Detroit's Uphill Battle
By Alexander Taylor
COVER STORY
New cars, new plants and a strong new emphasis on quality for U.S. autos
When Detroit's Jefferson Avenue assembly plant rolled out its first Chrysler in 1925, there were 56 optimistic American automakers. Along with familiar names such as Ford, Chevrolet and Cadillac were ones that have now become quaint, like Stutz Bearcat, Reo and Jordan. This year another new car is coming off the Jefferson Avenue assembly line. But today's Detroit is far more sober about its debut. Only four U.S. auto companies remain, and two of those, American Motors and Chrysler, are in danger of going the way of the Stutz Bearcat.
In these late summer days, Detroit's automakers are bustling to complete billion-dollar programs that they hope will turn the fortunes of their industry. The Jefferson Avenue plant, for example, is daily turning out 400 new Dodge Aries, Chrysler's front-wheel-drive K-car that will determine whether the company survives as a major automobile producer.
Twenty-five miles away, at Ford Motor Co.'s Wayne, Mich., plant, workmen are busily assembling the company's new subcompacts, the Ford Escort and the Mercury Lynx. Developed at a cost of $3 billion, the new cars are the first autos that Ford has built from the ground up since the Model A in 1927.
At General Motors' testing track near Milford, Mich., the giant automaker's J-car, which will be released next May or June, is being put through punishing road tests. The J-car will get an estimated 28 m.p.g. in the city and can seat five people in modest comfort.
Nothing less than the survival of the U.S. auto industry in its present form depends on the success of these new 1981 models. Sales of U.S.-made cars have fallen from 9.3 million in 1978 to an estimated 7 million this year. Last week the latest ten-day figures showed that the Big Three automakers sold the fewest cars for any mid-August period since 1967. Chrysler has already lost more money ($2 billion in the past 18 months) than any other company in the history of American business. The firm only exists today because of the $1.5 billion guaranteed loan approved in May by the Federal Government. Ford is expected to lose more than $2 billion on its North American car operations this year. Even mighty General Motors was $412 million in the red from April through June, and is likely to lose money during the whole year for the first time since 1921.
Close to 300,000 blue-and white-collar workers are now out of jobs. Nearly a dozen auto plants have closed, probably forever, and 1,469 car dealers have boarded up their doors. Looking at a worst of all possible worlds, which would be the result if recent trends continue, Chrysler Chairman Lee A. Iacocca says: "If you take that scenario, by next April we're bankrupt. By October, Ford is bankrupt. By the following October, GM is bankrupt."
Such a brush with doom has been a stunning shock for an industry that once represented all that was right about American business. In 1913 Henry Ford and his assembly-line method for making the Model T become an inspiration for the new industrial age. Detroit's auto technology spread throughout the world, even to the mountain towns of Argentina and Spain, and the big luxurious American auto became the very epitome of U.S. know-how and cando.
Today, however, autos are in the forefront of an American economic decline. European and Japanese carmakers, who once slavishly copied Detroit's methods, now turn out products that are more stylish, more economical and better designed. U.S. consumers often drive to the shopping center in a Japanese mini-pickup, rather than in an American station wagon.
The auto industry, the granddaddy of the 20th century industrial revolution, has become the first candidate for the new American imperative called reindustrialization, the total remaking of U.S. industry. Detroit's old ways of doing business no longer suffice. The industry's billions are now being spent to design and build cars that meet the demands of the new fuel-short era. Automakers are stripping clean their plants and are rebuilding them with new automated machinery that will increase productivity. Workers, plant supervisors and white-collar executives are searching for ways to improve quality and output. Both Government and business are setting aside past acrimony and seeking ways to revitalize Detroit. The roles and responsibilities of workers, managers and Government officials in the auto industry are rapidly changing, and the new industrial order developed there will have a profound impact on all U.S. business.
