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.