The Silent Cash Register

On Van Nuys Boulevard in suburban Los Angeles last week, used-car Dealer Jack Black put up signs around his lot: “GOING-BROKE” sale. Excited Dealer Black was complaining about the Federal Reserve Board’s new restrictions on installment buying, which had cut the payoff time on cars from 21 months to 15 (TIME, Oct. 23). When such controls had been slapped on in 1948, Black said he had lost $13,500 and had been forced to go out of business. This time he said he was quitting before the loss; at week’s end he had cleared off 14 of his 22 cars.

From automen all over the U.S. came similar moans & groans. Said one Denver dealer: “Used-car dealers, unless they have a sideline or automotive repairs, will not be able to stay in business.” In Detroit, the used-car capital, prices were down an average of $300, with most of the decline occurring last week. Even at that, sales were slow. Though the used-car lots were hit the hardest, new-car salesmen were also feeling the pinch. With the slump in used-car prices, dealers were forced to slash their trade-in allowances. One Hudson dealer in Detroit who had sold 30 cars two weeks ago last week sold just five.

“A Stab in the Dark.” The sales slowdown caused Kaiser-Frazer Corp. to revise its production schedules to get a firmer footing in the low-priced field. Instead of making two higher-priced Kaisers for every low-priced Henry J, it reversed the ratio. And automen who were talking about raising car prices were taking a hard second look.

The greatest howl of all came not from the producers or buyers but from the Auto Workers’ President Walter Reuther. Said he in a letter to NSRBoss Stuart Symington: the new credit restrictions would create “mass unemployment before there is enough defense work and take materials out of civilian production before they are needed in defense production. They are discriminatory, ill-considered and dangerous. They are a grievous blunder . . . The Federal Reserve Board, living in a world of banker mentality and unaware of basic production problems, has . . . made a stab in the dark and the knife is in the backs of America’s low-income families.”*

A Heavy Toll. Reuther was exaggerating—as is sometimes his wont. But the new credit restrictions, plus the new tax bite, were taking a heavy toll in other businesses besides autos. The prices of new houses, which were removed from the easy credit field at the same time as autos, were not yet dropping, but sales were down.

In the Northwest, lumber prices had plummeted in one of the steepest drops in the industry’s history. Some grades had dropped 50%. Sales of television sets (hit also by the color controversy), radios, washers and other big appliances were also on the skids. Said one Atlanta retailer: “Business is off 50% in television sets and almost as much in refrigerators and stoves.”

There was a bright side, too. Credit Man William Murray of Chicago’s Goldblatt Bros., Inc. department store, whose sales were off 20%, thought his business would actually be better because he would not have to repossess so many items. “Believe me,” said he, “when a buyer has to put $100 down on a $400 item, he’s going to make those payments.” Furthermore, Murray, and many another retailer, thought that customers would be coming back again as soon as they got used to bigger installment payments.

Nevertheless, it looked as if credit had been cut enough, at least until actual arms production is a lot bigger than at present.

* One Detroiter had a special treatment for the knife wound. Arrested for a $100 robbery, he blandly explained that he “needed more money to buy a car under the new credit control.”