No society has ever been built on the automobile like the U.S.'s. In his novel Lolita, the late Vladimir Nabokov had his hero drive mindlessly around the U.S. because that represented the quintessential American experience. With only 5.3% of the total world population, Americans drive almost 40% of the world's motor vehicles. There is a car for almost every single licensed driver: 120 million, vs. 143 million. Americans use their cars for work and play; they eat in them, sleep in them, pray in them, see movies in them, even make love in them. Some of the country's largest cities, among them Los Angeles and Houston, could scarcely exist without the automobile.
Auto production has become one of the single largest industries in the U.S. economy. Car manufacturers, suppliers, dealers and repairmen account for about one-fifth of the country's gross national product. Autos create employment for almost one in five American workers. The industry uses 60% of the country's synthetic rubber, 50% of its malleable iron, 33% of its zinc, 25% of its steel and 17% of its aluminum. Motor vehicles also consume nearly 40% of the 6.7 billion bbl. of oil used in the U.S. every year.
Detroit's current troubles, therefore, have sent tremors through other vital sectors of the U.S. economy. Akron rubber workers, faced with layoffs like those in the auto industry, are accepting extraordinary reductions in their wage contracts, a development seldom known since the Depression. Even 200 Montana miners have lost their jobs because the low-sulfur coal they were digging is no longer needed to power Detroit's auto plants. Textile workers in North Carolina are out of work because demand has ebbed for the carpeting that they make for car interiors. In all, declining auto sales have cost 650,000 jobs in related businesses. Says Ford Chairman Philip Caldwell: "It's not really just the auto business. I think we're talking about the industrial capability of the nation."
The U.S. auto industry has gone through sales slumps before, most recently in 1974 after the Arab oil embargo. But this year's crisis is unique because it could leave the industry permanently weakened. It will take Detroit's Big Three at least another three years and an investment totaling about $80 billion to design and produce the new generation of fuel-efficient cars of the future. During that period, they will be hard-pressed to satisfy the demand for small cars, and the gap will be filled by imported autos, especially from Japan. Already, foreign-made cars have captured as much as 30% of the U.S. market, and Toyota and Datsun now rank right behind GM and Ford as the world's largest auto producers. To win buyers back it will take superior products and strong selling techniques. Otherwise there will be a lasting reduction in U.S. auto production, which would have far-reaching implications for the whole U.S. economy.
General Motors Executive Vice President Roger Smith, the expected successor to Chairman Thomas A. Murphy, who will retire at the end of the year, likens the industry's present plight to a hockey team in the midst of a line change. As soon as all the players are out on the ice, he says, the team will be competitive again. But others are less sanguine. Says David Cole, an engineer and auto expert at the University of Michigan: "It is indeed possible that the relative importance of automobile manufacturing in the U.S. economy will be downgraded for many years, if not permanently. The evidence to date would seem to indicate that almost irreparable harm may be only months away."
The fast, hard fall of the U.S. auto industry will doubtless rank as one of the most remarkable collapses in the annals of American business. Even makers of horse-drawn carriages and buggy whips did not see their markets and profits disappear so quickly. Just 18 months ago, Detroit was fearful that it could not build enough big V-8-powered sedans to meet consumer demand. The industry in 1978 rang up $3 billion in profits. One hot-selling car: the $6,300 Oldsmobile Cutlass. It got a modest twelve miles to the gallon, but it had lots of vroom.
U.S. automakers for 70 years were uniquely successful in profitably satisfying the automobile demands of American consumers. Detroit's cars provided affordable, comfortable transportation across the country or around the corner--and they survived on the minimal maintenance that owners gave them. Consumers kept coming back for more, and best of all from Detroit's point of view, they preferred to buy big. The auto companies responded by producing more V-8-powered, full-size cars, the industry's real moneymakers, and by making its successful compacts, such as the Ford Falcon and the Plymouth Valiant, longer and heavier.
