(The following article appeared in the September 9 issue of Was Tun, fortnightly newspaper of the Gruppe Internationale
Marxisten (GIM - International Marxist
Group), German section of the Fourth International. The subheads appeared in the original.
[The translation was done by Russell Block for Intercontinental Press.]
The automobile industry in the capitalist countries is now going through a crisis of overproduction. It is a classical crisis — not just a simple recession. The scope and the duration of the cutbacks in production testify to this.
The Scope of the Crisis
In the first quarter of 1974 the number of new automobile registrations has declined by the following percentages in comparison with the number in the first quarter of 1973:
France
8 percent
Sweden
18 percent
Italy
22 percent
Great Britain
22 percent 22.9 percent
Switzerland
27.4 percent
USA
31 percent
Japan West Germany
31 percent
This has resulted in a rapid pileup of inventory despite a significant cutback in production. Profits are even more clearly off. A substantial cutback in employment is unavoidable.
In France, car production in the first quarter of 1974 (not including trucks) was cut back by 2.7 percent, in the USA by 28 percent, in Great Britain by 26 percent, in West Germany by 18.3 percent. In Italy, production increased slightly but only because Italy was the only country in which production had already decreased in the first quarter of 1973 with respect to the previous year.
The decline in profits was sensational. In the first quarter of 1974, General Motors' profits were off by 85 percent, Ford's by 66 percent, Chrysler's by 98 percent, American Motors' by 58 percent, Nissan's by 40 percent, Toyota's by 83 percent. British Leyland lost £16.5 million (before taxes) in the six-month period ending March 31, 1974, compared with £22.8 million profit registered in the preceding comparable period. Fiat also found itself in the red. Citroën narrowly avoided bankruptey.
In the USA, there was a serious drop in employment. Of the 728,000 members of the United Auto Workers, 1406
79,000 had been laid off by the first week in April and 72,000 were working a short week. That is an unemployment rate of 20 percent (General Motors alone accounted for two-thirds of the layoffs).
In Europe, the layoffs were less extensive. However, there were several waves of partial unemployment (threeday week at Italian Fiat at the beginning of the year; 62,000 workers at Volkswagen in Germany working a short week in the spring of this year). Above all, there was a complete moratorium on hiring, and workers were pressured into early retirement. "Voluntary" separations and other methods were used to disguise the layoffs, but it still boiled down to a reduction in the number of persons employed.
The companies whose profit rate has been hit hardest by the crisis are preparing to make new cuts in employment. The most serious situation is clearly that of British Leyland in Great Britain. On June 21, 1974, this firm announced an "economy" program that anticipates a massive reduction in employment (particularly in the branch that produces the popular Austin Morris).
The Reason for the Crisis
The bourgeois press and the automobile industry public-relations specialists have tried to present the current depression as run-of-the-mill business mishaps engendered by the "energy crisis." There are several reasons for this.
First of all, by using the Coué method, * the companies hope to halt the decline in sales, or at least that portion of the decline that can be attributed to "psychological reasons." (Similarly, Nixon hoped he could stop the recession by declaring that it did not exist.)
We must, in addition, look at the efforts of the industrialists from the standpoint of the importance that the automobile industry has in the imperialist countries (and in a few semicolonial countries like Argentina and Brazil) for the capitalist economy as a whole. The automobile industry is so important that a prolonged depression in this branch of industry would change the whole outlook for investment and the rate of growth in imperialist industry.
Moreover, a more prolonged depression in the automobile industry would unmask the deceptive character of one of the axioms of bourgeois ideology and particularly of contemporary bourgeois political economy - namely, that nowadays the "science of economics" can make it possible to assure sufficient "overall demand" to
*Emile Coue (1857-1926), a French pharmacist and healer whose system of "self-help" won a large audience in Europe and the United States. Coue recommended that his patients repeat over and over: "Every day in every way I am getting better and better." - IP
avoid crises of overproduction, and in addition, assure each important branch of industry a "special demand" to protect it from a sharp fall in production.
