For a lot of years I covered the auto industry, as well as teaching, and wrote about it in a nationally syndicated column. My reporting and writing covered a forty year span watching the industry go from three major and several smaller companies dominating the US market to the gaggle that we have today. During that time there was AMC, the remnants of Nash and Hudson, GM, Ford and Chrysler. GM held 65 % of the market place with 6 divisions, Chevrolet the low priced entry level car. One step up was the family Pontiac, then the more expensive Oldsmobile, the higher level Buick and the top dog Cadillac. Ford held second place with Ford, Mercury, and Lincoln. Chrysler rounded out the “big three” with Plymouth, Dodge, DeSoto, and Chrysler. The one prominent factor in that market mix was the clear definition between car lines based on quality and price.
VW was just starting to make inroads into the market and was the signal that change was just over the horizon. During the 70’s and 80’s the Japanese started an invasion that would see them taking almost one half of the market share and adding seven or so more car lines to the mix. Most of the Japanese car companies started with small inexpensive high fuel economy cars that attracted flocks of buyers. Then cars were still transportation and as the slogan for Honda in the late seventies and early eighties was “We make It Simple” typified the vehicles.
All of the car makers found that as the living standard of the American people rose, so did the desire of the buyer for more than basic transportation. The car makers, including the much praised Japanese, followed the market demand for more expensive luxury cars with more and more toys, and lower fuel economy. Toyota expanded to the Lexus line, Nissan with the Infinity, and the Acura line is the upscale Honda entry. Today it appears that the fundamental purpose of the car has shifted from basic transportation to a rolling entertainment and comfort center.
During that time sales rose from just above 12 million units a year to over 17 million, The other factor here is that the quality of the cars being sold over the complete line improved to the point that the average car built today and sold in the US has a reasonable life span of over 10 years and 200,000 miles. This means more cars sold and fewer scrapped each year. When I first broke into the auto industry in the late 1940’s the average life of a car was about 50 or 60 thousand miles. Car dealers shunned 100 thousand mile cars. Today a 100 thousand mile car is sold as a low mileage cream puff.
Currently car sales are in the dumpster and car companies are looking for bailouts. The federal government is making noise that it thinks that the auto execs should be fired as they did not make the right decisions. The decisions that they made was to follow the buyer’s dollar and they responded to the market. The Asian makers are in the same financial boat as the American makers as they too went for the dollar with more expensive cars.
Could some of the problem be that the market demand has just dried up? That 17 million cars a year out of the factories is just too many units? That a market place that offers now 18 ( GM, Ford, Chrysler, Jeep, Saturn, Honda, Toyota, Nissan, Mitsubishi, Subaru, Hyundai, Kia, VW, Audi, Mercedes, Lexus, Infinity, and Acura) car lines. Like the old gas station on every corner that sparked gasoline price wars of the 60’s.
The problem is the trickle down. When sales slump several things happen. sellers resort to creative sales methods, off the wall financing, and sales gimmicks. Leasing became the big thing. One major high dollar maker once told me that 70% of the cars his company produced and moved to the market place were on leases. The car was basically paid for during the lease time with the original driver turning it in and receiving nothing in return. The vehicle was then sold through the used car market returning the profit, and more than if the car was sold new rather then leased, to a combination of the lender, the auction house that handled the sale from the lease company to the dealer, the dealer, and the factory.
In a down market, money dries up, including research and product development money, as the bean counters slash without long term concern. During the great depression of the thirties there were great advances in automotive technology and design as car companies pulled out the stops to gain what they could in depressed markets. But that was done without a government hand out.
Later one company did go to the feds for help. In the early eighties, Lee Iacocca negotiated loans with the private market place using a government promise that the loans would be paid. Not one cent of federal money went into that package, and Iacocca saw to it that the loans were all paid ahead of time. In fact Chrysler pledged a bundle of stock to the government coffers that ultimately made the country money.
But Chrysler paid a stiff penalty. At the time of the loans the Dodge chassis and the venerable 440 cubic inch engine was the darling of the RV makers. The federal government in its unique wisdom (?) made Chrysler drop its big rear wheel drive car program and the large truck, including the RV chassis, line. The federal boys demanded that Chrysler concentrate on their front wheel drive small car program. We have seen how long that mandate lasted. In case you have not noticed Chrysler builds and sells a slew of V-8 rear wheel drive Hemi’s. The auto industry is and has been market driven with profit as the motive.