The U.S. Government helped keep behemoths popular by refusing to take serious action against the growing realities of a petroleum-short world. Washington produced no energy policy, kept the price of gasoline artificially low and spent $77.8 billion for the construction of the Interstate Highway System, on which Americans could cruise coast to coast at 70 m.p.h. Admits Transportation Secretary Neil Goldschmidt: "The U.S. Government allowed us to go from a nation importing a third of its oil to one importing almost 50% because there wasn't the political courage to deregulate the price of oil."
Detroit's labor force abetted the industry's slide into decline. Work was often sloppy. Cars built on Mondays and Fridays were frequently defective because high absenteeism meant the job was done by less experienced fill-ins. Workers at GM's notorious Lordstown, Ohio, plant rebelled at attempts to streamline production in the early '70s and brought the factory to a halt.
The United Auto Workers union did little to stem the erosion of productivity. In an attempt to win ever higher wages no matter what the product, the U.A.W. went along with the automakers' insistence on quantity over quality. It failed to push for better working conditions or lower absenteeism, which would have reduced assembly line foulups. Wrote New York Times Labor Reporter William Serrin in his book The Company and the Union: "The union is aware of the problems of absenteeism and tardiness and shoddy workmanship, but whatever it does in this area must be done with great tact, if anything is done at all."
In the end, however, the auto industry's problems rest with Detroit's managers, who failed to plan for a new-car market after the 1974 oil embargo. Wealthy GM went ahead with a plan to scale down gradually its fleet of big cars and to introduce small, fuel-efficient models. But its executives publicly declared that Americans would always demand full-size cars. Despite pleas from then Ford President Lee A. Iacocca, Chairman Henry Ford II refused to give up the big profits in building big cars. As a consequence, Ford today has the fewest small economical models. Meanwhile, in order to boost quarterly sales figures, Chrysler during the '70s pushed questionable products onto the market on a near panic basis. One result: the 1974 Dodge Aspen and Plymouth Volare have the dubious distinction of being two of the most recalled cars in history. Operating on the industry's fringe, American Motors Corp.'s small cars failed to win wide buyer approval. Its profits came largely from the popular, though fuel-thirsty, four-wheel-drive Jeep.
All the while, automen fought a rearguard action against Washington's attempts to make cars cleaner and more fuel thrifty. For at least ten years Detroit opposed the Clean Air Act, which reduced auto pollution. It also struggled long and hard against the 1975 Corporate Average Fuel Economy (CAFE) standards that required American automakers to have a fleet fuel efficiency of 18 m.p.g. in 1978 and 27.5 m.p.g. in 1985. As a result, after Iranian oil was cut off in December 1978 and American consumers began demanding smaller cars, Detroit had little to offer.
Now, 20 months later, the Big Three have ready to roll what they hope are some of their answers to the imports. The cars are functional with clean lines; but they are unlikely to reignite the American love affair with the auto. The new 1981 models that will soon be seen on American highways include:
>The K-car. This fall Chrysler will be selling two new models, which have been code-named the K-cars: the Dodge Aries and the Plymouth Reliant. These are front-wheel-drive compacts aimed at the same market as GM's X-cars, like the Chevrolet Citation, which were introduced 16 months ago. The dimensions and performance of the K-cars are nearly identical to the GM products. Designed to carry five or six passengers in relative comfort, the K-cars are Government-rated to get 25 m.p.g. in city driving and 41 m.p.g. on the highway. The base sticker price: $6,192, or $44 more than a Citation.
>The Erika. The cars in Ford Motor Co.'s future are the Ford Escort and Mercury Lynx, code-named the Erika. As successor to the decade-old Ford Pinto and Mercury Bobcat, they are smaller than either GM's X-cars or Chrysler's K models. The Escort and Lynx will seat four adults with ease, and have fuel economy estimates of 30 m.p.g. city and 44 m.p.g. highway.
