Wednesday, January 11, 2012

1958: Automotive Industry


1958: Automotive Industry

Archives consist of articles that originally appeared in Collier's Year Book (for events of 1997 and earlier) or as monthly updates in Encarta Yearbook (for events of 1998 and later). Because they were published shortly after events occurred, they reflect the information available at that time. Cross references refer to Archive articles of the same year.
1958: Automotive Industry
Automobile production and sales in 1958 dropped to ten-year lows, and the industry became a symbol of the U.S. business recession. Because 10,000,000 Americans — one in seven job holders in the nation — were employed directly or indirectly in the manufacture, selling, or servicing of motor vehicles, or in building roads for them to travel on, the sharp decline in the automotive industry had wide effect throughout the economy. Layoffs of production workers in the major assembly plants, concentrated in comparatively few cities, resulted in exceptional economic hardship for those communities. Depressed conditions in the automotive field were regarded as a symptom and a cause of the general downturn.
In the 1958 model year — from September 1957 through August 1958 — the automotive industry produced 4,306,000 passenger cars, 30 per cent less than the 6,212,000 cars made in the preceding model year, and 40 per cent below the all-time high of 7,131,000 cars in the 1955 model year. Truck production also fell markedly; in the 1958 calendar year, some 870,000 trucks and buses were turned out, a drop of 21 per cent from the 1,108,000 that came off the production lines in 1957. As the 1959 passenger cars were introduced in the fall of 1958, a wave of brief but costly strikes plagued some of the largest manufacturers. Prices in general rose from the level of the 1958 models, although the general wage settlement which averted a major work stoppage at the beginning of the new model year was the least costly to the industry of any since the end of World War II.
A notable event was the switch in consumer credit for automobile financing during 1958. For the first time since 1954, repayments of automobile loans caught up with and passed the extensions of new loans, resulting in a net contraction of outstanding credit. This indicated that a larger number of consumers would be in a position to buy new automobiles in the 1959 model year. Another optimistic factor was the growing age of automobiles in service; in 1958 the average age of cars on the road was five and one-half years.
With 95 per cent of domestic automobile production in the hands of the 'Big Three' of the industry — General Motors, Ford Motor Company, and Chrysler Corporation — the number of brands offered to the public continued to decrease in 1958. Packard, one of the oldest names in the industry, dating back to 1899, was discontinued by the Studebaker-Packard Corporation at the end of the 1958 model year. The company also abandoned all models except the Studebaker Silver Hawk and brought out a series named the Lark, the only completely new model introduced in 1958. The Lark, a compact car priced from $1,925 to $2,590, was an effort to capitalize on the small-car market, most of which has gone in recent years to foreign-made automobiles and to the Rambler, the only remaining model of American Motors, which discontinued its larger Nash and Hudson lines at the beginning of the 1958 model year.
Increasing public criticism of the automobile industry resulted in the enactment by Congress of a law requiring that manufacturers affix price tags to each car shipped to dealers, showing the list prices of the basic automobile and each of the accessories. The law was aimed at the 'price pack,' a widespread practice among dealers intended to conceal actual prices for competitive reasons. Criticism was also directed at the 1958 styling, similar to that of the previous year, stressing a long, low, and wide silhouette, with prominent tail fins. Auto manufacturers insisted, however, that this styling was actually preferred by car buyers, and they cited sales figures from previous high-volume years to show that the more radically styled models were the leading sellers.
Production.
Virtually the only bright spot in the industry's record for the 1958 model year was the performance of American Motors' Rambler, which sold 162,000 units, almost double the 84,700 units produced in the previous year. This small car, priced well below the standard-sized models, continued to sell strongly in the last quarter of 1958, when 100,000 units of its 1959 model came off the assembly line, double the volume in the last quarter of 1957. The only other 1958 model that was able to record an increase over its 1957 production level was Ford's Thunderbird, a sports-type car whose sales shot up 59 per cent to 34,000. The Edsel, Ford's new entry into the medium-priced field in the 1958 model year, was not considered a success; it sold 60,800 units, however, and was continued into 1959. The overall leader in number of cars sold was Chevrolet, which recaptured the leadership for General Motors after having fallen behind the Ford in 1957. Although Chevrolet production declined from 1,552,000 in 1957 to 1,283,000 in 1958, the drop was not as severe as that of Ford, which plunged from 1,655,000 in 1957 to 961,000 in 1958. Plymouth, the leading make for Chrysler, was in third place in 1958 volume, with 399,000 cars produced, sharply off from its 1957 figure of 663,000.
