Decorating this article is the image of a 1992 7th generation Buick Skylark. We can only assume it is as awful to drive as it is to look at. We think this picture might sum up, in a single image, just what a dire state the US auto industry eventually found itself in. Everything that was wrong with US car making embodied in a single car. The fact that it’s taken all this time for the world’s largest superpower to realise that their automotive industry is in real trouble perhaps tells you all you need to know about the supreme arrogance of our stateside cousins. Although we share some common interests and a language the cars that roll around our streets could not be more different.
Did you know that the typical UAW worker at the Big Three earned between $71 and $76 an hour in 2006. This amount is triple the earnings of the typical worker in the private sector and $25 to $30 an hour more than American workers at Japanese auto plants. The average unionized worker at the Big Three earns over $130,000 a year in wages and benefits. This tells you everything you need to know about the road to nowhere on which this industry was headed and the stranglehold the American Autoworkers Union had on the industry. The parallels with Britain can perhaps be drawn from 60s and 70s when we had a nationalised monstrosity like Leyland which also made awful cars that broke down and were way too expensive. But remember they stopped making the dreadful Austin Princess back in 1981, our equally ugly fiend, the 7th generation Skylark, was still rolling off the production lines in 1997. The crucial difference, however, is we learned from our mistakes, took our medicine and entered into partnerships with car makers that could make great cars which sold well and were profitable.
We can’t think of too many cars of American build which are in any way memorable or aspirational (although there are, of course, some examples). For the most part they are thrown together and have virtually no redeeming features whatsoever and the only reason tourists put up with them is because they are on holiday. Perhaps the only reason Americans put up with them is the clever marketing and the fact that you can legally drive a car at something like 9 years old. In fact make that 2 reasons, the other being blind patriotism, Americans would rather drive a poor substandard American car than a great foreign one, up until now anyway. The American auto industry did bring us the Personal Contract Plan, for which we might be thankful, but it only came about because ownership of a new American made car is virtually not an option because the residuals are so poor.
To understand how we arrived at this point and with at least 2 of the Detroit big 3 on the brink of meltdown we should perhaps chart the downhill journey.
Fifty years ago, American car companies dominated the world and GM was officially the world’s biggest industrial company. However during the 1950s and 1960s, US car firms failed to innovate, preferring instead to increase profits by increasing the size and weight of their vehicles by adding extras like air conditioning, power steering and sound systems. It was left to the European car makers to develop disc brakes, rack-and-pinion steering, air-cooled and diesel engines. In addition the mass production system employed by the American car makers discouraged innovation because it was so expensive to introduce fundamentally new models.
However it was the oil crisis in the 1970s that first highlighted the problems of US car makers.
For the first time in modern US motoring history smaller cars were in vogue, and US consumers found that cars made by the likes of Toyota and Nissan were a viable commercial alternative to the big American alternatives.
During the 1980’s Imports of Japanese cars rocketed and US car makers and unions looked on with growing concern as nearly 25 percent of the US market was lost to these imports. Desperate, the car firms pressured the US government into limiting imports from Japan but Toyota and Nissan just started building car plants in the US instead.
By 2005, these Japanese “transplants” were producing 4 million cars a year, one-quarter of US output, and more than GM. To compound the misery for the home grown auto industry the Japanese plants were located in low-wage, “non-union” areas of the US and, in addition, implemented new, more flexible production methods. As a result the Japanese car makers could make money on smaller cars, innovate and change models far more frequently. The US car firms did try to design a competitive small car but they just couldn’t pull it off, as if they were just not programmed that way.
The 1990’s proved to be a much better decade for the US car makers. As oil prices stabilized the SUV was born and the US car industry utilized its get out of jail free card.
As they were classified as “light trucks”, SUVs were protected by a 25 percent import tariff and also escaped government rules laid down to boost fuel efficiency. Subsequently SUV sales soared from one to four million and accounted for 60 percent of the Big Three’s sales – and mostly all their profits.
The fortunes of Chrysler, in particular, were transformed and they dominated the market with the Voyager minivan and Jeep Grand Cherokee. But it was Ford who boasted the best-selling SUV, the Ford Explorer.
Unfortunately for the US automotive industry it proved to be short term gain for, what turned out to be, long term pain as abandoning “cars” proved to be a costly mistake when it became clear, in recent years, that environmental concerns were here to stay.
As the price of petrol in the US reached a record, panic inducing, $3 per gallon in most states, SUV sales plummeted, and, once again, smaller vehicles became popular and their sales rose accordingly.
Even by 2006, Ford and GM had accepted they would never dominate the US car market again and announced huge downsizing initiatives, cutting 70,000 jobs between them. As we now know this was just the start.
It doesn’t really take a brain surgeon to work out that their policy of building cars at a willfully reckless rate at low margins was never viable in the long term and as soon as a small downturn occurred the industry buckled under the sheer weight of all that unsold metal.
What is the answer, what lies ahead and how can the US car industry survive? The extreme dieting of the once morbidly obese GM might give us a clue.
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