The new Ford cars will have important design changes to correct past problems. To avoid the fires that were sometimes caused in rear-end collisions in the Pinto, the new cars' gas tanks are placed in front of, rather than behind, the rear axle. In addition, the automatic transmissions have a pronounced barrier between park and reverse to prevent slippage between the two gears. Last week the National Highway Traffic Safety Administration was still considering whether to force Ford to recall some 16 million vehicles because of that problem in earlier cars.
>The A-and J-cars. In October GM will roll out its A-cars, the redesigned successors to its strong-selling Oldsmobile Cutlass Supreme and other intermediates. The auto industry, though, is impatiently waiting for GM's next model: the J-car, which will be unveiled in May or June. The J-car will be larger than a Ford Escort but smaller than the Dodge Aries. It is expected to get 28 m.p.g. in city driving. The new models will carry Chevrolet and Pontiac name plates and probably later Cadillac. They will come in a range of styles that will include a notchback and a five-door station wagon.
Unlike in earlier years, when model changes often involved only a rounder headlight or a longer tail fin, Detroit's new generation of cars represents some important changes in the auto industry. Many of the parts, such as trunks, were designed by computers, which permit three-dimensional views and instant read-outs of technical data. The new cars are most noticeable for their smaller size, cleaner aerodynamic styling and greater interior space. But some of the most dramatic advances are under the hood. The auto industry is on the threshold of an electronic revolution that will make cars run better, cleaner and more reliably through the use of minicomputers. All GM models in 1981 will have what it calls Computer Command Controls, which regulate emissions, engine speed and coolant temperature.
This year Detroit is not just turning out new models; it is also trying innovative ways to build them. Aging plants have been gutted and filled with hundreds of millions of dollars of new equipment. Chrysler alone spent $100 million refurbishing the 73-year-old Jefferson Avenue plant, and claims that it will have 17% increased productivity. For instance, by installing engines in car bodies from the bottom up, instead of the traditional way from the top down, assembly is faster. GM is spending approximately $1 billion building new plants in St. Louis and Pontiac, Mich., to replace outdated ones.
The industry is making such changes on the assembly line that Henry Ford would never recognize it. Industrial robots are taking over many tasks previously done by workmen. A spot welding unit can cost $60,000, but operating expenses run only $6 an hour. By contrast, an average assembly-line worker earns $17 per hour in wages and benefits. Programmed by computer, the robots' hooklike hands lift heavy steel parts and wield welding torches with better-than-human precision. New Chrysler welding machines now carry out 98% of the 3,000 spot welds used for body assembly operations on K-cars. The GM robots that are under development will be capable of selecting parts from a bin, examining them for defects and then using only those that are perfect.
The industry is openly borrowing production ideas from its archrivals, the Japanese. Says Ford President Donald Petersen: "They have a lot of good techniques, and we're starting to feed them all through the system." For example, the Japanese have become skillful at keeping a production line moving without keeping mountains of parts on hand. Ford has now copied some of the Japanese methods to cut its inventory stockpiles. The saving: $90 million a year.
Detroit now readily admits that in comparison to the Japanese, it has been seriously deficient in the area of "fits and finishes," the production imperfections like badly hung doors and poorly fastened trim. At its Fisher Body plant in Fairfield, Ohio, GM put a Toyota Celica on display alongside an Oldsmobile Omega to let workers see the difference.
Innovative approaches to quality control are most apparent at Chrysler, where new models like the Dodge St. Regis and the Chrysler New Yorker in 1979 were often clunkers when they rolled off the assembly line. Says U.A.W. Vice President Marc Stepp: "The Chrysler worker is now very sensitive to the need to build a good piece off the press. He knows that if the company goes down, he'll be out of a job."
Chrysler has also negotiated a unique company-wide product-quality agreement with the autoworkers' union. If an assembly-line worker sees a product flaw, he is instructed to tell his foreman, who is obliged to fix it. If the problem recurs, the worker is urged to report it to the plant's new union-management quality committee.
