The American auto industry thanks to visionaries like Henry Ford, John Dodge, Ramson Olds, Louis Chevrolet or Walter Chrysler. They innovated production systems (online assembly, economy of scale) and commercialization (installment sales, financial leasing, dealer maintenance and repairs).
The Great Depression wiped out many smaller automakers and has since consolidated three titans: Ford, General Motors (GM) and Chrysler.
In the 1930s and 1940s, GM President Alfred P. Sloan laid the foundation for the modern corporation. He also highlighted the importance of attracting and retaining talent while offering performance bonuses. Teamwork is encouraged to solve problems. He understood the aspirations of the consumers, less interested in functionality and more in status. This fueled the planned obsolescence, with new models introduced annually. They segmented the market by creating five brands (Chevrolet, Pontiac, Oldsmobile, Buick and Cadillac) with different price ranges. What he couldn’t stop was that the union (United Auto Workers) reaped unprecedented benefits, such as bonuses, very comprehensive health insurance, and retirement with 30 years of antiquity.
As the country entered World War II, resistance was overcome by heavily subsidizing Detroit’s own factories to manufacture airplanes, tanks, trucks, and jeeps. When the war ended, automakers found themselves with abundant capital, huge plants, advanced engineering and no competition from Europeans. By 1950, they had made three out of every four cars sold in the world.
In the 1950s, the population moved to the suburbs and it became necessary for each family to have at least one car. The oil industry always benefited from larger and more powerful vehicles, which were filled with chrome on the outside and leather on the inside. Convertible and Super Deluxe (Imperial and Cadillac Eldorado) appeared.
Over the next decade, after the completion of the Interstate Highway network, Americans began to travel and there was a need for pickup trucks and campers. Sports cars (Corvette, Thunderbird, Mustang, Camaro, Barracuda, Firebird, Javelin) were very successful among youth.
In the early 1960s, activist Ralph Nader published Unsafe at any speed. The book drew attention to the large number of deaths due to car accidents. Congress passed laws that mandated the purchase of insurance and the provision of seat belts, side lights, shatterproof glass, stronger fenders and power-absorbing steering columns.
At that time a law on air pollution was also passed. Lead was removed from gasoline and catalytic converters and low-compression engines were installed.
All of this increased the cost of cars, insurance premiums and gasoline, as inflation, unemployment and interest rates rose. Then the Arab sanctions and crisis broke out in Iran. Gasoline skyrocketed and people stopped buying bigger, heavier cars.
A minimum performance of 18 miles per gallon was set and automakers solicited Jimmy Carter’s support to achieve this. The government funded a research program, but they were unable to produce quality diesel engines and compact cars. Both the Vega (GM), Colt (Chrysler) and Pinto (Ford) were abandoned by consumers due to design, workmanship and safety issues.
The Treasury Department authorized a $1.5 billion loan to save Chrysler, which was on the verge of bankruptcy. The firm’s president, Lee Iacocca, closed the obsolete plants and managed to produce cars with front-wheel drive (K line) sold.
By then, all three had set up factories in Europe, but had not received a substantial share there. In the old continent they preferred local brands with better efficiency and longer shelf life. In contrast, Europeans were increasingly selling compacts in the United States and the Japanese already had 22% of the market, despite smear campaigns.
Alleging unfair trade and accompanied by nationalist arguments, he called for protectionist measures from the government. In 1980 the UAW and Ford asked the International Trade Commission to limit the import of Japanese cars to 1.7 million. The commission denied that ban; This determined that Japanese cars sold for a higher price than domestic cars, yet found buyers because they were better built.