(EXPANDED 10/28/2022)
A few years ago Richard M. Langworth argued that Ford’s aggressive attempt to overtake Chevrolet in 1954 received more blame “than it deserved” in undercutting the viability of independent automakers (2019, p. 16).
“Management, sales tactics, dealer strength, and product choices were more significant in the decline of the independents — management especially,” wrote Langworth in a feature story about the early-50s Ford-Chevrolet rivalry in Collectible Automobile magazine (2019, p. 16).
This is an intriguing argument. However, the only evidence Langworth presented was a quote from Fredric Donner, who became the CEO of General Motors in 1958. In response to a question about whether the automaker should “ease up on competitors so as not to drive them out of business,” Langworth said that Donner responded, “And when did you stop beating your wife? We didn’t drive them to their present condition. They drove themselves there. Did you ever stop to wonder what they did with the profits of the lush war years, if they reinvested them in the business?” (2019, p. 16).
At the risk of sounding harsh, this is weak evidence. For starters, Donner was not an objective observer. He reportedly made this comment in 1958, when Congress was discussing whether to pass antitrust legislation targeting GM.
In addition, Langworth didn’t acknowledge that he shortened Donner’s quote in a way that inaccurately broadened its meaning. According to Alex Taylor III, Donner had said, “And when did you stop beating your wife? If you are thinking about Studebaker-Packard, we didn’t drive them to their present condition. . . .” (2011, p. 19; italics added). In other words, Donner was not alleging that all of the independents failed to reinvest in their automotive operations.
Langworth also undercut his argument by noting that “GM and Ford Motor ended 1954 with 82 percent of the market, up from 70 percent the year before” (2019, p. 16). Such a large and rapid shift does not typically happen without a black swan event. Management weakness — particularly by multiple firms — would play out more gradually.
Perhaps Langworth’s analysis was constrained by space. After all, the focus of his story was not the independents, but Ford and Chevrolet’s rivalry in the early-50s. Or perhaps his thinking about the Ford blitz has evolved over the years. In a book about Studebaker that was first published in 1979, Langworth offered a more mixed perspective. He wrote that on the one hand:
“When Henry Ford II declared a production war on GM in 1953, and GM fought back, it coincided with the critical acceptance period of the new Studebaker line. The result was a drastic cut into Studebaker sales: Production dropped over 100,000 units between 1953 and 1954. Henry Ford II did not set out to murder Studebaker, and once or twice since he’s said he regretted his ’53 blitz. But he dealt South Bend a crippling blow.” (Langworth, 1979, 1993; p. 164)
On the other hand, Langworth ultimately blamed Studebaker’s demise on its own failures. If management had decided in 1950 to push the company “out of the car business within the next fifteen years, they could hardly have gone about it in a more efficient way” (1979, 1993, p. 166).
Langworth made similar arguments in other book-length histories. For example, in discussing why Hudson failed, he wrote: “Undoubtedly the independents suffered dramatically from the ‘Ford Blitz’ of 1953. The overproduction of Ford and GM, in their strident efforts to bury each other, buried only the independents” (1977, 1993; p. 125). Yet he suggested that the Hudson’s demise “very possibly” was inevitable even if its management had not failed to “predict and satisfy the market” (1977, 1993; p. 126). The “temper of the times was against the firm from the dawn of the fifties” (1977, 1993; p. 124).
How accurate is Langworth’s take? I can’t offer a definitive answer, but this essay will present data and analysis that may help to add nuance — and balance — to the debate.
The underlying question is why the number of independents shrank from six to three in roughly one year. Kaiser-Frazer merged with Willys, Nash with Hudson, and Studebaker with Packard. Five years later two-thirds of those brand names had been discontinued. By 1965 only one independent automaker was still producing passenger cars in the United States — American Motors.
Let’s start by looking at the trajectory of the independents from before the Great Depression through the early-postwar period. Then we will draw upon a number of analytical frames that can help us better understand what happened in 1953-54.
Before proceeding, I should mention one basic challenge in talking about the independents. They all were impacted by the same macro-level challenges, but each automaker faced somewhat different micro-level circumstances. The specific steps Studebaker arguably needed to take in order to survive would have looked at least somewhat different than for Hudson or Willys. This post will mostly hover at the macro level.
The good times end for independents
The 1920s were still a fairly good time to be an independent automaker. Although Ford and General Motors had established themselves as the dominant automakers, the gap between them and second-tier automakers wasn’t overwhelmingly large.
As a case in point, Hudson and Willys-Overland both had years when they competed for third place in sales behind Ford and Chevrolet. Either one of these automakers could have plausibly broken from the pack to become one of the Big Three.
Instead, the Chrysler Corporation did — and for a time even challenged the Ford Motor Company for second place. Chrysler production soared from 278,000 units in 1930 to more than one million in both 1937 and 1941.
In contrast, prior to World War II the independents failed to surpass their 1930 production of roughly 516,000 units. They came the closest in 1937, when they collectively almost hit 490,000 units. However, in the banner year of 1941, the independents produced less than 408,000 units.
The plight of the independents can be seen even more starkly in the stacked graph below. The Great Depression hit the auto industry hard, with total production falling by two-thirds between 1930 and 1932. However, the Big Three bounced back strongly as the economy began to improve. By 1941 their production had jumped 61 percent above 1930 levels.
Some of the Big Three’s production gains were at the expense of smaller automakers. Whereas in 1930 the independents controlled 17.6 percent of domestic passenger-car production, by 1941 their market share had fallen to 9.5 percent.
The Great Depression certainly culled the herd. Between 1930 and 1941, one third of all domestic brands either exited the passenger-car market or disappeared altogether. Although General Motors killed the slow-selling Viking, Marquette, Oakland and LaSalle, all of the other casualties were among independent automakers.
One reason that the Big Three gained an upper hand over the independents was because the latter had been strongest in two markets most impacted by the depression — premium-priced and luxury cars. Donald T. Critchlow wrote:
“The medium-priced market ($750-$1,500) accounted for close to 30 percent of total sales in 1927, but by 1934 it accounted for only 4.1 percent of sales. Similarly the luxury market (over $1,500), which accounted for 5.5 percent of total sales in 1927, fell to 0.8 percent in 1934.” (1996, p. 67)
Meanwhile, the independents that had done relatively well in the low-priced field in the 1920s failed to maintain their standing. As a case in point, Hudson’s lower-priced companion brand, the Essex, sold upwards of 200,000 units during 1927-29. This allowed the automaker to reach a peak of roughly 301,000 units in 1929. However, by 1933 Essex production had fallen to 38,000 units, with the premium-priced Hudson brand adding only another 2,900 units. That same year Plymouth almost cracked 300,000 units.
Studebaker did not experience anywhere near Hudson’s success in the 1920s. In the early-30s, Studebaker’s second attempt at a low-priced companion brand, the Rockne, sold so poorly that it was discontinued in 1933. Studebaker didn’t gain even a modest amount of traction in the low-priced field until it introduced the granddaddy of mid-sized cars — the 1939 Champion.
I don’t show production for Willys-Overland and Nash in the above graph because they were minor players in the low-priced field during the 1930s. In 1928 Willys produced 315,000 units — a record for an independent that was not broken until 1950, when Studebaker surpassed 320,000 units. Alas, during the early days of the depression Willys experienced the most dramatic decline of the larger independents — and failed to recover.