At Ford's Wayne factory, 250 roving troubleshooters assist 3,750 assembly-line workers. Their duties: to teach new operators, keep track of supplies and help correct tooling or materials problems. They are also expected to give plant management tips on improving production.
Quality does not stop at the factory door, as buyers have found during sometimes rancorous relations with dealers. GM has thus instituted a massive program to teach mechanics how to service the new cars and has also established an arbitration procedure to settle disputes among customers, the dealers and GM. This year Ford is tripling the number of training hours usually available on a new model to dealers and their mechanics.
Despite all the exotic robots and the new productive atmosphere around auto plants, the Big Three carmakers still face an uncertain future. Their reputations for poor quality will be hard to live down, and the Japanese will continue to be fierce and efficient competitors (see box). Perhaps most important, auto sales will be the prisoner of the economy. If U.S. business in general continues to limp along in recession or in sluggish growth, auto sales will probably remain low. Prospects for the Big Three:
CHRYSLER. Its perilous bout with bankruptcy now temporarily alleviated by $1.5 billion in Government-guaranteed loans, Chrysler nevertheless remains in serious trouble. The company's hopes for survival ride with the K-cars. Out front selling the new models as "the American way to beat the pump" will be Chairman Lee A. Iacocca. With a savvy and pound-on-the-fender style learned during 34 years in the auto business, he hopes to sell every one of the 600,000 K-cars that the company can produce this model year. So far, the public's response is good. Even before the cars have moved into dealer showrooms, Chrysler has sold 45,000 to fleet buyers like Xerox and AT&T and another 45,000 to dealers and individuals.
Though the K-cars are expected to support 50% of Chrysler's total sales this year, the firm has a few other cars in its garage. The flamboyantly plush Imperial, which has not been sold for five years, will be reintroduced. It will carry a $19,500 price tag and be promoted by Frank Sinatra. The rest of the company's product line is less impressive. Its older big cars, such as the Chrysler Cordoba and Dodge Mirada, look like forgotten orphans on the market. The small fuel-efficient Dodge Omni and Plymouth Horizon are now three years old; they face stiff competition from both Japanese imports and new American cars like the Ford Escort.
Iacocca brashly predicts that Chrysler will show a profit in the fourth quarter, but the company is still likely to lose more than $1 billion this year. Concludes the Chrysler Corp. Loan Guarantee Board that acts as a watchdog on the company: "The judgment [on Chrysler's viability] is now a more marginal one."
If Chrysler can survive for another twelve months, its prospects look somewhat brighter. Waiting on the test tracks are several new cars. Flouting industry tradition, Chrysler has already been showing off its new models for the next three years. Next fall a luxury version of the K-car will be introduced. In 1983 new "stretch K" mid-size cars will replace the moribund Chrysler LeBaron and Dodge Diplomat line. Also in the planning stages are a mini-van and an Italian designed sports car.
FORD. Delays in down-sizing its cars and a cash bind have made Ford in many ways an even sicker company than Chrysler. Ford's big models are selling poorly, and it lags behind both Chrysler and GM in the production of small, front-wheel-drive cars. Says Auto Analyst Maryann Keller of Paine Webber Mitchell Hutchins: "Caught between GM, with all its money, and Chrysler, with a federal sugar daddy, Ford has to husband its limited resources."
Ford's new offering this year, in addition to the Escort and Lynx, is a redesigned Ford Granada. The car, which will be marketed also as a Mercury Cougar, is 500 lbs. lighter than the old Granada and Mercury Monarch. But, like other standard Ford products, it has a "big car" look, which could hurt in a market that is demanding small autos.
GENERAL MOTORS. "GM looks so good that by 1985, it will end up with a higher percentage of the market than it has now," says Auto Specialist James R. McElroy of the U.S. International Trade Commission. Indeed, last week GM announced that it expects sales to pick up and that it will recall 18,700 hourly workers. Despite the Japanese auto invasion, GM has increased its share of the U.S. market from 42% in 1974 to 45% this year.
