The Car Price Swindle

It takes the power and greed of the auto companies to show how seriously the Nixon Administration’s price control program has failed the consumer and worker. Partly because of consumer and labor pressure, but mostly because General Motors and Ford overreached themselves in demanding large price increases, the Price Commission has relented and will hold unprecedented hearings on auto price increases on September 12. The Chairman of the Commission, C. Jackson Grayson, has declared that no price increases for 1973 model cars will be finally approved until after the hearing.

The mockery which the big auto companies have made of the namby-pamby government price control program can be seen in the following figures. For the second quarter of this year, GM profits are at an all-time high, running a staggering 28 percent over the same period last year, which itself was the second highest in recent GM history. Ford chalked up a profit increase over last year’s second quarter of 43 percent. Both companies are heading toward the most profitable year in their long history. As one giddy GM executive was heard to say to his lunchtime associates at a Detroit restaurant near the GM headquarters, “If this be price control, let’s have more of it.”

The auto industry’s confidence that the September 12th hearing in Washington will not change the course of events rests on their cushy relationship with the Price Commission over the past year. The Commission refuses to disclose the factual basis for the repeated price increase approvals it has given the auto companies since last fall. Mr. Grayson keeps secret all information provided him by the auto industry, and all contacts between Commission officials and auto company representatives. He won’t even supply consumers with a general idea of what information is being supplied by the auto companies.

Since the Commission does not have the necessary economists and other specialists to begin to evaluate any information from Detroit, keeping the door closed on the public also keeps the Commission from having to admit that it can do little more than rubber‑stamp the price increase requests.

Other factors favor the auto companies. This is an election year. What they do not get now by way of their full demand, they plan to get in January. The Commission permits these interim or incremental increases during the model year to keep the total increases from coming at once and generating a consumer revolt.

Now comes the Bureau of Labor Statistics with its annual report on new car quality improvements six weeks ahead of the usual release date. Since BLS relies on the auto companies for information, it is not surprising that the companies only push what they say are quality increases and decline to divulge quality decreases. The BLS then swallowed the industry line that the increases were necessary just to pass on the cost of safety and pollution features required by the government. For example, the Bureau attributed a $69.90 value increase for 1973 cars due to bumper improvements required by safety laws. It neglected to mention that the legally required safety requirements for bumpers were already met by most domestic 1972 autos.

The White House, through the Cost of Living Council, is embarrassed by the behavior of the auto companies. Last year’s tax relief package for corporations benefited most of the auto industry and was alleged to help consumers through lower prices and the generation of more jobs. Instead, consumers are being gouged and there are fewer jobs even though industry-wide domestic car sales are 8.5 percent higher in the first six months of 1972 than last year. The average number of GM hourly employees in the U.S. was down 4.2 percent (17,800 less jobs) in the second quarter of this year compared with the same period in 1971, but its domestic vehicle output was up 5.4 percent during the same period.

It is this trend — the divergence between exorbitant prices and profits, on the one hand, and fewer jobs on the other — that has brought the United Auto Workers to demand reduced car prices. The figures also suggest improved productivity which should lead to lower prices. The auto industry wants to keep to itself information about such reduced costs of production.