The U.S. Car Companies Downfall In 2008

2012-02-12T08:08:00.000-08:00

For decades the American car companies ruled the world. Whatever they made consumers bought. They had no choice. For a long time they had it made. They would use the same body style for too many years. The cars were not built well, not very reliable and Detroit got away with it. Total arrogance. These companies were run by supposedly the best and the brightest in their industry. And now we have the results.

EXPERTS AGREE THESE CARS RUINED FORDS REPUTATION

Ford's 1971 Pinto. A horrible car. People died in this car due to rear end collisions that erupted some cars in flames. Reports came out later that the company refused to spend the money to reinforce the rear end. It was cheaper to settle lawsuits. Also the 1995 Ford Explorer and the 2000 Ford Excursion

EXPERTS AGREE THESE CARS RUINED THE REPUTATION OF GM

1961 Chevy Corvair
1971-1977 Chevrolet Vega
1980-1985 X cars-Buick Apollo, Chevy Citation,
Chevy Nova, Olds Omega, Pontiac Ventura, Pontiac Omega.
1976-1987 Chevrolet Chevette
1982-1988 Cadillac Cimarron
1991-1995 Saturn
1978-1985 Olds diesel V-8
2004 Chevy SSR

But the real disaster for GM was the 2001-2005 Pontiac Aztec. At the Detroit auto show, when this vehicle was unveiled, it is reported that the crowd gasp, rather loud, because they could not believe what they were seeing. It was reported that a GM executive told someone "we'll have something better next year".

THE UNION INFLUENCE ON U.S. AUTOMAKERS

In 1945, the UAW demanded a 30% increase for their workers. When this was denied, the workers went on strike for 113 days. In the 1960's the UAW negotiated a contract with one auto manufacturer and applied it to secure a number of new benefits for auto workers, including fully paid hospitalization and sick leave benefits at GM and profit sharing at American Motors. Later the UAW negotiated a "job bank" where workers who were laid off would go to a location, where they did nothing, and would receive almost 100% of their pay and have the right to be the first rehired.

THE U.S GOVERNMENTS QUOTAS ON FOREIGN CAR COMPANIES

Then starting in the early to mid 1970's, with the gasoline shortage and the imports of Japanese cars, this started years of layoffs and pay reductions by U.S. car companies. And American cars were known for getting horrible gas mileage during this time.

Also, in the 1970's and 1980's, the U.S. auto industry faced it's first major challenge from foreign competition as Japanese automakers aggressively entered the U.S. market. As Japan's share of the car market grew, The Big Three automakers, General Motors, Chrysler, and Ford, convinced the federal government to impose a cap on the number of cars Japan could ship to the United States.

In 1981, the Reagan administration agreed to impose such restraints, despite Reagan's free market policy, because the auto and auto parts industry were major employers in the United States. Also, auto employment was largely concentrated in a number of politically pivotal states. Michigan, Ohio, and Illinois. These states exerted a great deal of influence in Congress and in presidential elections.

The annual import limit had the perverse effect of encouraging Japanese car companies to change the product mix of vehicles they shipped to the United States, sending more upscale models, where profits were greatest, and fewer, smaller, cheaper cars. It is estimated, that at its peak, in the early 1980's, the quota was transferring $5 billion a year in additional profits to the Japanese automakers, who could sell their quota-limited cars at a premium.

Despite this protection, the U.S. auto industry continued to lose market share to Japanese producers because, Toyota, Nissan, and Honda simply jumped over the trade barrier. They began manufacturing their cars in the United States, totally circumventing the laws the U.S. government had put in place.

GENERAL MOTORS BUYING OTHER CAR COMPANIES

While experts agree Detroit abandoned focusing on their core brand, Chevrolet, and decided to buy other brands, with these decisions coming back to haunt them years later.

In 1990, GM bought a 50% stake in Saab. In 1999, Gm bought the rights to Hummer. In 1984, GM establishes joint venture with Opel.

FORD BUYING OTHER CAR COMPANIES

In 1999, Ford bought Volvo. In 2000, Ford bought Land Rover. In 1979, Ford bought 25% of Mazda, then bought 33.4% stake somewhere between 1996-1998. In 1989, Ford buys Jaguar .

While some of these deals may have been good, experts agree most were not. It is just a shame that college educated executives and board members aloud these questionable decisions to happen over the course of decades. Many factors contributed to where the U.S. car companies are today. Some say greed on one side, and others say perhaps stupidity.

While many Americans have a strong opinion against G.M. and Chrysler being successful again, I can't believe that deep down any of us are pulling for these companies to go away forever. That would be a sad day indeed. In a 1997 Seinfeld episode, The Postmaster General told Kramer "It is my job to by god get things done". It's too bad Detroit didn't have that same philosophy.

The Downfall Of The U.S. Car Industry In 2008

The U.S. Car Companies Downfall In 2008