In this kind of car market, however, even GM has troubles. Its profits as a percentage of sales have slumped from 10.3% at their peak in 1965 to 4.4% last year. The firm's huge loss in the second quarter was a shock for a company used to steady profits. Nevertheless, GM's vast financial resources should enable it to glide relatively easily over the current bumps. The company still has a massive $40 billion six-year capital-spending program. The money will pay for the development of a new GM car every six months until 1985. Following next spring's J-car, the sporty Chevrolet Camaros and Pontiac Firebirds will be down-sized in 1982. Then in the 1983 model year GM will introduce a front-wheel-drive family car that will seat five or six.
AMERICAN MOTORS. The joke around Detroit is that the only difference between Chrysler and the American Motors Corp. is that AMC was bailed out by the French government, not the American one. There is some truth to that. Earlier this year, AMC's banks refused to extend the company further credit, and the American firm had to turn to Renault, its French government-owned partner, for a $90 million loan. Eventually, Renault will own 22.5% of AMC.
The long-term prognosis for the tiny automaker is dim. Although it has specialized in small cars for more than 25 years, "AMC has never had the capital to design autos that were technologically competitive. Today it has just 1.7% of the U.S. market. AMC's only new models this year are the Renault 181, which it is importing from France, and a four-wheel-drive subcompact. By 1982 AMC may be phasing out the existing subcompact Spirit and compact Concord, leaving it with a Renault-designed small car to be built at its only surviving passenger car plant, in Kenosha, Wis. American Motors will probably become more and more of a French company as the '80s progress.
AMC's deal with Renault is a forerunner of the worldwide consolidation that is likely to take place in the auto industry during this decade. Last week, for example, Ford confirmed that it was continuing discussions on a deal with Toyota to build cars in the U.S. Some observers predict that mergers among the world's 30 major auto producers will finally result in perhaps only nine superfirms doing business in all parts of the globe. Three of these might be based in the U.S., three in Japan and three in Europe. In addition, there will probably be a few low-volume specialty companies such as Rolls-Royce and Mercedes-Benz.
The world auto market of the late 1980s will also be a much more homogeneous one. U.S. companies for years built big cars like the Chevrolet Caprice for the North American market, and smaller ones like the Opel Rekord abroad for the foreign market. By the mid-'80s, however, there will be one world auto market. The same car is likely to be seen on the streets of Frankfurt, West Germany, and Fargo, N. Dak. The Lynx, Escort and J-cars are all such "world cars." Models will be assembled in places like Japan and South America, in addition to Detroit, from parts that are manufactured in several countries. The result will be stiffer competition among the remaining auto giants. According to a congressional subcommittee study, for example, Europe will import an estimated 200,000 U.S.-built cars by 1983, compared with only 30,000 last year.
The U.S. auto industry will undergo a profound transformation in the 1980s. Additional automation, a slower-growing U.S. market and more overseas manufacturing will inevitably mean fewer domestic automobile jobs. Various analysts estimate that even if car sales fully rebound in 1981 or 1982, the auto industry will have lost up to 500,000 jobs since 1978.
The U.S. automobile consumer is also due for a shock. As cars get smaller, they will look increasingly similar and be painfully more expensive. Detroit has long subsidized the sale of its small cars with profits from its big ones. That will stop. GM is already closing the price gap between big and small by raising the prices of its X-cars faster than those of its larger ones. Since April 1979 the basic sticker price for a Chevrolet Citation has increased 37%, to $6,148.
