Detroit's Uphill Battle

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jobs. Various analysts estimate that even if car sales fully rebound in 1981 or 1982, the auto industry will have lost up to 500,000 jobs since 1978.

The U.S. automobile consumer is also due for a shock. As cars get smaller, they will look increasingly similar and be painfully more expensive. Detroit has long subsidized the sale of its small cars with profits from its big ones. That will stop. GM is already closing the price gap between big and small by raising the prices of its X-cars faster than those of its larger ones. Since April 1979 the basic sticker price for a Chevrolet Citation has increased 37%, to $6,148.

Along with smaller cars come smaller engines and generally less safety. By 1985, the V-8 engine, which has been the auto industry's mainstay since 1954, will be virtually dead. Replacing it will be smaller power plants such as the L-4 and V-6 engines in the X-cars. Moreover, almost none of the new U.S.-made models will be larger than today's compact Ford Fairmont. Unfortunately, now that cars will no longer resemble fortresses on wheels, there will be less protection in an accident. Two weeks ago, NHTSA reported that ten out of twelve small cars failed a test in which they crashed into a wall at 35 m.p.h.

With Detroit's new plants, new equipment and new emphasis on quality control, the reindustrialization of the American auto industry has begun. Moreover, Detroit's experience provides many lessons for other sectors of U.S. business. The most obvious is the need to avoid such industrial decline. A generation of neglect has sapped Detroit's competitive strength, and further delay would have put it in graver peril. Only the huge capital investment now being made has given American automakers the chance to survive.

Detroit's experiences during the past 18 months, as Chrysler tottered on the brink of bankruptcy, also raise again the question of business's relations with Government. Chrysler continues to exist only because of federal aid. Talk of other business-Government agreements in the industry has already started. The Carter Administration has proposed that a group of auto, labor and Government leaders meet to discuss the industry's problems. Says Transportation Secretary Goldschmidt: "We value this industry, and we don't intend to let it fail." Ford President Petersen adds: "It's my job to improve our productivity and efficiency as much as we know how. But I'm saying that when it's all done, that's not enough."

There is certainly much that Washington can and should do for the auto industry, as well as for U.S. industry in general. Tax laws need to be changed to make it easier to raise capital to replace obsolete factories and to speed the write-off of new investment. Regulations should be re-examined to separate the necessary and helpful from the needless and expensive. The Environmental Protection Agency last week gave Detroit some relief, when it decided to drop a 1982 exhaust emissions test requirement. This will save the industry $250 to $350 million.

Detroit and other businesses, however, must remember that the Government is not some new Magus who comes bearing gifts but never asks for anything in return. Chrysler Chairman Iacocca now serves two masters: his board of directors and the Chrysler Loan Guarantee Board in Washington, which, for example,