Prices.
The general price level of 1959 cars was between $50 and $175 higher than the price level on 1958 models, which in turn had been increased slightly in price over the 1957 lines. For the 1959 model year, both General Motors and Chrysler discontinued the least expensive models of their low-priced makes, Chevrolet and Plymouth respectively. Ford moved its new Edsel's price range down a notch, so that at $2,320-$2,800 it could compete with the top of the Chevrolet and Plymouth range. Ford also brought back, after a year's absence, the Continental; its top price for 1959 was set at $10,238, compared with $7,500 for the Continental's 1957 convertible.
Styling.
The industry spent some $750,000,000 to restyle its 1959 models, although major changeovers were not involved. Tail fins, the most prominent feature of recent-model cars, were even more accentuated in 1959 models although less chrome finish was in evidence. Car length and width continued to increase slightly and the low-slung appearance remained in favor. Two-tone color combinations were more popular than single-color finishes.
Engineering.
The 'horsepower race,' in which the major producers had engaged for several years, came to an end in 1958. The 1959 models had only minor changes in engine performance, and there was little emphasis on power for its own sake. There was, however, an increase in 'gadgetry'; more cars were equipped with power steering, power brakes, power windows, and power seats. Auto makers were planning to introduce power radio antennae, power lubrication, and power operation of the rear luggage compartment door, but these innovations were offered sparingly in the 1959 models. Safety belts, which had been introduced a few years earlier and had been heavily promoted by the industry, all but disappeared in 1958, owing to lack of public acceptance.
Foreign Cars.
Importing of foreign-made cars, from the lowest-priced to the most expensive, shot up rapidly in 1958. From 200,000 in 1957, imports rose to 350,000 in 1958 — an increase from three to eight per cent of a shrinking domestic market. Many dealers in U.S.-made automobiles took on foreign cars to serve as a hedge against declining sales of the domestic product. Except for American Motors and Studebaker-Packard, none of the American manufacturers had produced smaller cars, although it was expected that 1960 lines would contain one or more small or 'compact' models designed to recapture some of the market from the foreign makes.
Employment and Labor Relations.
The often stormy relations between management and labor in the automotive field threatened to break out into work stoppages many times in 1958, but there were no real difficulties until the 1959 models came out. Contracts between the United Auto Workers, A.F.L.-C.I.O. and the major automobile companies expired in the spring, but the union chose to continue work without contracts because of the depressed condition of the industry. Eventually, the 'Big Three' settled for three-year contracts, providing for increases of about 28 cents an hour over the contract period. The settlement was less costly to the companies than any previous agreement in the postwar period. A wave of strikes at individual plants followed the general settlement, however, when local issues could not be resolved satisfactorily, and some curtailment of production was experienced in the fall. Earlier, slow production had forced widespread layoffs, lowering average weekly gross earnings of auto workers to $96.50 from the 1957 level of $99.54. Average hourly gross earnings were actually high — $2.51 in 1958 compared with $2.47 in 1957; but weekly earnings were brought down by a decline in the length of the average work week, which stood at 38.5 hours in 1958, against 40.3 hours in 1957.
Company Earnings.
The disappointing sales of 1958 were reflected in the industry's profit-and-loss record, which turned down as soon as volume declined. Of the 'Big Three,' only General Motors was able to show a profit through most of the year. Ford and Chrysler registered losses. General Motors' net profit after taxes in the first nine months of 1958 was $399,100,000, but this was a sharp drop from the $603,400,000 earnings in the first nine months of 1957. Ford's nine-month deficit was $16,200,000, compared with a profit of $229,500,000 in 1957. Chrysler recorded the biggest loss — $45,200,000 in the nine-month period, against a profit of $103,600,000 in 1957.

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