Along with smaller cars come smaller engines and generally less safety. By 1985, the V-8 engine, which has been the auto industry's mainstay since 1954, will be virtually dead. Replacing it will be smaller power plants such as the L-4 and V-6 engines in the X-cars. Moreover, almost none of the new U.S.-made models will be larger than today's compact Ford Fairmont. Unfortunately, now that cars will no longer resemble fortresses on wheels, there will be less protection in an accident. Two weeks ago, NHTSA reported that ten out of twelve small cars failed a test in which they crashed into a wall at 35 m.p.h.
With Detroit's new plants, new equipment and new emphasis on quality control, the reindustrialization of the American auto industry has begun. Moreover, Detroit's experience provides many lessons for other sectors of U.S. business. The most obvious is the need to avoid such industrial decline. A generation of neglect has sapped Detroit's competitive strength, and further delay would have put it in graver peril. Only the huge capital investment now being made has given American automakers the chance to survive.
Detroit's experiences during the past 18 months, as Chrysler tottered on the brink of bankruptcy, also raise again the question of business's relations with Government. Chrysler continues to exist only because of federal aid. Talk of other business-Government agreements in the industry has already started. The Carter Administration has proposed that a group of auto, labor and Government leaders meet to discuss the industry's problems. Says Transportation Secretary Goldschmidt: "We value this industry, and we don't intend to let it fail." Ford President Petersen adds: "It's my job to improve our productivity and efficiency as much as we know how. But I'm saying that when it's all done, that's not enough."
There is certainly much that Washington can and should do for the auto industry, as well as for U.S. industry in general. Tax laws need to be changed to make it easier to raise capital to replace obsolete factories and to speed the write-off of new investment. Regulations should be re-examined to separate the necessary and helpful from the needless and expensive. The Environmental Protection Agency last week gave Detroit some relief, when it decided to drop a 1982 exhaust emissions test requirement. This will save the industry $250 to $350 million.
Detroit and other businesses, however, must remember that the Government is not some new Magus who comes bearing gifts but never asks for anything in return. Chrysler Chairman Iacocca now serves two masters: his board of directors and the Chrysler Loan Guarantee Board in Washington, which, for example, advised the company this spring to cut expenses by $1 billion. Chrysler complied by dropping a planned extra line of cars. In times of stress, the temptation for a cozy business-Government relationship is strong, but this almost inevitably results in an unstable marriage.
The auto industry's experience has started discussions over whether trade protectionism should be a part of reindustrialization. When Japan's share of the U.S. auto market jumped from 9.3% in 1976 to 21.8% the first half of this year, the United Auto Workers and Ford petitioned Washington to roll back imports. They argue that the sudden surge threatens the domestic industry. Ford and the U.A.W. contend further that Japan is taking unfair advantage of an artificially weak yen and international trade rules that allow them to export their products cheaply to the U.S. They assert that as a result of this the essentially identical cars made in Japan can cost less in the U.S. than in other countries.
The Carter Administration has so far resisted pressure from protectionists. The Council of Economic Advisers argues that each auto industry job saved would cost American consumers up to $100,000 through higher car prices. Without the competition from Japanese imports, American producers could doubtless increase their prices. Propping up a sickly industry by restricting the imports of foreign products is not the way to help the U.S. economy, American consumers or even the industry itself.
Perhaps the most promising lesson from the first steps to revitalize the American auto industry is a new spirit of cooperation between management and workers. When the very future of Detroit became an issue, the old "we-they" approach changed to an "all of us" one. Especially in tackling the problem of quality production, company and union officials showed a willingness to experiment and listen that should be a model for many other businesses. Some of these innovations, such as the election of United Auto Workers President Douglas Fraser to the Chrysler board of directors, are still unproven experiments. But as Fraser says: "There's a new realization that we all have problems and a lot more tolerance for the other guy's point of view."
Detroit's 1981 model cars demonstrate that the industry has learned that it must change outmoded business practices. The true test of the new generation of American cars, though, will come this fall, when millions of prospective buyers walk into car dealers' showrooms, look skeptically at the new models and then gently kick the tires.
With reporting by Barrett Seaman, Christopher Redman
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