Meanwhile, Nash volume in the 1930s tended to be lower than Hudson and Studebaker partly because its junior brand, the Lafayette, never caught on. Nash didn’t become more competitive until it came out with the light-weight, unit-bodied 600 in 1941.
The above discussion hints at how individual independent automakers shifted their strategies in response to the depression. As the graph below shows, some shifts worked better than others.
Packard saw the greatest volume gains once it launched premium-priced models in 1935. By the same token, Studebaker once again became the best-selling independent beginning in 1939 by shifting downmarket with the Champion. Hudson saw its competitive position decline relative to Studebaker and Nash, arguably because it gravitated upmarket in the late-30s — the opposite of the other two. Meanwhile, Willys began to recover in 1936-37 with its four-cylinder compact, but then sales collapsed and trudged along at around 20,000 units per year through 1941.
Also see ‘1933-42 Willys offered a better template for an import beater’
The key thing to keep in mind is that in 1941, which had the highest automotive sales since the beginning of the depression, only Studebaker surpassed 100,000 units. The next three independent automakers were clustered between 73,000 and 92,000 units. That level of volume was a big step up from the depths of the depression but was not a recipe for long-term financial sustainability.
Independents briefly benefit from post-war boom
The post-World War II economic boom lifted sales to unprecedented heights for many of the established independents, but the seller’s market was short lived. Although automotive historians have debated its end date, it was clearly over by the beginning of the 1954 model year (go here for further discussion).
The stacked graph below illustrates how much the independents benefited from the seller’s market. The peak year of 1951 saw output reach 900,000 units. This was a whopping 88 percent higher than 1937, which was the top year in the 1930s and early-40s for the eight listed brands. For 1952 and 1953 output fell to around 550,000 units, but that was still higher than 1937.
Output fell to under 277,000 units in 1954. To make matters worse, the losses weren’t over. After a modest increase in 1955, the following year production fell to 214,000. This was a low not seen since the sharp recession of 1938. Only in 1932-34 — the depth of the depression — did the independents produce fewer passenger cars.
What’s particularly striking is that the independents’ post-war boom and bust did not correspond very closely with its larger competitors. As you can see from the stacked graph below, the Big Three had three production peaks and valleys between 1948 and 1956. However, their overall trend line went dramatically upward — particularly compared to the 1930s.
In 1955 the Big Three pumped out 3.72 million passenger cars. That was almost three times as many as in 1930. Compare that to the independents, which saw their output decline by a third during the same time period.
Said another way, independents saw their market share decline from 17.6 percent in 1930 to 4.6 percent in 1955. It’s true that they staged a comeback in the early post-war years, hitting a high of 15.8 percent in 1951. Nevertheless, the good times disappeared all too quickly. In 1952 market share declined slightly to 14.3 percent — but then in 1953 fell to 8.5 percent and in 1954 to 5.7 percent.
This catastrophic drop in market share translated into much lower volume. Six automakers were not going to make a profit when they were fighting over less than 300,000 units.
GM and Ford drove industry consolidation
The decline of the independents in the first half of the 1950s can’t be blamed on Chrysler. Between 1951 and 1956 its market share of total U.S. auto production declined 3 points to 17 percent.
GM and Ford were the big winners. Between 1951 and 1956, their market penetration jumped by 15.4 points to 79.6 percent. That’s an extraordinary amount of growth — and almost as large as Chrysler’s market share.
The key growth years were between 1952 and 1954, when the Big Two’s market share increased by 12.1 points to 77.9 percent. Of that increase, 9.3 percent came from the Chevrolet and Ford brands (2.5 and 6.8 percent, respectively).
Only 2.8 percent of the Big Two’s market-share increase in 1952-54 came from the rest of their brands. GM gained another 1.8 percent on the strength of Buick and Oldsmobile, which had new styling for 1954. Ford’s additional 1 percent came largely from Mercury.
Also see ‘Why V8 engines were less important in the 1950s than commonly believed’
Chrysler took a hit but was less impacted than is commonly presented by automotive histories. Between 1952 and 1954 its market share dropped from 19.9 percent to an unusually low 16.4 percent. However, Plymouth’s share of total U.S. auto production fell only slightly, from 10.1 percent in 1952 to 9.5 percent in 1954. This suggests that Chrysler’s low-priced brand did a fairly decent job of holding its own against the Ford blitz — contrary to most automotive histories (go here for further discussion).
The biggest victim of the Ford blitz would appear to be the independents, which saw their market share fall by more than half — from 14.3 percent in 1952 to only 5.7 percent in 1954.
That said, let’s not lose sight of the larger historical context: GM and Ford had been consolidating their hold on the U.S. automobile industry for quite some time. From 1930-56, GM’s market share had increased from less than 34 percent to 51 percent. A goodly portion of that growth occurred after 1949, when its proportion of the market was 40.1 percent.
Meanwhile, 1930 was the last time that Ford beat GM in volume — and due to increasingly dysfunctional management slid to a low of only 14.3 percent of the market in 1948. However, Ford’s revival was rapid. By 1956 the automaker had doubled its market share to 28.6 percent.
The Big Two’s post-war growth had a huge impact on the character of the U.S. auto industry. Between 1941 and 1956, annual production increased by 46 percent — and all but 2 percent of that growth was absorbed by GM and Ford. This put Chrysler in a perpetually tenuous position and went a long way toward destroying the viability of the independents.
Also see ‘1955-56 Chryslers: ‘Forward Look’ wasn’t as successful as sometimes assumed’
The declining number of cars on the road that were produced by independents served to culturally marginalize them — and their owners. James A. Ward wrote that those who drove independent automobiles “marched to different drummers, they did not look for their friends’ approval, and they probably dressed funny” (1995, p. 129). By the mid-60s being different would prove to be hip, but that wasn’t the case a decade earlier.
Struggling to survive in an oligopoly
Automotive histories mostly avoid saying so point blank, but the post-war U.S. auto industry was a classic example of an oligopoly. This is the term for an industry where a few producers control the majority of its market share. Investopedia summed up why oligopolies can be so problematic:
“The economic and legal concern is that an oligopoly can block new entrants, slow innovation, and increase prices, which harms consumers. Firms in an oligopoly set prices, whether collectively – in a cartel – or under the leadership of one firm, rather than taking prices from the market. Profit margins are thus higher than they would be in a more competitive market.” (Kenton, 2019)
The large-scale and capital-intensive nature of the auto industry had spurred consolidation since the 1920s, but it went into overdrive by the mid-50s. “Competition occurred largely on the basis of economies of scale, which left the independents at a great disadvantage,” Critchlow stated. One result was that innovation “became incremental at best” (1996, p. 121).
The biggest automakers did the best. Cray noted that GM averaged a 25 percent return on investment between 1950 and 1955. This was more than any other U.S. automaker (1996).
George Romney, who led the newly named American Motors after Nash merged with Hudson in 1954, offered an example of how GM had become so big that it could dictate industry styling trends. He told a Senate subcommittee in the late-50s that the wraparound windshield had “no basic advantage over the straight windshield, and yet through advertising and promotion you can make an item of that type become absolutely the hallmark of a modern car, if you have got a large enough percentage of the total market to do it” (Cray, 1980; p. 377).
Smaller automakers were put in the position of having to follow the latest trends in order to stay competitive, Romney argued.
