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OCR Page 1 of 50P An
THE
WHITE HOUSEE PRESIDENT HAS SEEN
OTOT
WASHINGTON
ACTION
7/
August 10, 1972
ADMINISTRATIVELY CONFIDENTIAL
MEMORANDUM FOR:
THE PRESIDENT
FROM:
DONALD RUMSFELD
Rspe
SUBJECT:
1973 Automobile Price Increases
The "Big Three" auto companies and American Motors Corporation
(AMC) have requested from the Price Commission 1973 model year
average price increases per car of between $81.30 (AMC) and
$91.53 (Ford), or an average price increase of about 2.5% at
retail. These requested price increases reflect additional
costs of manufacturing automobiles resulting from federally
mandated safety and environmental protection equipment,
product improvement, and Federal, State and Local plant
safety and environmental quality requirements. These price
increase requests are still pending, having been delayed by
the Commission on the basis of need for further information.
The Price Commission staff has recommended to the Commissioners
that price increases be allowed of $55.90 for GM (a 1.3%
increase at retail), $60.1 for Chrysler (a 1.5% increase at
retail) and $75.70 for AMC (a 2.2% increase at retail). The
Commission staff is expected to recommend some price increase
for Ford. (Table I details the price increase requests from
each of the four auto companies.)
The issue is whether the President and the Administration should
seize this opportunity to jawbone the four major auto companies
to hold the line on 1973 auto prices, at least through calendar
year 1972.
BACKGROUND
New cars account for 2.12 percent of the CPI and are a highly
visible sector. The new cars contribution to the CPI for
October is expected to be negative because the estimated value
added by BLS will be greater than the price increase granted by
the Price Commission. BLS will calculate the expected price
increases needed to fully cover safety and emission, product
improvement, plant safety and other costs.
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