But this oversimplified explanation for the automobile crisis- that it was caused solely by the "energy crisis"— doesn't stand up to a serious investigation of the facts. The reality is quite different.
The automobile crisis developed under the influence of three important factors: (1) the economic recession in most imperialist countries, (2) the economic effects of the rise in oil prices, (3) the end of the long phase of accelerated growth in the total number of vehicles in Western Europe and Japan (and secondarily in a few other countries). The "energy crisis" is therefore only one of several factors that brought about the automotive crisis. While the "energy crisis" can be considered the detonator of the depression in this branch of industry, this should not overshadow the deeper causes.
Moreover, the false analysis of many bourgeois observers led to a false perspective. They expected a rapid increase in car sales as soon as the petroleum shortages (or fear of shortages) were over and the rapidly escalating gasoline price increases eased off. But there has been no upturn since March 1974, although the petroleum shortages have disappeared and gasoline prices have stabilized - even if at a significantly higher level.
'Energy Crisis' and Automobile Crisis
What then are the real effects of the "energy crisis" on the depression in the automotive industry? Basically the "oil crisis" affected the costs of operating a car and sales of particular classes of automobiles.
The gasoline shortage, as well as the considerable increase in gasoline prices, obviously inhibits people from buying (and/or using cars). This affects a certain kind of buyer - the lowest income group of auto users— the average skilled worker, lower-ranking white-collar workers, artisans, small farmers and shopkeepers who aren't living on Easy Street, and so on. They are giving more thought than in the past to whether they can deign to use public transportation.
A significant increase could be observed in the use of rail, bus, subway, and other means of transportation for which the private car has been competitor number one in the past decade-not just for the home-work-home route, but also for travel and recreation (weekends, evenings out).
Vacation statistics for 1974 are not yet available. But it is already clear that vacation use of automobiles has decreased to a significant extent, at least in Western Europe and Japan. In addition, the gasoline prices together with the lowering of legal speed limits have wiped out most of the advantages that would justify buying a "middle-sized" or big car as opposed to a small oneexcept for reasons of luxury or prestige. With the exception of a few makes of specialized luxury or prestige cars, large and middle-sized cars have experienced a proportionally greater drop in sales than the smaller cars, which have done better.
On the U.S. market, the sales of smaller cars have declined only slightly, while the sales of cars with big October 28, 1974
engines, which were previously preferred (especially by American customers), have literally collapsed (from 666,- 000 in March 1973 to 350,000 in March 1974). Since the beginning of 1974, the number of sales of small cars has exceeded that of large cars for the first time.
This is why the four big American auto trusts are going over to the production of small cars. American Motors, the weakest of the four, had pretty much made this transition before the outbreak of the present crisis. The three other big trusts have introduced an investment program projected over the next several years.
These investment programs are, however, less ambitious than was originally planned. Ford reduced its program from $1,100 million to $1,000 million. Chrysler, which was even harder hit by the crisis in profits, reduced its investment program from $350 million to $265 million. Only General Motors, which was furthest behind when it entered the small-car market, will invest more in this area this year than in the previous year ($1,300 million as compared with $1,200 million).
This restraint is due both to the drop in profits as well as to the rise in the cost of credit and the uncertainty that weighs upon the future of the automotive industry (and thus also on its sales). So, it is apparent how much even the direct effects of the "energy crisis" are actually intertwined with the cyclical and structural factors that determine the development of dem and for passenger cars in the imperialist countries.
Effects of the Recession
The auto industry (like other industries that produce consumer durables) is more subject to cyclical ups and downs than other branches dealing with consumer goods. It is clear that the budget item "car" for a working-class family is much more easily reduced than the items "food" or "clothing," not to mention rent and related expenses like heating, electricity, gas, water, and so forth.
