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Chrysler last week reported a 1981 net loss of $475 million, bringing combined losses of all the major U.S. automakers to $5.5 billion over the past two years. The red ink threatens their ability to raise the $60 billion that they need to spend on retooling by 1985 to build smaller and more fuel-efficient cars and meet import competition. Says Robert Stempel, general manager of General Motors', Chevrolet division: "If the economy does not turn by the end of this year, it will be the beginning of the end for the U.S. auto industry."
Investment. Economists of all schools agree that the nation cannot in the long run enjoy noninflationary growth without a large increase in business spending for new plants and equipment. But Commerce Department surveys indicate that U.S. industry generally plans to spend .5% less on capital projects than last year, after adjustment for inflation. One major reason, of course, is that uncertainties over the course of inflation and recession have made it difficult to calculate whether the products of a new factory could be sold profitably. Indeed, persistently high interest rates have thus far seemed to many businessmen to amount to nothing more than a devil's trade in which one menace, inflation, is swapped for another—the cost of money itself.
Some economists go so far as to calculate that towering loan charges have just about wiped out the investment-stimulating benefits of Reagan's tax cuts to business. Moreover, companies unwilling to shackle themselves for decades to the high rates now charged in the long-term bond market are increasingly turning to short-term financing as a way to raise tide-me-over cash until long-term rates ease back. In the process, the so-called commercial paper market, where such funds are often raised, has grown into a wobbly mountain of debt exceeding $164 billion, up from $83 billion in 1978. Since few, if any, companies would even consider trying to finance long-term projects by raising short-term funds at rates that could leap to new highs every time the debts had to be renewed, more and more firms are simply scrapping expansion plans altogether. Last week American Airlines joined the list, canceling an order to buy 15 new Boeing 757 jets for $600 million and dropping options on 15 more. By way of explanation, the company gave the bluntest and most understandable of reasons: no money.
Bankruptcies. Dun & Bradstreet, the credit-reporting firm, last year counted 17,043 business failures, barely under the post-World War II record of 17,075 in 1961; before then, the number had not been so high since 1933, one of the worst Depression years. This year has started off even worse. Failures in the first seven weeks totaled 3,065, or 50% more than a year earlier. In the small town of Barnesville, Minn. (pop. 2,500), Thomas Fisch, head of a building-supplies firm, counts seven businesses that have recently gone bust in his home town. Included are a radio-TV shop, a Ford dealership, an auto repair shop and one of Fisch's building-supplies competitors. Fisch worries that his own