year." ’’ 1 That his company with the- dealers’ interest in mind, intends to be the first big producer to apply corrective measures and to adopt a 1 policy which, he predicted, would become the practice of the industry was the assertion of Mr Aiiller, who continued :

“This year we will produce hi 'the neighbourhood of 300,000 cars, :-A\’e do not plan to increase this total'.’next year, AVe believe it is the 'conservative number of cars our dealers : can move without the need of forced' .selling, unprofitable trades, excessive used car stock, and with the turnover in their capital to assure a sound return on their investment at the end of the year;- ’■ -■' - -/s! ■ «-> * "AVe will keep our productive capacity absolutely flexible SO’ that”as dealer outlets increase and resiiltiil'g increased retail demands warrant’ expanding our output, we can do it promptly and efficiently. AA 7 e are confident that the result will be a large increase in our own profit.' "With' this policy each new car sale will net our dealers a substantial profit. They will he able to keep used car stocks at a minimum, and turning over regularly, and their net for the year will be substantial. “The flood ’of ‘ new cars from the factories and the piling up of used car inventories, both of which shoulder an unbearable burden on the automobile retailer, can be stopped when all tlie manufacturers adopt a policy of producing in accordance with reasonable retail demands.

"AA 7 ith such a policy universally adopted there will be no used car problem.”