Independents found it difficult to keep up because they lacked adequate economies of scale. Langworth’s Kaiser-Frazer history quoted Bill Williams to explain why that was so challenging:
“.. . it costs as much for a small company to retool a new car as it does a big one. Chevy or Ford, though, can amortize that tooling cost over, say, a million cars, while a company like K-F is lucky to produce a tenth of that number. Now it’s true that it costs less to tool for a 100,000 car run than it does for a million car run, but not enough less to make the lower run competitive.” (1975; p. 125; original italics)
What was an adequate level of production to be viable has been heavily debated. However, Robert R. Ebert (2013) pointed to a mid-50s study which concluded that an independent could be profitable by producing 100,000 to 150,000 units. Meanwhile, Roy D. Chapin Jr. estimated that Hudson’s breakeven point in its final years was somewhere around 75,000 units (Langworth, 1977, 1993).
At least on the surface, generating an average of 75,000 to 100,000 units sounds plausible for a well-run automaker in the 1950s. However, development costs escalated with the Big Three’s increasingly rapid-fire embrace of new technologies and major styling changes.
For example, most of the independents could not afford to develop on their own a V8 engine or an automatic transmission. Studebaker was the earliest one to do so, but the automaker undercut its financial viability by not selling these components to others in order to achieve adequate economies of scale. Additionally, even if all of the independents had survived into the late-50s, most would have arguably struggled to keep up with the Big Three’s fast-paced styling changes, such as switching to lower bodies.
Also see ‘Five (arguably) unresolved mysteries of postwar independent automakers’
What this suggests is that even if the Ford blitz didn’t occur, the independents still would have faced a long-term squeeze — at least in the absence of antitrust action taken against GM and perhaps Ford. This is why I would agree with Langworth’s 2019 article that managerial decisions at each automaker contributed mightily to their fate. Even so, I lean toward his earlier assessment that the Ford blitz badly hurt the independents.
Independents varied in their survival skills
The graph below shows how divergent the independents were in their post-war trajectories. Studebaker was typically the volume leader, but it suffered from the most dramatic collapse in its production. Nash did not come anywhere close to Studebaker’s peak sales but displayed steadier output that began to eclipse Studebaker in 1954.
Hudson started off the post-war years fairly strong but by the early-50s settled into a pattern similar to that of Packard; both failed to top 100,000 units after 1951. Kaiser-Frazer showed the ability to make a splash with new products but lost altitude with remarkable speed. Meanwhile, Willys’ volume was consistently so low that one might question its rationale for reentering the passenger-car market after WWII (at least as a stand-alone brand).
Truth be told, during the early-50s none of the independents displayed a particularly high level of savvy in their corporate strategies. Nash showed the greatest promise, but it would have likely had a harder time if its head, George Mason, had not died shortly after the automaker merged with Hudson. Unlike his successor, George Romney, Mason was committed to a financially unsustainable, two-platform strategy that could have undercut — if not destroyed — the automaker’s ability to weather a late-50s recession.
I don’t think it is an accident that the last independent producer of passenger cars — American Motors — largely owed its survival to Romney, who was one of the best auto executives of the post-war era. The level of competition had become so intense by the mid-50s that there was virtually no room for error by smaller automakers. And even AMC came close to going out of business in its early days — partly because of mistakes by Romney (go here for further discussion).
Most automotive histories treat this dynamic as the natural order of the universe. What is usually left unsaid is that American antitrust regulations were supposed to have kept the auto industry from becoming an oligopoly.
At the very least, the federal government could — should — have stepped in to stop the Ford blitz before things got out of hand. Perhaps that might have happened under a Democratic president. As it turned out, the Eisenhower administration was not only indifferent to antitrust regulation, but it also undercut Studebaker-Packard at the worst possible time by redirecting defense contracts to larger companies . . . such as General Motors. The latter occurred when Charles Wilson — the former head of GM — was Eisenhower’s defense secretary (Ward, 1995).
Also see ‘Would Hudson have been Packard’s best merger partner?’
If the Ford blitz had not occurred and the independents continued to receive a fairly stable flow of defense contracts, they would have still faced intensifying competition from the Big Three. Some of the independents would likely have not made it through the 1950s. However, at least their departures or mergers would have occurred in a more gradual fashion.
One potential result is that more compacts might have survived into the late-50s. That could have reduced the public’s appetite for a first wave of foreign cars.
Antitrust action could have saved Detroit from itself
The moral to this story is that the collapse of the independents in 1954 was significantly a result of external politics over which they had no control. Yet even if the federal government had taken aggressive antitrust actions, some of the independents would inevitably have not survived.
Breaking up GM would not have been a get-out-of-jail-free card for poorly run independents. What it could have done was to level the playing field enough for the more solid companies to make it into the 1960s — and perhaps beyond. A more competitive domestic auto industry, in turn, would have been in better shape to fend off additional waves of imports in the 1970s and 1980s.
The Ford blitz was but one presenting symptom of an industry that had become an oligopoly. This was not an act of God but a consequence of myopic political leadership.
Why should we care? Because the lack of meaningful antitrust action in the first half of the 1950s cast an insidiously long shadow: The 21st-Century collapse of the No Longer Big Three began right here.
NOTES:
This story was originally posted on April 1, 2020 and expanded on Oct. 28, 2022. Production and market share figures were calculated with data drawn from the auto editors of Consumer Guide (1993), Gunnell, (2002), Kimes and Clark (1996), Kowalke (1999) and Wikipedia (2020). All figures should be for model-year production, so may be somewhat different than the numbers presented in automotive histories that use calendar-year data.
Share your reactions to this post with a comment below or a note to the editor.
RE:SOURCES
- Auto editors of Consumer Guide; 1993. Encyclopedia of American Cars. Publications International, Lincolnwood, Ill.
- Cray, Ed; 1980. Chrome Colossus: General Motors and its Times. McGraw-Hill Book Co., New York, NY.
- Critchlow, Donald T.; 1996. Studebaker: The Life and Death of an American Corporation. Indiana University Press, Indianapolis, IN.
- Ebert, Robert R.; 2013. Champion of the Lark: Harold Churchill and the Presidency of Studebaker-Packard, 1956-1961. McFarland & Company, London.
- Gunnell, John; 2002. Standard Catalog of American Cars, 1946-1975. Revised Fourth Ed. Krause Publications, Iola, WI.
- Kenton, Will; 2018. “Oligopoly.” Investopedia. Updated February 9.
- Kimes, Beverly Rae and Henry Austin Clark, Jr.; 1996. Standard Catalog of American cars 1805-1942. Third Ed. Krause Publications, Iola, WA.
- Kowalke, Ron; 1999. Standard Catalog of Independents: The Struggle to Survive Among Giants. Krause Publications, Iola, WI.
- Langworth, Richard M.; 1975. Kaiser-Frazer: The Last Onslaught on Detroit.Princeton Publishing, Princeton, NJ.
- ——–; 1977, 1993. Hudson 1946-1957: The Classic Postwar Years. Motorbooks International, Osceola, WI.
- ——–; 1979, 1993. Studebaker 1946-1966: The Classic Postwar Years. Motorbooks International, Osceola, WI.
- Taylor, Alex III; 2011. Sixty to Zero: An Inside Look at the Collapse of General Motors — And the Detroit Auto Industry. Yale University Press.
