General Motors Corp. Chairman Thomas Murphy thinks that forecasts of long or deep recession are incorrect.
He also remains opposed to federal government assistance for ailing Chrysler Corp., disputing claims by his competitor that it's "all or nothing" -- either taxpayer assistance now or overnight collapse of the nation's 10th largest industrial firm, which would add 250,000 persons to the nation's jobless lists.
On both points, Murphy is at odds with the most-loudly-spoken conventional wisdom of the day. The chief executive of the nation's largest industrial firm elaborated on his views in an interview here Tuesday night.
"People are preaching recession repeatedly," Murphy said. Although the Federal Reserve Board's recent drive to restain credit expansion has led to "a degree of caution. . . that's helpful," personal earnings remain substantial and more people are employed than ever before, he added.
Financial markets still are digesting the central bank's actions, but Murphy forecast a "positive impact" will be apparent within a few weeks. Although stock prices have taken a beating and rates are setting records every business day, he pointed out that the dollar has strengthened on exchange markets and the price of gold has declined.
"We expect no dramatic increase in the economy into early 1980. . . but a later strengthening" that will make next year "reasonably good," Murphy stated. "People are going to be prudent. . . [but] they will continue to buy and support the economy."
GM is planning to match these expectations by continuing record spending for expansion and modernization. After outlays of $5.3 billion in 1979, the company is planning to spend "well over" $6 billion in 1980.
Based on these relatively optimistic assessments -- and his optimism in early years has often been well-placed in the face of gloomier industry forecasts that were proved wrong -- the GM chief said:
Although the 1980 model year has just begun after a delayed and slow start that helped dealers sell part of the 1979 inventory backlog, passenger car sales of 1980 models should total about 11 million while truck sales will be in excess of 3 million units. Car sales of that volume would represent one of Detroit's best years -- about 5 percent below the 1978 model year.
GM sales for the 10-day period dropped 8.4 percent from 175,407 to 160,726, the automaker said yesterday. He noted that the year-to-year comparison is distorted because of an abnormally strong sales period last year (industry volume was at an annual rate of 15 1/2 million cars and trucks) and said a true indication of 1980 model sales won't be available for about a month.
Third-quarter earnings, to be announced shortly, were "not a world-beater . . . they will suffer by comparison with last year" when GM earned $1.84 a share. Murphy declined to be more specific, but Wall Street analysts have forecast flat earnings in the third quarter and a substantial decline for the October-December period when compared with the very strong GM 1978 earnings. For the year as a whole, Drexel Burnham Lambert Inc. is projecting GM profits equal to $11.25 a share vs. $12.24 in 1978.
On the Chrysler question, Murphy admits to being "a little ambivalent." Indeed, various press reports in recent weeks about Murphy's position on aiding the No. 3 auto firm have reached different conclusions.
In the interview here, Murphy stated emphatically that "a solution should be found, sought in the private sector. . . we have a profit and loss system. . . but people always are willing to disregard the loss side" when a problem develops.
He emphasized his view that the government is being misled when told that the only issue is federal support or Chrysler closing its doors. "yes . . . [Chrysler] will have to regroup its forces. . . make new determination of direction. . ." Such rethinking by Chryler's officers is under way -- specifically whether to cut out some models in the 1980s -- according to a report this week by the cousulting firm of Booz, Allen & Hamilton.
"It is a risk business. . . one we assumed in 1974, which some people in the industry were not willing to assume," he said in an obvious reference to previous management at Chrysler when GM moved on its own to spend huge sums to develop smaller cars.
At the time, GM had a lower fleet average in terms of miles per gallon than did Chrysler or Ford Motor Co. -- about 12 mpg vs. 14 mpg, he noted. To meet government mileage standards that were adopted later, GM had to increase its fleet average by 53 percent compared with 40 percent or less for its major competitors. (GM's fleet average for 1980 models is projected to be 21.4 mpg.)
Meanwhile, Rep. James Blanchard (D-Mich.), a sponsor of Chrysler loan guarantee legislation, said yesterday that he has been "assured" by White House domestic affairs adviser Stuart Eizenstat that the White House supports aid for Chrysler.
He said he isn't sure just what form of aid or what amount will be proposed -- probably next week.
But United Autoworkers President Douglas Fraser said yesterday that the Treasury won't "be going in with any specific amount when it introduces legislation to aid Chrysler," adding, "I think that is much better" than the $150 million ceiling.
Fraser spoke in Highland Park Mich., after returning from Washington where he met with Vice President Mondale and Treasury Secretary G. William Miller.
Sen. Russell Long (D-La.), chairman of the Senate Finance Committee, also joined a growing list of legislators who have stated that $750 million of loan guarantees -- as proposed by Chrysler and suggested by the administration -- may not be enough to save Chrysler. And Sen. Gaylord Nelson (D-Wisc.) said: "Everybody who is knowledgeable doesn't seem to think it will be enough."