My only hope is that research will not suffer because of the economic down turn. Not just research on alternative fuel but the design of the entire vehicle line including the RV segment.
This is only one part of the equation that has caused the near collapse of the industry. And it appears that creative economics by highly educated people has also had a great deal to do with it. The same principles that I put forth in this blog apply to the RV industry. Just look at all the bling on the new RV market.
That’s all the room for this time, catch you next time, till then keep on camping.
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Ron Butler
Brad,
Generally a good overview of the industry. However, I think you left out an important aspect that I think turned people to the Japanese imports. Detroit and its executives have fought all of the safety features that the consumer was wanting to have included in their cars. I can remember their objections to seatbelts, then shoulder harnesses to mileage standards. Meanwhile, the Japanese recognized this and offered those features on their cars long before the Detroit manufacturers. Those are some of the reasons that I had Japanese cars and one European car for almost 30 years.
I think the arrogancey of the decision-makers of the “Big 3” turned me off as well.
I then got a Chrysler van in 1996 and loved the comfort and wasn’t too upset with the 19-25 mpg that I got. Thankfully, I got the extended warrenty and the transmission went out with about 3000 miles left on it! I sold it when we started traveling fulltime and we kept the Saturn for our dingy, but my back aches from an extensive driving it. That’s why my better half drives it most of the time!! Still miss the comfort of the van in my advancing years!
Gail Clark
After reading your article and the comments, I say if we could get Honda or Toyota to build RV’s we would have perfection every time. Bling is nice- the amenities of home! Maybe a foreign company could but up some of the dead or dieing RV manufacturers. Will the goverment kick in $$$ to help?
Bill Seufert
At the risk of sounding harsh, I don’t see how the auto indusrty can ever pay back the loans since they must sell cars to survive and cars arent selling. Also Chrysler has money in its other industries but wont lend it to the car manufacturing division. Bush is just kicking the can down the road.
Drew Mueller
“We make it simple”…..I forgot that one, thanks for remembering Brad- nostagia is alot of fun. Remember L.S.M.F.T? (It’s not car stuff).
John Shelton
“That a market place that offers now 18 ( GM, Ford, Chrysler, Jeep, Saturn, Honda, Toyota, Nissan, Mitsubishi, Subaru, Hyundai, Kia, VW, Audi, Mercedes, Lexus, Infinity, and Acura) car lines.”
If Jeep – a Chrysler product; and Saturn – a GM product are listed here as an independent car line, shouldn’t Chevrolet, Pontiac, Dodge, Chrysler, Mercury, Lincoln, etc. also be listed individually? This would bring the total car lines sold in US to something like 26 to 28. If “corporate cousins” are lumped together as one car line, Jeep would fall under the Chrysler umbrella, Saturn under GM, Lexus under Toyota, Infinity under Nissan, Acura under Honda, and Hyundai and Kia are also “corporate cousins” in some way. If one lumps all badge names under their corporate umbrella, the total would be more like 12.
When a fine point like this is all that one finds to pick at in your article, you must have done a fine job. Thanks for the Historical Perspective. Well done!
Tireman9
Brad, I have to wonder how long any of today’s RV manufacturers would survive if there was a quality import available. I also remember 1 year 12k miles being the norm for a warranty in the early 60’s. Today, Thanks to Kia and Hyundai with their 5/50k B2B and 10/100k drivetrain we are seeing Detroit responding. Just this year GM increased their warranty from 3/36.
While a warranty by itself is not a complete measure of a vehicle’s design quality or build quality you can’t offwer 5/50 B2B and have the car start to fall apart after 2 or 3 years. As a Design Quality Engineer with 39 years experience in the automotive part field I can tell you that my new RV fit & finish is on a par with Detroit in 1970. Some design features guarantee that it will take a couple hours labor to fiz some components when it should be only 20 minutes.
I really wish there was an RV manufacturer that decided the way to survive in this market is to offer a reliable, worry free vehicle with a complete warranty that covered every part including nuts, bolts, wires and plumbing. I would much rather pay an extra grand and get complete coverage from the manufacture than have to buy partial coverage from some “Extended Warrenty” company then have to fight to get even the most fundamental coverage.
George Stoltz
Brad: good insight. Thanks. Bling on RVs? I’d say some of it is trash!
Bob Difley
Excellent explanation of how the car market has changed. Thanks Brad.