- Ward, James A.; 1995. The Fall of the Packard Motor Car Company. Stanford University Press, Stanford, CA.
- Wikipedia; 2020. “U.S. Automobile Production Figures.” Accessed March 28.
ADVERTISEMENTS & BROCHURES:
- ads.aacalibrary.org (Antique Automobile Club of America): Nash (1954)
- wildaboutcarsonline.com (Automotive History Preservation Society): Studebaker (1954)
- oldcaradvertising.com: Essex (1930); Plymouth (1954); Rambler (1958); Whippet (1930)
- oldcarbrochures.org: Willys (1953)
While the focus has been on the Ford Blitz, I would argue that another factor was more critical in the long run – the increasing dominance of Oldsmobile, Buick and Cadillac in the early 1950s, which was capped with the debut of GM’s all-new B- and C-bodies for 1954. The independents largely competed in the medium-price field. Packard did compete in both the luxury market and the medium-price field.
By 1954, Oldsmobile, Buick and Cadillac had blanketed those segments with up-to-the-minute styling, modern OHV V-8s and fully automatic transmissions. The wraparound windshield was just one feature of the GM cars. They offered flashy two-tone paint schemes for the medium-price market (Oldsmobile and “junior” Buicks), and features such as the fully radiused rear wheel openings on the Buick Special and Century hardtop coupes.
In the medium-price and luxury markets, image was (and is) critical, and added features and styling tricks played a key role in maintaining a marque’s image. (If buyers want to simply “get where they were going,” a Chevrolet, Ford or Plymouth were able to meet that need.) Nobody did that better than GM in the postwar period.
Meanwhile, the newest body from an independent competing in the medium-price field came from Studebaker. It had debuted in 1953, and the two- and four-door sedans very much looked like afterthoughts compared to the stylish coupes. They simply were not competitive in styling and size with the Oldsmobiles and Buicks. And thanks to Studebaker’s high labor costs and inefficient factory, Studebaker had to sell the Commander V-8 at Buick prices to make a profit…Robert Bourke had “costed it out” using GM’s price structure, and discovered that GM could have sold it at Chevrolet prices! Customers could likely sense the difference in quality and materials.
Hudson, Nash and Packard were competing with bodies introduced in 1948, 1952 and 1951, respectively. The Nash would have looked more modern if it had not been saddled with skirted front wheels, which required a narrow front track, which, in turn, affected the “stance” of the car. Packard’s body was handsome and up-to-date (and, considered in a vacuum, probably more attractive than the GM competition), but somewhat anonymous. It could have been sold as a Dodge or a DeSoto. Meanwhile, an Oldsmobile, Buick and Cadillac were immediately identifiable, thanks to Harley Earl’s practice of carefully cultivating styling trademarks for each marque.
Chrysler Corporation’s experience is also instructive. Plymouth – the marque that competed directly with Ford and Chevrolet – suffered the least out of all of the company’s marques during the Ford Blitz. Dodge, DeSoto and Chrysler were hammered harder. One would think that it would be the opposite, as Ford and Chevrolet competed directly with Plymouth.
Dodge, DeSoto and Chrysler competed in the medium-price field against the GM marques. They all had modern OHV V-8s by 1953, but the styling looked dowdy compared to the GM trio (particularly DeSoto and Chrysler), and the corporation didn’t offer a fully automatic transmission until late 1953 – the last automaker to do so!
Another forgotten factor was GM extending the length of the loan period to customers who financed through GMAC. From what I’ve read, Buick, in particular, aggressively marketed the longer loan terms. This lowered monthly payments, and enabled customers to “step up” to a Buick Special. This goosed Buick’s sales – particularly in 1955 – but it also borrowed sales from the future (as customers were locked in to a longer payoff period). During the 1958 recession, there were several analysts who partially blamed the 1958 sales downturn on auto makers “borrowing sales from the future” during 1955.
In my opinion, the 1954 Ford was in every way a superior car to the 1954 Chevrolet. Ford had designed a winner with the 1952 cars, from Ford to Mercury to Lincoln. By 1954, all had O.H.V. V-8s and Ford had a good six, too. The 1953-54 Chevys were not as good a car as the Ford. My maternal grandparents had a 1954 Ford four-door sedan. It was a superior car to the 1954 Chevrolet my father’s G.M. co-worker drove when they carpooled. I do not blame Ford management to try to reclaim market share by pushing a very solid automobile. Ford products were not superior to most Chrysler products, but Ford had a top-of-mind image and Plymouth, Dodge, De Soto and Chrysler did not, nor was Chrysler’s dealer network as widespread as Ford’s. Ford’s weakness was the dealer network for Lincoln and Mercury, where Chrysler was superior. G.M.’s aggressive push in selling the Buick division in 1955 backfired, and Buick production suffered for it in the following years. After 1954, Ford’s problem was Oldsmobile and Buick, because the Mercury, while a good car especially after 1952, was not the logical step-up from the fully trimmed-out Ford V-8, as Francis Reith pointed out to the Ford executive committee in 1952. People who drove Chrysler products stayed with MoPar products. I believe that the real problem for the independents were in the heated-up marketplace in 1954-1955, Ford and Chevrolet picked off the “low-hanging fruit” while Buick and Oldsmobile soaked up the customers aspiring for the next level in the mid-price range.
Excellent analysis. By any measure, the 1950’s was the largely the last hurrah for the independent automakers. Automobile manufacturing is a volume driven business. After the pent-up post-war demand was depleted, the independents had little chance beyond being niche players. AMC survived by being a niche player, first with compacts, then through its acquisition of the Jeep brand. Studebaker’s fade was postponed only by the Lark, but not for long. It would become clear by the early 1960’s that automobile manufacturing had become a volume game, especially with impending safety and pollution legislation starting to take shape.
My 1964 Studebaker Daytona is a wonderful automobile. Every bit as stylish a ride as a big three competitor. However, in its day, it was sadly, overpriced, outdated and largely forgotten, if not simply avoided, despite the freshened 1964 body stampings. Without sales momentum there was simply no cash flow for reinvestment and updates. The Avanti was a bold and largely fruitless effort to stem the decline of Studebaker and perhaps hastened their automotive exit.
Given the many elements involved, the idea that antitrust action could have saved Detroit from itself is imho, a hypothesis only – and a weak one at that.
Such action could have just as easily led to a faster decline of the U.S. auto industry or had no long-term effect at all. Also, such action’s effect on broader, longer term political and societal dynamics could have led to significant consequences tallied in the bad column. Look at the mistrust that grew in the decades following the government’s assassination investigation of almost 60 years ago.
Unlike Teddy Roosevelt’s time and during the Great Depression, there was no clear need for government intervention in the U.S. auto industry in the 1950s and 1960s.
Innovation in the American post-war period came from all corners of the industry, as did styling trends. Why did GM abruptly change to straight-through body sides for its 1950 C-bodies? Because Kaiser-Frazer and Hudson started the trend and Packard, Nash, Lincoln and Ford quickly followed. Who started the “lower” part of “Lower, Longer, and Wider”? Cord pre-war, Hudson post-war.
But don’t take all this as an argument for anti-trust action. GM and Ford obviously made major contributions too, mostly significant. And they drove prices down, giving the consumer more buying power. But yes, there were also minor, useless contributions too. Question is, are we going to let a little thing like GM’s distorted wrap-around windows distort our perspective of the entire era? Or a brief sales war between Chevy and Ford that any healthy automotive bystander could have recovered from? Or terminated government defense contracts that no automaker should have ever allowed themselves to be dependent on to carry their auto business?
