BUSINESSWEEK’S ED WALLACE GETS IT PARTLY RIGHT
[Get the latest “Truth With Speedzzter” here]
In a BusinessWeek column entitled “The Boomers Stop Buying,” journalist, historian and talk show host Ed Wallace gets it partly right.
Wallace opines:
He further points out that while the parents and grandparents of boomers correctly recognized that Detroit had built much of modern America, “unconditional love, or "Detroit or nothing" started crumbling” with the later generations.
The coup de gras was Detroit’s failure to appreciate the Europeanization of the luxury auto market in the 1980s and 1990s, leaving upwardly mobile boomers with no place to go but to imports.
Wallace, of course, is pessimistic, expecting America’s automotive traditions to collapse into a heap of $7.00/gallon gasoline, baby boomer retirement parsimony, and an impoverished middle class with less new vehicle buying power than even during the Great Depression.
Wallace does omit a few points:
1. The seeds of Detroit’s failure to nurture the luxury market were sown in the 1950s with:
(a) Henry Ford II’s abandonment of the Continental Division, leading to the domestic industry abandoning building “World Class” luxury cars and engineering subsequent American luxury cars to a mass market price point;
(b) the public safety lobby which killed any replication of the German Autobahns in America, and saddled our new interstate highway system with excessively low speed limits, which hampered demand for European-style handling and performance capabilty, as well as reducing pressure on American driver education programs to actually teach car control (Thus, America's mass market near-luxury cars became isolation chambers that failed to appeal to boomers who learned about cars in the First Supercar Era);
(c) the 1957 AMA racing ban, which delayed the development and implementation of new motoring technologies;
(d) the recession of 1958, which started Detroit down the road of cheapening the design features of American cars.
Myopic hacks such as Lee Iacocca, Red Poling, and Roger Smith merely were playing the poor hands dealt by these conditions (while being focused only on short-term stock share performance and personal career advancement).
2. The lack of exciting Detroit cars available to the last third of the Boomers was caused in large part by failed fiscal and regulatory policies out of Washington D.C. Washington’s failure to get inflation under control until the late 1980s crushed Detroit’s cost structure.
Washington’s failure to insist on open markets in Japan and its support for preventing American investment there allowed the Japanese auto industry to incubate without any meaningful competition and led directly to their predatory export-driven business model.
The regulatory polices of the 1970s made it almost impossible for Detroit to offer much excitement in the youth market. Corporate Average Fuel Economy regulations restricted supplies of the sorts of cars Americans wanted to buy and artificially drove up prices. Only a few dim lights, such as the Mustang 5.0 and the Buick Grand National were still shining by 1985 – and both of these cars were in short supply at dealerships and not being developed as much as they should have been because of CAFE.
Washington’s labor policies led to the Detroit 3 being saddled with expensive and demanding unions, while the Japanese invaders were free to set up final assembly plants in union-free areas.
The Detroit 3 cost structure created by 1930s forced unionization, 1940s wage and price controls (which created the platinum fringe benefit plans in the first place), inflation, and a steady drip of unfunded regulatory and litigation-driven mandates, made the production of cars developed and built off-shore or partially in non-union plants highly advantageous. (Note that in the light truck market, tariff policy protected domestic trucks, and looser regulations held the prices down, so American trucks and SUVs tended to flourish.)
Thus the “perfect storm” that Wallace writes about started building decades ago and was caused by many forces that were within the government’s control. To blame only Detroit, as Senator Richard Shelby and a number of other know-nothings do, is wholly inaccurate.
Certainly, because it costs virtually as much to engineer, tool and build a big car as it does a small car, Detroit in decades past has produced some poor “entry level” vehicles. And the bean counters did cause Detroit to miss many opinion-leading niches over the years in pursuit of the broader, blander mass market. And certainly model proliferation and brand management diluted the identity and market strength of some brands. Both the Detroit 3 and its automobile dealers have been all too ready to penalize buyers of “exciting” cars with unreasonable mark-ups and limited inventories as well. Moreover, the Detroit 3 have been inconsistent in pursuing increases in efficiency and in integrating these advancements into well-rounded, functional, higher-performing vehicles. So Detroit cannot escape all blame for the current mess.
However, what Wallace brushes over is the prime role that Washington D.C. played in the destruction of the “Arsenal of Democracy” and the Detroit-based engine which powered the growth of America’s middle class in the 20th Century. He ignores that Washington D.C. facilitated the Japanese invasion and takeover of the American automobile market. He apparently doesn’t see that America’s politicians wholly missed the “second Pearl Harbor” which occurred in our automobile markets.
[Get the latest “Truth With Speedzzter” here]
In a BusinessWeek column entitled “The Boomers Stop Buying,” journalist, historian and talk show host Ed Wallace gets it partly right.
