GM in Trouble I. THE VEGA

On September 10, four days before the United Automobile Workers struck General Motors, Chevrolet started selling a small and inexpensive car. The car had been the subject of the longest prenatal advertising campaign ever provided for an American commodity. In April, 1970, it was baptized in sky-writing over downtown Detroit: “Chevrolet Names It Vega 2300.” Its engine was displayed on a velvet-covered pillar at the 1970 New York International Automobile Show. Advertisements for the Vega began to appear in the spring—“Coming Soon: the Little Car that Does Everything Well. Everything? Everything…. Bear With Us. Read Our Future Ads.” “By the time it actually goes on sale,” Chevrolet announced, “we want this totally new car to be as familiar to Americans as a member of their own family.”

The basic Vega sells for $2,091, without optional equipment. It cost General Motors between $100 and $200 million to develop. The Vega project was first described in 1968, by James M. Roche, chairman of GM: the new car would be “GM’s positive answer to the demonstrated need for a small, economical, durable, safe, comfortable and well-styled car built in America to American tastes.” Chevrolet and the Fisher Body Division of General Motors built a new factory for the new car, at a deserted crossroads in Lordstown, Ohio. The Lordstown complex of plants cost $100 million. The Vega engines are cast at a new foundry in Massena, New York, and assembled at a new plant in Tonawanda, New York. Retooling for the Vega is the most expensive investment project GM, or any other corporation, has ever undertaken.

During the ten-week strike by the UAW, General Motors confined its advertising effort to severe statements of the benefits of working on a GM assembly line. The Vega plants in Lordstown, Tonawanda, and Massena were closed. Meanwhile a yellow Vega coupe was shipped to Europe for exhibition at the Paris, London, and Turin motor shows. On November 19 a new local contract was agreed upon at the main Vega factory in Lordstown. In the last week of November, GM started producing Vegas, at a rate of 1,600 a week, and GM recently initiated a new introductory campaign to relaunch the Vega. Now, Chevrolet makes about 6,200 Vegas a week, and has scheduled Saturday overtime at Lordstown.

Nineteen seventy was a dismal year for General Motors; the American automobile industry looks forward to a dismal decade. The UAW strike, and the deterioration of GM labor relations, are consequences rather than causes of GM’s difficulties. The Vega project is an attempt to solve these difficulties. GM’s margin of profit on sales was lower before the recent strike than it had been since 1946: 4.7 percent in the first three quarters of 1970 (which included two weeks of the strike), having fallen steadily from 7.0 percent in 1969, or $1.7 billion after tax, 7.6 percent in 1968, 8.1 percent in 1967, and 10.3 percent in 1965. Private …

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