Thus every recession leads to a falling off in automobile sales that is greater than the general decline in production. If the decline in automobile sales-figures in the USA, Japan, West Germany, Great Britain, and other countries has outlasted the "energy crisis," obviously this must be attributed to the recession-both the actual recession and the one that is expected in a short time. Countries like Australia and Brazil, which have not yet been hit by the recession, have not experienced faltering although they have been affected by the "encar sales, ergy crisis" just like other countries.
restricting credit, which have been taken in
Measures order to slow inflation (no one talks any longer about halting inflation), have contributed to a decline in auto sales by making consumer credit (time-payment plans) more expensive and difficult to get. Particularly in Great Britain the effects of these measures have had a catastrophic effect on the demand for automobiles.
The lack of causal connection with the "energy crisis" can also be seen in the fact that sales have weakened in a number of other categories of consumer durables and services whose sales generally decline sharply during periods of recession. Typical examples: the decline of sales of black-and-white and color television sets in
Great Britain (from 4.1 million sets in 1973 to 2.5 or 3 million projected for 1974); the decline in foreign travel by vacationers from West Germany (the estimates project a decline in 1974 from the figures for 1973), with catastrophic results for the hotel industry in Spain and certainly noticeable effects on Italy and Yugoslavia.
Naturally, it is impossible to estimate how long the recession will last. Thus it is difficult to give a prognosis for the possibility of an upturn in the automobile market in the near future.
What is certain, however, is that the economic situation is getting worse in Western Europe, especially in West Germany (but in France too), where the recession is taking form more and more clearly, while in the USA and Japan the conjuncture seems stable for the moment. There is no doubt that we will have to wait until September and October to see whether the recession will spread and extend into the fall or even the winter of 1974-75, or whether a mild upturn in the USA and Japan in the second half of 1974 will counteract the West European recession and thus slow it down.
The Long-Term Decline in Automobile Expansion
We must put both these cyclical developments and the effects of the "energy crisis" in a larger context-that of the long-term development of the automobile industry. Here few experts would deny that the rapid expansion of the automobile industry in the 1950s and 1960sone of the most important stimulants for the accelerated growth of the economy in the imperialist countries during this period - is over.
The phenomenon of market saturation, which has already appeared in the USA, is becoming increasingly evident in capitalist Europe and Japan. This tendency can clearly be seen in the declining annual growth rates for total number of automobiles. The figures for the original six Common Market countries (West Germany, France, the Netherlands, Italy, Belgium, and Luxembourg) are as follows:
Percentage of increase in total number of vehicles (includina trucks):
of the more poorly paid strata of the working people rose significantly or if automobile prices dropped substantially.
The second possibility is totally excluded for the immediate future. On the contrary, almost all the automotive trusts have replied to the fall in sales and profits with price increases. Only a real technological revolution in the auto industry that would cut the manufacturer's cost by 30 to 50 percent could induce one or another of the trusts to reduce prices in order to radically increase its share of the market.
Moreover, inflation and the recession are causing the real income of households to decline or at least stagnate. If the recession is ended by an economic upswing, inflation will still continue to rage. Thus the real increase in income for working-class households will be very modest, assuming that there is any increase at all, which is far from certain.
Under these conditions a new, rapid increase in the number of automobiles in capitalist Europe and Japan is very unlikely. This is also true for the USA, where increases during the last decade have been almost completely based on purchases of a second car. It is only in countries such as Canada and Australia that a rather rapid expansion could be maintained until the car market reaches a level of saturation comparable to that of the USA or Western Europe.
In the semicolonial countries like Mexico and Brazil that have also been caught up in the motorization wave the income structure is such that purchasing an automobile is possible only for the middle class and a very thin layer of the labor aristocracy. The level of saturation is reached there much earlier than in the imperialist countries.
The bureaucratized workers states have also plunged into a phase of accelerated motorization. But these countries do not present a supplementary market for the capitalist countries. The governments of the workers states either prohibit the import of private automobiles or limit imports to very small numbers. If they build or expand their own automotive industries in collaboration with capitalist trusts, then the profits will go essentially to the sector that builds machines for the automotive industry. The machine-building industry will acquire supplementary markets, but not the automotive industry itself.
