Detroit's Uphill Battle

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huge loss in the second quarter was a shock for a company used to steady profits. Nevertheless, GM's vast financial resources should enable it to glide relatively easily over the current bumps. The company still has a massive $40 billion six-year capital-spending program. The money will pay for the development of a new GM car every six months until 1985. Following next spring's J-car, the sporty Chevrolet Camaros and Pontiac Firebirds will be down-sized in 1982. Then in the 1983 model year GM will introduce a front-wheel-drive family car that will seat five or six.

AMERICAN MOTORS. The joke around Detroit is that the only difference between Chrysler and the American Motors Corp. is that AMC was bailed out by the French government, not the American one. There is some truth to that. Earlier this year, AMC's banks refused to extend the company further credit, and the American firm had to turn to Renault, its French government-owned partner, for a $90 million loan. Eventually, Renault will own 22.5% of AMC.

The long-term prognosis for the tiny automaker is dim. Although it has specialized in small cars for more than 25 years, "AMC has never had the capital to design autos that were technologically competitive. Today it has just 1.7% of the U.S. market. AMC's only new models this year are the Renault 181, which it is importing from France, and a four-wheel-drive subcompact. By 1982 AMC may be phasing out the existing subcompact Spirit and compact Concord, leaving it with a Renault-designed small car to be built at its only surviving passenger car plant, in Kenosha, Wis. American Motors will probably become more and more of a French company as the '80s progress.

AMC's deal with Renault is a forerunner of the worldwide consolidation that is likely to take place in the auto industry during this decade. Last week, for example, Ford confirmed that it was continuing discussions on a deal with Toyota to build cars in the U.S. Some observers predict that mergers among the world's 30 major auto producers will finally result in perhaps only nine superfirms doing business in all parts of the globe. Three of these might be based in the U.S., three in Japan and three in Europe. In addition, there will probably be a few low-volume specialty companies such as Rolls-Royce and Mercedes-Benz.

The world auto market of the late 1980s will also be a much more homogeneous one. U.S. companies for years built big cars like the Chevrolet Caprice for the North American market, and smaller ones like the Opel Rekord abroad for the foreign market. By the mid-'80s, however, there will be one world auto market. The same car is likely to be seen on the streets of Frankfurt, West Germany, and Fargo, N. Dak. The Lynx, Escort and J-cars are all such "world cars." Models will be assembled in places like Japan and South America, in addition to Detroit, from parts that are manufactured in several countries. The result will be stiffer competition among the remaining auto giants. According to a congressional subcommittee study, for example, Europe will import an estimated 200,000 U.S.-built cars by 1983, compared with only 30,000 last year.

The U.S. auto industry will undergo a profound transformation in the 1980s. Additional automation, a slower-growing U.S. market and more overseas manufacturing will inevitably mean fewer domestic automobile