Wallace opines:
Detroit's loss of market share is generational in character. . . . When the first two-thirds of the boomers came of age, Detroit was still king and gasoline was cheap; the last third entered adulthood after two major energy crises and the rise of Japanese automakers. In their youth the larger group of boomers had lusted after Camaros, Mustangs, Monte Carlos, and Cutlasses. Exciting cars didn't exist as the youngest boomers turned 21 in 1985; and though the following year set a record for car sales, it also marked the start of the decline of Oldsmobile.
He further points out that while the parents and grandparents of boomers correctly recognized that Detroit had built much of modern America, “unconditional love, or "Detroit or nothing" started crumbling” with the later generations.
Our parents and grandparents believed in and were loyal to what Detroit stood for: American business and manufacturing dominance, national pride, and superiority. Early boomers focused only on Detroit's products; we were the ones who could become fickle.
The coup de gras was Detroit’s failure to appreciate the Europeanization of the luxury auto market in the 1980s and 1990s, leaving upwardly mobile boomers with no place to go but to imports.
Wallace, of course, is pessimistic, expecting America’s automotive traditions to collapse into a heap of $7.00/gallon gasoline, baby boomer retirement parsimony, and an impoverished middle class with less new vehicle buying power than even during the Great Depression.
Wallace does omit a few points:
1. The seeds of Detroit’s failure to nurture the luxury market were sown in the 1950s with:
(a) Henry Ford II’s abandonment of the Continental Division, leading to the domestic industry abandoning building “World Class” luxury cars and engineering subsequent American luxury cars to a mass market price point;
(b) the public safety lobby which killed any replication of the German Autobahns in America, and saddled our new interstate highway system with excessively low speed limits, which hampered demand for European-style handling and performance capabilty, as well as reducing pressure on American driver education programs to actually teach car control (Thus, America's mass market near-luxury cars became isolation chambers that failed to appeal to boomers who learned about cars in the First Supercar Era);
(c) the 1957 AMA racing ban, which delayed the development and implementation of new motoring technologies;
(d) the recession of 1958, which started Detroit down the road of cheapening the design features of American cars.
Myopic hacks such as Lee Iacocca, Red Poling, and Roger Smith merely were playing the poor hands dealt by these conditions (while being focused only on short-term stock share performance and personal career advancement).
2. The lack of exciting Detroit cars available to the last third of the Boomers was caused in large part by failed fiscal and regulatory policies out of Washington D.C. Washington’s failure to get inflation under control until the late 1980s crushed Detroit’s cost structure.
Washington’s failure to insist on open markets in Japan and its support for preventing American investment there allowed the Japanese auto industry to incubate without any meaningful competition and led directly to their predatory export-driven business model.
The regulatory polices of the 1970s made it almost impossible for Detroit to offer much excitement in the youth market. Corporate Average Fuel Economy regulations restricted supplies of the sorts of cars Americans wanted to buy and artificially drove up prices. Only a few dim lights, such as the Mustang 5.0 and the Buick Grand National were still shining by 1985 – and both of these cars were in short supply at dealerships and not being developed as much as they should have been because of CAFE.
Washington’s labor policies led to the Detroit 3 being saddled with expensive and demanding unions, while the Japanese invaders were free to set up final assembly plants in union-free areas.
The Detroit 3 cost structure created by 1930s forced unionization, 1940s wage and price controls (which created the platinum fringe benefit plans in the first place), inflation, and a steady drip of unfunded regulatory and litigation-driven mandates, made the production of cars developed and built off-shore or partially in non-union plants highly advantageous. (Note that in the light truck market, tariff policy protected domestic trucks, and looser regulations held the prices down, so American trucks and SUVs tended to flourish.)
Thus the “perfect storm” that Wallace writes about started building decades ago and was caused by many forces that were within the government’s control. To blame only Detroit, as Senator Richard Shelby and a number of other know-nothings do, is wholly inaccurate.
Certainly, because it costs virtually as much to engineer, tool and build a big car as it does a small car, Detroit in decades past has produced some poor “entry level” vehicles. And the bean counters did cause Detroit to miss many opinion-leading niches over the years in pursuit of the broader, blander mass market. And certainly model proliferation and brand management diluted the identity and market strength of some brands. Both the Detroit 3 and its automobile dealers have been all too ready to penalize buyers of “exciting” cars with unreasonable mark-ups and limited inventories as well. Moreover, the Detroit 3 have been inconsistent in pursuing increases in efficiency and in integrating these advancements into well-rounded, functional, higher-performing vehicles. So Detroit cannot escape all blame for the current mess.
However, what Wallace brushes over is the prime role that Washington D.C. played in the destruction of the “Arsenal of Democracy” and the Detroit-based engine which powered the growth of America’s middle class in the 20th Century. He ignores that Washington D.C. facilitated the Japanese invasion and takeover of the American automobile market. He apparently doesn’t see that America’s politicians wholly missed the “second Pearl Harbor” which occurred in our automobile markets.
Labels: AMA Racing Ban, American Autobahn, Buick Grand National, CAFE, Detroit Bailout, Economic Crisis, Japan, Mustang, open markets, Richard Shelby, youth market
posted by Editor at 08:26
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