We should also acknowledge the significant competition that existed within each of the Big 3 companies during this time, fed in no small part by individual ambition. We all know the history of the many personalities and vehicle programs involved, but have we fully appreciated the diversity of outcomes that resulted? Some failed, others succeeded, all were instructive, and nobody can accuse the companies of internal stagnation.
It would be interesting to calculate the average length, width and height of the U.S. automobile in say, 1965, and weighted by the number of sales of each model, including not only the big behemoths but also the compacts and intermediates. How would these numbers compare with a similar 1950 analysis? The results might be more revealing than the recent “Lower, Longer, and Wider” analysis and give us a truer picture of the aggregate reality.
Regarding the imports, let’s start with the Beetle. Is its incursion in the U.S. really something for auto historians to fuss about? Was it something to break the Big 3 up over in the 1960s? Where is the Beetle now? Where is VWoA now? What was all the fuss really about?
Other European manufactures made a greater long-term impact and elevated the U.S. auto industry in a mostly healthy way. Meanwhile, Japan’s significant entry into the U.S. automotive market gave the consumer more choice and value, unfortunately at the expense of the American factory worker. Given that poor quality was not so much a Big 3 problem as it was increasingly an American problem, would earlier anti-trust measures have prevented it? The eventual import quotas and never passing NAFTA were/would have been much more helpful.
In the 1960s, AMC and to a lesser extent Chrysler represented two small, nimble companies of the size advocated by anti-trust proponents. What did they accomplish? It’s an important question to answer because as they went, so goes the counter-factual argument for anti-trust action.
Paul, I would invite to more deeply research the “Ford blitz.” That effectively resulted in a massive case of price fixing. Do you think that price fixing should be legal? I don’t.
Meanwhile, the former head of General Motors used his power as Eisenhower’s defense secretary to take contracts away from smaller automakers. That strikes me as a massive conflict of interest.
The Ford blitz and cuts in defense contracts functioned as a deadly, one-two punch against independent automakers.
Here’s the thing: It would not have taken much for the Eisenhower administration to use its mundane regulatory powers to stop the Ford blitz. Nor did they have to consolidate defense contracts.
If the Ford blitz had been stopped early on and defense contracts were not taken from independent automakers, I think one can make a very good, fact-based argument that more automakers would have survived the bloodbath that was 1954-55. And if more independents with a foothold in the compact car field had made it into the late-50s, that could have helped to thwart the rise of imported cars.
More broadly, it does not help your argument against anti-trust action when you ignore the negative impacts of oligopolies that have been widely documented in policy literature.
With the Ford Blitz, I’ve read that the issue was rampant discounting, as Ford, followed by GM (primarily Chevrolet, in order to protect Chevrolet’s first-place ranking), cranked up production and sent unordered cars to dealers. Dealers were desperate to move the metal, so they began offering hefty discounts and inflated trade-in values, and even sold brand-new cars to used car dealers (a practice known as “boot-legging”).
The complaint at the time was that the independents, with their more limited production base, could not match the ability of Ford and GM to LOWER prices. The dealers for the independents were not as dependent on the parent factory for their success, and thus were more likely to resist discounting their wares. (Studebaker dealers, in particular, were said to be notorious for this.) It’s hard for members of Congress to come out against lower new-car prices.
As I recall, there was a Congressional investigation into the abuses of dealers by manufacturers, primarily because new-car dealers, who were influential business leaders in their respective Congressional districts, were screaming about it by 1954. Every member of Congress had several new-car dealers in his district.
At the state level, it’s my understanding that the abuses sparked by the Ford Blitz led to the enactment of dealer franchise laws, which remain tilted in favor of dealers to this day.
As noted in the story, the new-car market had been distorted long before the Ford Blitz. The cessation of new-car production during World War II created a serious shortage of cars. When the war was over, workers were flush with cash, as they had made good wages but had been seriously curtailed in their ability to purchase big-ticket items (not just cars). When the lines were started, there were several customers bidding for anything that companies could push out the factory door. Postwar materials shortages (especially steel) and regular strikes by workers in all heavy industries aggravated the situation.
The situation was settling down when the Korean “conflict” sparked fears of another cessation of car production. Buyers scrambled to get new cars, and while the lines kept running, the federal government imposed production quotas on the auto companies.
In that market, the independents had an easier time selling their products, and some of them got sloppy. Packard management was slow to react to the challenge put forth by Oldsmobile, Buick and Cadillac. Studebaker management over-expanded its production footprint and allowed wages to rise too far above (and productivity to fall too far below) the industry norm.
The independents were lulled into a false sense of security by the distorted postwar seller’s market (except, one could argue, for Nash under George Mason). When the market switched to a more “normal” one in the early months of 1953, they were caught flat-footed.
So, from the perspective of that time, more than a few people (and not just GM leadership) probably thought the independents had a decent window of opportunity, and blew it.
Those companies – particularly Hudson and Packard – were also getting hammered by GM’s new 1954 B- and C-bodies. Not only were legislators not going to come out against lower car prices, they weren’t going to criticize GM for wowing customers with “the latest and greatest,” even if some of that was sizzle rather than steak. After almost two decades of grinding Depression and war, customers were ready to live a little, and most politicians weren’t going to criticize GM for letting them do that.
Price fixing can include reducing prices to such a low level that they push smaller automakers out of business and allow the surviving players to raise prices with greater impunity. This was one of the points of discussion in the late-50s among those interested in anti-trust policy as it applied to the US auto industry.
I am not making an either/or argument — that the fall of the independents was purely an anti-trust problem. Rather, I am suggesting that fairly normal government policies would have kept the independents from collapsing in 1954-55. Some would still have fallen by the wayside but it would have likely happened more gradually.
If there was price-fixing or anything else occurring in 1954 that was illegal at that time, then it should have been remedied within the judicial system. If no laws existed, then Congress should have investigated and taken action, up to and including passing new laws that it deemed necessary. There was no cause to break up the two companies, and such an action wouldn’t have guaranteed the end of price fixing.
With the defense contract cancellations, it would take a thorough review of all relevant facts from all parties involved to make an accurate determination of the level of fairness or prejudice exercised. I have never attempted to dig up historical data focused on these defense contract decisions. From the Independent’s perspective, they potentially meant corporate life or death. From the U.S. Government’s perspective amidst the Cold War, they were part of a broad strategy that ultimately dealt with national life and death. Was Uncle Sam skittish about entrusting Packard and the others with supplying key defense equipment in the out years? I don’t know what drove the decisions, need facts.
The Federal Trade Commission would have been the appropriate agency to have taken action against Ford and GM in 1954. And, frankly, Eisenhower could have put a stop to the Ford blitz with a phone call.
I’m not sure you are hearing what I’ve been saying in the above comments. My basic argument has been that the rapid and wholesale collapse of the independents might have been avoided in 1954-55 if the Eisenhower administration had stopped the Ford blitz and not dramatically restructured its defense contracts for few years. That’s all. No breaking up of GM. Indeed, if more independents had survived into the late-50s with compacts, there may not have been a need for more aggressive anti-trust action.
