The Economy: The Rattles in the Engine

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Now he and Wife Louise live in a modern, white house in Detroit's executive suburb of Bloomfield Hills. (Their daughter is married to a Chevrolet dealer in Florida, and their two sons—both Harvard law graduates—are lawyers). Of course Roche has a Cadillac, but he often test-drives a different car home from the production lines. He wears his responsibility as comfortably as an old shoe. When he got word last June of his promotion to a job that paid him $557,083 in 1965, he celebrated with Fred Donner and ex-President John Gordon by going to the New York World's Fair and taking the Pepsi-Cola ride.

Hunches & Hopes. Jim Roche arrived at the top just in time for trouble. Even when Detroit was in the midst of selling an astounding 8,700,000 cars in the U.S. last year—39% more than in 1960 and 21% more than in 1964—its computers were beginning to turn up some early warning signs for the current year. The industry's '65 sales record was artificially swollen by sales of 300,000 cars that were ordered but not delivered during a strike late in '64; moreover, sales last year ran more than 600,000 above G.M.'s carefully charted projections of "normal growth"—and insiders knew that they could not keep on beating the numbers game forever.

Still, Detroiters hunched and hoped that they could defy the statistical omens, if only they could count on the continuation of consumer confidence—the supreme factor in auto sales. Not only has that confidence been worn thin by all the jabberwocky about inflation and taxes, but since January the industry has been hit with everything but a ten-ton truck. To battle inflation, Lyndon Johnson has told consumers that it is patriotic to be parsimonious, and a lot of people are willing to heed him. When inflation winds blow, U.S. consumers do not go on a buying spree but instead forgo big, postponable purchases—such as cars—to save their declining dollars for necessities. On top of that, 250,000 potential buyers have been shipped to Viet Nam, and Stateside draftees and 1A civilians get 4F ratings from finance companies.

Another depressant to Detroit is that the price of cars, stable for years, has risen: new safety features on the '66s added $60 to $80 to the list price, the reimposition of excise taxes in March tacked on another $25 or so, and tight money has kicked up the carrying charges for an average car loan by $24 a year. Says Ford Division Chief Donald Frey: "The willingness of the consumer to go into hock has reached a plateau."