In addition to market saturation based on purchasing power, there are signs of saturation due to physical causes. Neither the construction of highways nor the traffic-handling and parking facilities in the cities of the imperialist countries have kept pace during the last twenty years with the automobile market and the production of cars and trucks.
At peak traffic periods it has become virtually impossible to drive a private automobile in cities like Lonsible to arive a private automobie in cines nke bondon, New York, Paris, or Tokyo. The roads leading out of the big cities are unbearably crowded during the hours when people leave the cities on nice weekends, not to mention during the general vacation rush. For this reason, independent of the cyclical effects of the "energy crisis" or the current recession, a change in the demand for transportation is taking place, a change that places a higher value on rail and public transportation to the detriment of the private automobile.
cluding trucks): 1955 16.6 percent
17.6
1956 1957 16.4
1967 1968
1958 15.4
14.8 1960
15.1
1970 1971
1961 14.6
15.9 1963
16.4
1964 13.9
12.3 percent 10.9 9.0 8.2 8.1 7.2 6.6 5.3* 4.2*
*estimated
From the point of view of sales possibilities, the saturation of the market can be explained by the fact that with the present income structure, all those households that want to buy a car, and are in a position to do so, already have a car! Thus current production is increasingly limited to meeting needs for replacement. It tends less and less to increase the number of cars in general. This could only be changed if the real income 1408
The Crisis and International Competition
The crisis in the auto industry has sharpened international competition. As the sales on the domestic markets of the big imperialist countries shrink, the "national" trusts of these countries are attempting to increase their exports in order to cushion the shock. It is still too early to draw the balance sheet of the effects of this sharpened competition. Up till now the following tendencies seem to have been manifested:
On the U.S. domestic market, imports of European and Japanese automobiles have declined to the same de-
Ford storage area in Cologne. Unsold autos are piling up.
gree as the sales of automobiles in general. Thus the foreign competitors are no longer succeeding in increasing their share of the market, especially because the Americans are themselves producing small cars now and the German mark has been revalued upward. The Ford Pinto has now become cheaper than the Volkswagen (in the USA).
In general, it seems that the German auto industry, the leading car exporter in the world, is being especially hard hit (particularly because of the increases in its export prices). In the period from January to April 1974, the export of German automobiles lagged 7.6 percent behind the comparable period in 1973. However, the export share of current production rose from 58.2
percent, because the domestic market has deto 63.5 clined even more sharply.
Japan is now overtaking West Germany as the world's leading automobile exporter. Possibly Japan will surpass Germany this year. In 1973, West Germany exported 2.35 million cars and trucks; France, 1.6 million; Japan, 2.1 million; Canada, 1.15 million; Great Britain, 750,000, and Italy, 705,000. In the first quarter of 1974, German automobile exports declined, while Japanese exports increased by 20 percent.
At the beginning of 1974, French and Italian industry had realized modest export gains. These were principally owing to the de facto devaluation of their currency in comparison with the currencies of a number of European capitalist states and to the dollar. It is, however, not certain that the Italian and French firms will be able to maintain these gains if the recession continues to deepen in most of the countries where it has begun.
Declines in production and profits combined with sharper competition threaten the existence of the least profitable firms. At present, BMW, Citroën, Chrysler (including its French subsidiary Simca), and British Leyland seem to be threatened. Chrysler was already at the point of bankruptcy during the previous recession, is operating almost at a loss, and is encountering increasing difficulties in obtaining credit. Citroën was only saved from catastrophe by its merger with Peugeot. The fate of BMW and the weakest of the Japanese concerns will certainly be decided by mergers on the national plane.
The situation of British Leyland is the most dramatic. It poignantly reflects the worldwide decline of British imperialism in the international capitalist economy. British Leyland was itself the result of a merger of automobile companies that were still in the hands of British capitalists. If British Leyland has to undergo merger now, under present conditions it can only merge with a foreign firm. In point of fact, this would mean that it would be swallowed up by one of its foreign competitors.