Millions of Americans elect Presidents to use that phone with what they hope will be a wholesome discretion. There are consequences to making calls from the White House, precedents set. Ward wrote that Ike was at some point engaged in Packard’s situation, but it was much later. The Independents blew it in the years leading up to 1954, just one bone-headed decision after another. Also, we don’t know what the ramifications would have been to our national security had we waited a few years before we dramatically restructured the defense contracts. What we do know is that both sides were headed towards an existential showdown, and the health of the Independents was likely not particularly visible on Washington’s radar. And why in the world would a grand company like Packard have ever put itself in a position where it would be materially affected by a Ford blitz? Was Cadillac affected?
Paul, as a direct result of the Ford blitz, in 1954 GM and Ford together garnered almost 78 percent of the domestic market — and in 1956 they almost hit 80 percent. That’s so far into oligopoly territory that even Chrysler was having a hard time competing. This is what American anti-trust laws on the books at the time were intended to avoid.
I would like to go back to a point you made in an earlier comment. You stated that “significant competition . . . existed within each of the Big 3 companies during this time.” During the second half of the 1950s a GM division manager arguably had more autonomy than his counterparts at Ford and Chrysler. Yet he couldn’t significantly deviate from Harley Earl’s basic styling sensibility, nor could he have come out with a compact car. Indeed, he very likely wouldn’t have even risen to a division-head level if he had pushed back too hard against the dominant “bigger, glitzier, more powerful” narrative.
Let’s look at the cause and effect of this corporate groupthink. In 1957-58 the Big Three’s lineups arguably reached a peak of conformity. I would suggest to you that this was a direct result of the independents’ collapse in 1954-55. What gives me confidence to say that? Because that’s what oligopolies routinely do.
Interestingly, the public decided that they didn’t like what the Big Three had to offer in the late-50s so they bought imports in unprecedented numbers.
If Eisenhower had displayed even a modicum of respect for anti-trust laws, he would have put a halt to the Ford blitz. Even that step alone could have saved some of the independents that later could have helped to stave off the imports. And kept some jobs in the US.
This is a key point. Properly enforced anti-trust laws will support the health of domestic industry. I personally don’t think it was a good thing that the US automakers got so flabby and complacent that they simply could not effectively compete against foreign automakers over the next 40 years.
Packard sales collapse in 1954, too. I doubt that people were cross-shopping Packards with Fords and Chevrolets. If they were doing so, it shows how far Packard had slipped by 1954. That is ultimately on Packard management, as no one would have cross-shopped Packard with those two marques in the 1930s.
Bringing up Packard is a strawman argument. I have made it clear in a number of stories that I think Packard’s sales decline in 1954 resulted from a variety of factors (e.g., go here and here). That included a backlog of 1953 models that delayed the introduction of 1954 models.
We know from production data that overall domestic production dropped by 20 percent in 1954. That was arguably driven by a recession. Meanwhile, we know that domestic market share for the low-priced brands went up around 2.5 percent and that came entirely out of the hide of the premium-priced field. Indeed, in 1954 premium brands saw their market share fall a good five points below 1952.
We also know that in 1954 only one US brand saw an output increase — Oldsmobile. We know that both the Chevrolet and the Ford brand saw their production decline but their share of the total domestic market go up a collective 4.6 percent. This was significant growth for one year. However, in 1955 the Ford brand’s market share dropped 3.6 percent whereas Chevrolet’s went up .4 percent.
So what does all of this mean? I think that one can use this data to help make a reasonable argument that the Ford blitz destabilized an already down market, e.g., it sucked sales away from the premium-priced field. How an individual brand was impacted obviously varied.
How was this different from what happened during the Great Depression and the severe recession of 1957-58? During economic downturns, the premium price brands decline (particularly during an era when loan terms were much shorter, and customers were required to put 20 percent down towards the purchase), while lower-price brands receive a larger share.
During the Great Depression, the low-price brands’ share of the market greatly increased, and both the premium-price and luxury segments declined dramatically.
It happened again in 1957-58, when a severe recession hammered car sales in general, and the medium-price market in particular.
The difference is something called the Ford blitz — a seminal event in US automobile history. I’m not suggesting an either/or situation where the blitz alone put the squeeze on the premium-priced field, but rather that it accentuated the impacts of the recession. Those market share swings were pretty substantial.
This is an interesting topic. When we examine the issues of defense contracting and allegations of “price fixing,” we have to look at the issues in play at that time. That means looking at the laws in effect at the time, the federal budget, and how federal spending and the exercise of executive authority were viewed.
Regarding defense spending – remember that, in the early 1950s, defense spending loomed far larger in the federal budget than it does today. In the 1954 federal budget, defense spending accounted for 69 percent of the total budget! (In 2021, it accounted for roughly 13 percent.)
In 1954, Medicare and Medicaid, along with other federal programs, had not yet been enacted. The Great Society program and the resulting expansion of the welfare state were 11 years in the future. “Defense spending” was largely synonymous with “federal spending.”
Defense spending constituted a huge percentage of federal expenditures. There was considerable pressure to contain it, and not just by left-wing peace activists. It therefore made sense to centralize defense contracts with fewer suppliers. The Army, for example, doesn’t necessarily want to buy three different types of trucks, as that means more parts to stock, and more effort making sure that the right parts are shipped to the right base. And while enthusiasts may have a favorite brand, the military brass doesn’t care whether the troops are driving GMCs, Dodges or Studebakers. They just want a vehicle that works and can be easily repaired when it does need fixing.
If GM could make a Chevrolet Bel Air at a lower cost than Studebaker could make a Champion (with the Bel Air, at that time, being the superior vehicle), it stands to reason that GM could use its economies of scale to make a truck cheaper than Studebaker-Packard could.
There is also a real question as to the purpose of defense contracting. Is it to ensure that each branch of the military receives necessary supplies at reasonable prices…or to keep marginal companies in business? You don’t have to be a free market enthusiast to ask whether the second objective is one that the federal government should be pursuing.
As to the second point – does the military want to rely on a marginal company for a critical piece of equipment? It’s one thing to supply trucks to the military. It’s another to supply a jet engine, which was a fairly new piece of technology at that time. Like many fading automobile companies, Packard was already showing signs of not having the engineering talent necessary to properly execute ambitious programs. The revised Twin Ultramatic for 1955 was troublesome. The Torsion-Level system was bought from an outside engineer, and released without sufficient real-world testing. Perhaps the military was wary of Packard’s ability to deliver a jet engine…for good reason. (Having a jet engine fail in flight is a lot more serious than having a transmission fail on the Pennsylvania Turnpike.)
Regarding the allegations of price fixing – there is one big roadblock. Namely, the companies weren’t the parties that were lowering prices, as I recall. The discounting was being done by the dealers, and the size of the discount (and if one was offered at all) was up to the individual dealer. The manufacturers suggested price did not change. Ford and Chevrolet were not officially cutting prices to sell cars.
The Monroney sticker requirement did not take effect until January 1, 1959. During 1954, there was thus no requirement that all new vehicles display an official, factory window sticker that listed the price of the vehicle and any optional equipment. Dealers were free to make up their own stickers. Customers could look for the manufacturer price in some publications – such as Consumer Reports or even some issues of Motor Trend – but that information wasn’t widely available. And it was very hard for customers to find out just how much the dealer actually paid for the vehicle, and how much that differed from the “price sticker” that the dealer had affixed to the window.
