Idaho County free press. [volume] (Grangeville, Idaho Territory) 1886-current, 1922-06-29
sBABSON SAYS
Automobile Business on
Firmer Basis

~ urScusslng the general situation for
the week. Roger w. Babson. the sta.
tistlclan, today made the following
analysis of the automobile industry.
Many persons have been surprised
at the recent rebound in the automo-
bile industry and in the price of
automobile securities. Those. how.
ever, who have been carefully watch
ing the situation are not surprised.
The price cut in automobiles developed
new buying; the extension of the
good roads movement increased the
point of saturation; and the reduc-
ton IN the cost of tires and general
supplies encouraged more people TO
use cars. The man who has never
had any car now drives one; and the
man who was content with one car
now has two or three. No, the satu-
ration point has not yet been reached.
Moreover, as our system of good roads
is extended, this saturation point is
pushed further and further awav.
The saturation point for automobiles
In this country will not be reached
until our system of highways has
been completed and perfected.
BIG SALES IN PARTS
"The great factor, however, which
is today making business for the au-
tomobile companies is the silent and
insistent purchasing of parts by the
present users of cars. People have no
idea of the tremendous business exist
ing today in automobile parts 1t is
generally estimated that about ten bill
lion dollors is invested in automobiles
and their accessories. II is further
estimated that man spends about 5
percent year on repairs and that q |
large proportion of this for new parts. |
This means that from three hundred |
to four hundred million dollars of |
business year exists in |
the manufacture and sale of new parts |
for ears already sold. Not only is this |
a large amount of money, but there is |
as much net profit in this business as
in double or treble the amount of |
business If you have any
doubt of this take the parts cata
log for any car and add up what it
would cost to buy all of the parts of /
The car separately. Not only are the
companies getting high prices for these
parts, but there is practically no ex-
oense connected with the selling of
-hese parts. When buying complete
EAR 1 may buy from any one of hum
lred companies, but when buying n
part to one of my present cars must
,uv of the company which manufac-
,ures the car. Sale of these parts is
bringing into the older companies a
tremendous income.
NO LONGER EXPERIMENT
"Investors will therefore see that
he automobile business has graduated
rom the experimental stage and has
become a great settled industry, at
east so far as the older companies are
The good will asset OF
very business should increase as years
70 on, provided it manufactures hon
stlv useful product. The older
automobile companies, however, pos
ess the additional asset of being able
o sell parts for existing ears.
"Many of these companies could
av their dividends, certainly their
referred dividends, from the profits ;
rom sale of parts. If Ford did not
manufacture another car, he could do |
tremendous business for years to
ONE in manufacturing parts for the
airs already sold. If the saturation
oint is ever reached in the automobile
usiness, the profits from the replace.
rents of machines and the sale OF {
arts will still be tremendous
SOME OVER CAPITALIZE
hOf course, new automobile com
anies do not possess this asset: Hence,
Conservative men purchase only the
tocks of the older and more stable
oncerns. Wise investors also look
arefully TO the capitalization. Before
uving an automobile stock, divide the :
anitaiization by the annual output In
ars and in dollars Certain popular ;
axes of cars are over capitalized, and
ertain companies with small outputs
ave verv conservative capitalization
hereford one should consider both
,e output and the capitalization ;
-either factor by itself is sufficient IN
ldging an automobile stock -
ssI want to emphasize particularly I.
,ncluded Mr.. Babson, "the fact that
,e automobile industry is today a
ornament industry and that the secu-
ties of the standard automobile com
anies should rank with those of the +
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