Since British imperialism cannot tolerate such a development, it is more than probable that it will come to the aid of British Leyland either with massive subsidies, through participation as a minority stockholder, or through partial nationalization, maintaining a minority of private stockholders.
The scope and duration of the recession will determine whether other automobile firms as well are swamped by the profits crisis and whether further moves toward concentration, including concentration on an international scale, will take form.
Ecological Consequences of Growth
The fact that the famous Club of Rome, which popularized the Meadows Report on "The Limits to Growth," is to a large extent supported by automobile firms (in particular, Fiat and Volkswagen) is indicative under present circumstances. Of course, it is no accident that capitalists discover the ecological consequences of growth in "their" sector at the very time when that growth is coming to an end.
deny that these "sins" are real. The
No one would poisoning of the air in large cities by automobile exhaust fumes, the heavy toll of traffic accidents, the tremendous waste caused by traffic jams in the cities— all of this is just a portion of the extremely negative account that humanity has to pay as the price for the so-called civilization on wheels.
However, we must avoid the superficial and mechanical reaction of damning the automobile as such and pre dicting that it will soon disappear. Such a reaction is just as foolish as the forced optimism of automobile industry spokesmen like the head of General Motors, who predicts a "new unprecedented resurgence" of the automobile in the second half of the 1970s.
Both reactions have something in common: they extrapolate from present tendencies of development and do not consider the possibility, the unavoidability, of sudden qualitative changes.
As a daily means of transportation the private automobile is obviously irrational. This irrationality is bound up in the first place with private property. It is clear that the same number of people could be transported by one-half, one third, or even one-fourth as many individual automobiles, or by one-tenth or one-twentieth as many buses and minibuses, if a rational system of road transportation were organized. The gains in time, money, in physical and mental health, in reduced pollution, could be gigantic.
Moreover, it has not been demonstrated that the users of these means of transportation would have to sacrifice comfort. It is perfectly possible to conceive of a system of buses, minibuses, and taxis that would be extremely flexible and transport the same number of people who now use their private cars for going to work and back under conditions of extreme discomfort.
City planners and traffic experts are nearly unanimous in calling for such a solution. If it is not put into effect on a large scale, if not universally in the richest capitalist countries, it is not because it would be too expensive or because the potential users would object.
The reason is that in the capitalist system there are powerful interests within the bourgeoisie who oppose such a reconversion. The whole logic of bourgeois society favors solutions based on private property and the sale of commodities rather than solutions based on the satisfaction of needs and public services, even when such solutions are more rational and less costly from the standpoint of society as a whole and even from the general standpoint of the individual.
Automobiles, as a means of transportation powered by internal combustion engines, are certainly not the best technological solution for covering short and medium distances. They were also not the only possible solution. If in the course of the last half century, the automobile has established its complete dominance, this was not for any compelling technological reason, but rather because at a particular time groups of capitalists made this choice in pursuit of their own private interests and enforced it by virtue of their weight and the breadth of the control they had over the market and scientific knowledge.
Other kinds of automobiles are conceivable- ones powered by other sources of energy, particularly electricity - which would radically decrease the damage to the environment now caused by the internal combustion engine. Without doubt, the "energy crisis" has had a positive result in the fact that it will certainly give a powerful stimulus to research and experimentation on, and surely even to production of, electric automobiles. It is only a question of time until large-scale, assemblyline production of such automobiles is undertaken and they become competitive with cars powered by internal combustion engines.
Capitalism Condemned to Death
Production for profit has no future. But the role of the automobile is by no means played out, even if it will never again assume the role of an idol that big business tried to give it in the previous decades.
Because of its great flexibility in comparison to rail transportation, the automobile will retain its leading position in a socialist transportation system. It will maintain its position thanks to a social, technological, and cultural revolution that will make possible the rational use of the automobile, free from the chains of private property and profits.