Since its long downhill slide began three years ago, the auto industry has sought comfort with the promise, "Wait 'til next year." This is "next year" for the industry.
In the next 12 months, the industry will get answers to some critical questions that will shape its future far into the 1980s, according to industry officials and outwide experts. These issues are:
* The automakers' demands for heavy wage and work rule concessions by the United Auto Workers, with the likelihood of deeper layoffs and increased purchases from foreign suppliers if the companies come away dissatisfied with the union.
* The fate of the government-backed Chrysler Corp., which appears to be running out of Houdini escapes from its financial plight. A solid recovery in auto sales by the second half of 1982 seems essential to keep Chrysler going.
* The future role of the Japanese automakers in the U.S. market. The second year of a two-year limitation on Japanese auto imports begins in April, and the Japanese are already protesting that the restraints are too severe. If U.S. car and truck sales do begin climbing in the six months, Detroit is certain to want to keep a tight lid on Tokyo to reap as much of the gain as it can.
Consumer attitudes toward new cars. If the optimists are right, consumers will be buying cars at something close to pre-recession rates by the end of 1982, with the trend continuing into the mid-1980s.
If pessimists are right, however, a fundamental change has occurred in car-buying patterns brought on by continuing high interest rates and the shock of current new-car prices. The result would be slower sales growth than in the past, further plant closings, and possibly, a faster move toward international alliances between U.S. producers and foreign allies.
The key to all these questions is the path that car and truck sales take this year.
Auto sales by the U.S. producers--General Motors Corp., Ford Motor Co., Chrysler, American Motors Corp. and Volkswagen of America--slipped to 6.2 million last year, the worst since 1961. Imports, which took 26 percent of the market, brought total car sales to 8.5 million in 1981.
With an eye on the current recession, Chase Econometrics recently lowered its 1982 car sales forecast to 9.3 million units. David Healy, auto analyst with Drexel Burnham Lambert Inc., is predicting domestic car sales of 7 million and total sales, including imports, of 9.2 million.
But as Healy and other analysts note, the beginning of 1982 is expected to be rough for the carmakers. The current pace of U.S. car sales is only about 5 million units, half of what the industry sells in good times, and not enough to keep most auto plants open on a regular basis.
Healy expects the market to turn upward in the second quarter of the year, but a real recovery won't occur until mid-year, when consumers receive the benefits of the scheduled 10 percent personal income tax cut, he and other analysts say.
But auto sales predictions have proved embarrassingly unreliable--so much so that GM isn't disclosing its annual forecasts this year.
At this point, industry leaders are operating on faith. "I start off as a very strong believer in the pent-up demand" for new cars, says Philip E. Benton Jr., vice president of Ford's embattled North American sales division, whose share of the U.S market has dropped from 20 percent three years ago to about 16 percent today. According to that demand theory, there is such a large accumulation of gas-wasting older cars on the road now that a boom in new car sales is inevitable.
"I also realize we're dealing with people's emotions and they can't be calibrated with a pencil and paper," said Benton. "What's going to make them feel happy and economically secure? I'll be damned if I know."
Chrysler's problem is to stay alive until the sales rates begins to climb. It is hanging on now by selling cars at rebates of $300 to $1,000, sacrificing profits in order to keep a life-giving flow of cash coming in to pay employes and suppliers. Rather than ask the government for more federally-backed loans, Chrysler is certain to sell off what it can, like Chrysler Defense Inc., the division that makes Army tanks, to keep its cash account solvent.
"We'll sell our way out of our problem one more time and we'll be here for the first quarter," Chrysler vice chairman Gerald Greenwald told an interviewer recently. "We've got to get out of the woods permanently. It is unlikely that can get done in a world of 7 million cars a year."
The bleaker the industry's outlook in the first half of the year, the stronger the demands by GM and Ford for unprecedented contract concessions from the UAW. Chrysler won wage concessions as part of its survival plan, worth $500 a car, according to Chrysler estimates, and the top two U.S. automakers are determined to do the same.
The union is prepared to delay wage increases and slow cost-of-living adjustments in return for protection against further plant closings and for company retraining of workers whose jobs are being terminated. Job security is the union's No. 1 priority, a spokesman said.
But the companies' plans include further cutbacks to reduce their U.S. operating costs, analysts believe, and GM Chairman Roger B. Smith seemed to have that in mind when he warned recently, "We've asked them and asked them to sit down and negotiate with us before it's too late. I'll tell you something--it's too late for somebody today."
The bargaining process is a true turning point for the union and the companies that could produce anything from a compromise that strengthens the U.S. industry and its workforce against foreign competition to a ruinous stalemate and strike at year's end.
The central issue is the argument by GM and Ford that they are paying $8 an hour more in wages, benefits and other labor costs than Japanese competitors. Since GM employes have logged one billion hours a year recently, that difference translates into an $8 billion penalty, Smith protests.
The UAW says the gap is significantly less than that, and the Japanese provide lifetime employment for their basic workforce in return.
The companies are sticking by their arithmetic, however. Ford's Benton says the Japanese can manufacture and deliver a small car to the United States for $1,700 less than U.S. companies spend to produce it here. "If they play that as a price chip" by cutting prices deeply, "there's no way we can touch it. They haven't so far."
If the industry doesn't get concessions, or if sales don't spurt upward in the second half of the year, Ford will step up its recent moves toward Mexico and Japan for more engines and components for U.S. cars, Benton indicated.
"In the final analysis, we have to make a profit. We'd have to cut the suit to fit the cloth. If the cloth gets too small, the question of foreign sourcing looms much larger.
"We sure don't plan to go out of business in the United States," he added. "If we have to make some cars somewhere else, we're sure as the devil prepared to do it," he said.