(9 of 10)
By being "right," Romney means that the compact-car market is far bigger than other makers have previously estimated. One prime piece of evidence: the entrance of Studebaker-Packard's compact Lark, which has not hurt Rambler at all, even though the Lark is being turned out at the rate of 4,300 cars a week. A year ago, the Big Three's experts estimated the compact-and small-car market at 500,000 a year—at most. Last week they had raised their sights, expect the compact market to range from 1,500,000 to 3,000,000 within five years, exclusive of imports. Says Romney: "In five years the compact car will have at least half the auto market."
That market may be 7,000,000 cars by 1965, as the U.S. population explosion continues and all the World War II babies reach car-buying age. Thus, in a growing market, the Big Three's compact cars will not necessarily be sold at the expense of the Rambler.
No one expects that the market for small foreign cars will disappear, but most automakers estimate that it will grow no bigger. In fact, it may shrink. One indication is that foreign cars are no longer as hard to get as they once were, and order backlogs have dwindled. The Big Three's compact cars will also be competing against their own imports.
No one expects the big car to disappear, but its market, too, may shrink. While working on their compact car, the Big Three are gambling on continued demand for bigger, flashier cars by planning 1960 models that are longer, lower and wider—with new fin treatments. G.M.'s cars will be completely done over; the Ford, Edsel and Mercury will also be completely redesigned; while Chrysler is planning changes, its main emphasis will be on new interiors.
But there is little doubt that the big car's medium-priced lines will be hard hit by the approaching battle of the compact cars. Their sales, which were 37% of all sales only four years ago, last week were down to 25%—and still slipping. Most experts expect the new compact cars to occupy the spot once held by the Ford, Chevy and Plymouth before they got big enough to push out the medium-priced cars.
Auto Bigamists. In the upcoming battle Romney will have one great advantage that the Big Three cannot match: his low break-even point. He can turn out considerably fewer cars than now and still make respectable profits. In its last fiscal year American Motors netted its $26 million profit on sales of only 169,000 units. Ford and Chrysler together, on the other hand, sold 1,429,000 cars in the first nine months of 1958—and lost $61 million between them. Romney can also count on financial backing from his Kelvinator appliance division, which he has thoroughly overhauled; Kelvinator sales are up 18.7% over last year.