The dealers were doing the “discounting,” although it was hard to determine how much of a discount they were offering. Given their ability to make their own window stickers, they could very well have offered only a small real discount (meaning, from the manufacturer’s official price). But, thanks to their ability to make their own stickers, this could have been presented as a big discount. Trying to prove all of this in court – and we haven’t even discussed the ability of the dealer to use trade-in offers to seal the deal – would be extremely difficult.
Yes, Eisenhower could have made a phone call…and Henry Ford II or Ernie Breech could have replied, “Thank you, but we’re on a roll, and we’re not quitting. We’re not forcing anyone to choose a new Ford over a Studebaker.”
Then what? Aside from the precedent set by the president (which may not be a good one), all of these charges have to be proven in court. Which isn’t necessarily a slam-dunk for the prosecution.
I would be less inclined to think that a major shift in defense contracting was made purely for national security reasons if it had not been done by the former head of GM. You know, the guy who talked about what’s good for GM being good for America. There’s at least the appearance of a conflict of interest.
It strikes me as interesting how you play up the dealer role in price fixing but don’t say much about the underlying reason for the situation: Ford dumping enormous numbers of vehicles onto dealers, who at that point had less latitude to say no. Even Henry Ford II later acknowledged the damage the Ford blitz did to the independents.
Of course an Eisenhower phone call could have been ignored. However, the president had leverage, such as the threat of anti-trust action. And let’s go back to the key point here: In 1954 GM and Ford captured almost 78 percent of the domestic market.
Here is what Wilson said during his confirmation hearing: “I cannot conceive of one (a conflict of interest), because for years I thought what was good for our country was good for General Motors and vice versa. The difference did not exist. Our company is too big. It goes with the welfare of the country.”
If Wilson had given the truck contract to Ford, or even Chrysler, the effect would have been the same for Studebaker. And it still would have been justifiable from a cost-reduction standpoint.
As for the jet engine contract – it’s my understanding that it was given to an aviation company that was not a part of GM or any other car company.
Let’s also note that Wilson used the end of the Korean Conflict to slash the defense budget by $5 billion and trim the Pentagon payroll by 40,000 employees. He did what he was supposed to do – and something that too few government bureaucrats and leaders are willing to do today. In response to changing conditions, he instituted policies that saved taxpayer money.
Bringing up the actions of the dealers shows how hard it would be prove price fixing by the manufacturer. GM and Ford weren’t lowering their prices…they remained the same, from what I’ve read. The dealers were supposedly discounting…but in the days before the standardized, federally mandated Monroney price stickers that included the manufacturer’s official retail price, that would be very hard to prove. Were they really offering a discount from the manufacturer’s official price…or what they had presented as the official price on their own, in-house “stickers”? And what role did the trade-in allowance play in the deal? All of this has to be proven by the federal government in any price-fixing case.
As for GM and Ford hitting 78 percent of the market – park a 1954 GM or Ford Motor Company vehicle next to the competition from the independents and Chrysler from that year. In the case of GM, in particular, I would wonder why its market share wasn’t even higher than it was. The only really compelling alternatives were the Nash Rambler and maybe the Studebaker Starliner and Starlight coupes.
Ed Cray’s book about General Motors has some interesting things to say about the relationship between the automaker and the Eisenhower administration. For example:
“The change from Democratic to Republican administrations altered the political climate enough, (Harlow) Curtis calculated, to allow General Motors to strike out for a larger market share. Holding 46 percent of domestic motor-vehicle sales in 1953, General Motors, he boldly announced, would aim for 48 percent in 1954. When President Eisenhower announced in his annual economic message to Congress in January 1954 that size alone would not be the criterion for bringing antitrust actions, Curtis had his license to plunder” (p. 354)
“As early as 1953, there were complaints that General Motors had been singled out as the sole supplier of trucks and of light and medium tanks for the army; the three other firms — Ford, Chrysler and American Locomotive — were eliminated as suppliers on the grounds that single-source procurement would be more efficient. (The policy of a single-source contractor, approved by Secretary of Defense Wilson, actually contravened General Motors’ own system of having at least two contractors for parts purchased outside the corporation; should one suffer a breakdown in production, the other could take up the slack.) As a favored supplier, General Motors repeatedly received contracts that unsuccessful rivals challenged as overly costly to the taxpayer, or unwarranted on the basis of competitive bids” (pp. 354-355).
As for your more general defense of a rather extreme oligopoly, I see no need to repeat my counterpoint except to suggest that history has not been kind to your argument.
Regarding the first Cray quote: According to the timeline provided by Cray, Curtice made his market share prediction before Eisenhower announced his policy statement regarding anti-trust actions.
That’s not really proof that Eisenhower’s policy gave GM a license to romp – particularly when we review the company’s actual market share in the years after 1954, and WHY it rose and fell. GM wasn’t operating in a vacuum.
GM would have had to set capital investments and product plans for 1955-57 in advance of January 1954. Within three years of that quote (1957), GM’s market share went DOWN, thanks to an aggressive Ford Division effort and the one-year success of Chrysler’s Forward Look.
It then increased in 1958 and reached its high point (for all time) in 1962…thanks to competitors’ mistake. Chrysler struggled with serious quality issues and increasingly bizarre styling. In 1960, it turned Dodge into a Plymouth competitor, which meant that it essentially handed over the low-medium price market to Pontiac.
Ford threw in the towel on its assault on the medium-price market, and muddied the image of Mercury by positioning it as a low-price car (further turning over the low-medium segment to Pontiac) and trimmed Lincoln back to two models, which assured Cadillac’s continued domination of the luxury market.
Are we to blame GM for its competitors’ mistakes?
If a company is building bland or bizarrely styled cars, and some with questionable quality, it stands to reason that customers will shop elsewhere if given an alternative – either at GM (medium price and luxury market) or AMC (economy market).
Note that GM’s market share began declining in 1963, after Chrysler improved quality and fixed the bizarre Exner styling, while Ford made some inroads with the Mustang and the 1965 full-size cars.
As for those defense contracts – of course “rivals challenged them.” Unless we can examine each of the actual bids, and determine whether the winning bidder consistently delivered substandard materials, we don’t know that what “rivals” say is necessarily the accurate picture.
Regarding the federal government not breaking up GM and Ford – the auto industry wasn’t the only American industry that was on the ropes in the late 20th century. The steel, tire and heavy equipment industries were also in serious trouble, with companies either going under or being bought by foreign competitors and undergoing a restructuring.
The auto industry wasn’t the only American industry plagued with lackluster quality, high prices and subpar productivity in the late 20th century. The same problems plagued the the steel, tire and heavy equipment industries.
There was a problem with American industry in general, not just the auto industry.
Note that the Japanese auto industry is an oligopoly that is also heavily protected by by the Japanese government. It did not fail. In Europe, the French and Italian auto industries are dominated by a handful of companies, and have enjoyed considerable government protection. They have been less successful on the world stage. (The French companies were either bailed out by the government – Citroen – or actually owned by the government for a period – Renault – with the government providing regular infusions of cash.)
That would suggest that the real factors in success or failure over the long haul are management culture, along with national trade and labor policies, which ultimately manifest themselves in the products delivered to customers.
You do so much cherry picking of facts and logic that I’m not going to even try to sort it all out. I get your perspective and I’ve already made clear what mine is.
If the auto industry of other countries was also an oligopoly, but those industries didn’t fail, and they were innovative, then it suggests other factors must also be considered. Given the economies of scale and massive capital requirements necessary to stay competitive (let alone meet government mandates), the auto industry inevitably organizes itself around 3-4 high-volume players in each country, with or without a Ford Blitz. Yet some of those industries are still sources of innovation.
I’m curious to know if there were corporate bailouts by the American government during the 1950s, equivalent to those that saved Chrysler in the 1980s and GM just over a decade ago. Also, what would it have cost to save Studebaker-Packard, for example? Were those jobs and the economies created by the independents not worth saving? Did no one care where any of the displaced factory workers and dealers went once they no longer could assemble and sell any of the independent auto brands?
Well, obviously both GM and Chrysler were much bigger than Studebaker-Packard. In addition, the political dynamics varied by era. For example, legislation that bailed out Chrysler in 1980 was passed by a Democratic Congress and president. Reagan even ended up reversing his earlier stance against the bailout.
I have brought up anti-trust policy because it can function as a form of preventative medicine. As I mention in the story, if the Ford blitz had been stopped, there would likely have still been a decline in the number of independents, but at least that could have happened in a more gradual and thoughtful way. For example, the ill-fated Studebaker-Packard tie up was arguably spurred by the sheer speed of their sales decline. They might have been able to weather the 1954 recession if it had not been combined with the brutal Ford-Chevrolet production war.
My point was that during the boom years of the post-war American economy, it didn’t seem to matter if a car company lived or died. It was a pull up your boot straps, dog eat dog world at the time, yet people were still put out of work, economies still suffered (and not just temporarily). Chrysler could just as easily have been put up for sale in the 1980s (I don’t recall if that actually was on the table) and if there had been no takers, well, c’est la vie. The US government did nothing to protect its car industry until it was far too late, and by then, individual states were offering huge tax incentives for overseas car makers to set up shop and give employment to Americans that Chrysler, Ford and GM couldn’t.
Those are good points — and ones not discussed often enough in auto media (and history) circles.
The independents were doomed on market fundamentals anyway. To achieve the economies of scale took huge investments that they either could not afford and certainly would be unable to sustain. As large as Chrysler was, they had issues maintaining the pace required to be competitive. The shared platform is a massive reason why GM could achieve its financial might – common components spread across multiple divisions made in massive numbers to get low part costs. With that might they could afford to do yearly facelifts and 3 year model changes. In the time period under discussion look at just how much aesthetic change there was from 1949 to 1957-59; a completely different design language. Could any of the independents fund such a change along with the rapid development of the engines, transmissions, and creature comforts?
The concept that had been a recurring topic in the time was to do a merger to create a 4th major with Nash, Hudson, Studebaker and Packard when each was reasonably healthy might have stood a decent chance. Multi-line that could employ the shared platform production system to get the economies of scale.
The European cars that were coming in to the US had a cost advantage. Remember that Europe was still rebuilding their economies from WWII and their currencies were at the Bretton Woods fixed exchange rates. They had a manufacturing cost advantage that the independents did not have. And, in some of the cases with the Europeans, since their factories had been flattened in the war their manufacturing equipment was new.
Jeff, you have summarized what I suspect is the dominant view in the field. There are certain elements of your analysis that I would agree with — but not in an either/or way. For example, I don’t think that the US automakers failed to compete with the imports only because of cost disadvantages, but would suggest that a lack of commitment to continuous innovation was also a problem. That lack of innovation was at least partially fueled by exceptionally weak internal competition in the US auto industry (David Halberstam sums up this perspective quite well here).
Individual historians (professional as well as armchair) have a right to their views. The problem is when auto history is dominated by too narrow of a range of voices. That can result in groupthink. My goal is to add diversity to the conversation.
I would agree with you, Steve, about the lack of innovation in the US car industry and you support that nicely with the quote from David Halberstam. Automatic transmissions and high compression V8s do not constitute ground-breaking innovations if they are the only innovations. Ford’s Taurus is but one example of how Detroit can pull off a dog and pony show but when it came time to meaningfully update and keep Taurus competitive, Ford basically let it wither. They just weren’t into it anymore and Taurus became bigger, heavier, and less desirable. How’s that for innovation? And how about the American Escort and Focus? Poorly translated versions of popular European Fords and two of the most recalled Ford products in North American history. Arguably, worse than GM’s X-cars. That’s innovation!
With the Taurus, Ford needed to take the Toyota and Honda approach, and give the basic platform meaningful updates every four years. Toyota and Honda don’t let products wither on the vine, and then reinvent the wheel because they have fallen behind competitors. (The current “new” Civic, for example, is a restyled and refined version of the previous generation. But to customers, it looks new.)
I wouldn’t compare the Escort and Focus to the GM X-cars, because Ford did stick with them and made numerous improvements over the years. The North American Escort was on the market for over 20 years. Several relatives and friends had 1985 1/2 and later Escorts and got very good service out of them. The early years, however, were problematic.
The first Focus had its share of teething problems because Ford made changes to the European design without doing sufficient testing in this country. By 2003, those problems had been worked out…we had a 2005 Focus SE sedan that gave very good service over 12 years and 235,000 miles.
Ford messed up the 2012 model (and the Fiesta) because it tried to use a new automatic transmission (for the North American market) that promised better economy and lower cost. But it wasn’t fully developed.
You are way to kind to Ford on the continuing development during a product’s run. I would say that Ford has a far more prevalent habit of creating a sufficiently worthy car then letting it run until it is no longer market viable. Then that brand name has been devalued (or at least management thinks so) so when they finally replace the car it has a new name.
Ford has been a leadership disaster since they pushed out Mullaly.
I’m not disagreeing with you on what happened with the Taurus. The first Taurus was a great car, but Ford didn’t do enough to keep it competitive…and then went overboard with the oval 1996 model.
If Ford had taken the Honda and Toyota approach – make meaningful updates every four years to the basic car that address weaknesses – it would have succeeded over the long haul.
The Escort and Focus were not nearly as bad as the GM X-cars. The GM cars made a big splash, and were gone from the market within six years. After Ford addressed the teething issues with the Escort and first-generation Focus, the cars stayed on the market for years and gave good service to those who bought them.
I would also note that the second-generation Focus with the problematic automatic transmission – the car’s Achilles Heel – was developed during Mullaly’s tenure.
GM’s X-cars lived on as the fwd A-body Celebrity, 6000, Century & Ciera and proved to be more reliable than their forebears.
While they weren’t as bad as the first X-cars, the front-wheel-drive A-bodies had their share of teething troubles. By the time GM had them sorted out, they were outclassed by the Taurus and Accord.
The Celebrity and A6000 didn’t last as long as the Taurus, while the Ciera and Century were allowed to linger beyond their sell-by date. They ended up hurting the image of the Oldsmobile and Buick brands.
My point was that the X-cars lived on. I don’t think the A-body Century did Buick any harm at all, as the next generation (upgraded to the W-body) replacement carried that nameplate from 1997 to 2005. Going back to Ford, the Taurus should have been to Ford what the Accord is to Honda, but it seems no one could ever figure that out. In the end, Ford, GM & Chrysler simply ceded the mid-size car market to Honda and Toyota, who as you noted, steadily improved their cars and never lost sight of their importance to the company and the customer.