Upheaval in Global Automotive Industry: What Car Are you Driving?
Everyone remembers his or her first car. Mine was the 1951 Raymond Loewy-designed Studebaker Champion. My father was also a Studebaker owner. The 1951 model was a big hit with designers, and it had respectable, if not sensational, sales. But the company went out of business in 1963 when it closed down its factory in South Bend, Indiana.
In the 1950s, I began driving Fords. I am not sure why. They were always breaking down. At the same time I began following the entry of foreign cars into the United Sates as a reporter for Advertising Age. It was just a trickle at that point – and Detroit treated it as a laughing matter. The U.S. has these long highways, and these small cars would never make it here, said the moguls at General Motors, Ford and Chrysler.
Journalists love incisive, eye-catching leads and I had one of my best in 1959 when I crafted this opening sentence on a story sent to Chicago, where Ad Age was then published: “Doyle Dane Bernbach, the agency for El Al Israel Airlines, the Israel Tourist Office and Levy’s Real Jewish Rye, was today appointed to handle the advertising for the German import, Volkswagen.” On Monday when copies of the issue arrived in New York, I was horrified to find that the subordinate clause listing DDB clients had been excised. The editors in Chicago explained to me that they thought the clause was irrelevant. I remember screaming into the phone: “Didn’t you guys in the Midwest hear about the Holocaust?”
In 1971, I moved from New York to the Bay Area, and I saw at first hand how the imports were beginning to take over the California market. In Marin County, where I now live, kids grew up not knowing what a Chevy or Ford looks like. We used to have one billboard in Marin along the 101 Freeway that cuts through the country. It was used to advertise GM cars. People began going out at midnight to tear it down. Finally, GM gave it up. So now we have a billboard-free county.
These reflections came to mind as I was reading Steven Rattner’s new book, Overhaul. Rattner is the Wall Street pro appointed by Barack Obama to orchestrate the bailout of General Motors and Chrysler. Both companies went, hat in hand, to Washington to accept bailout funds from TARP (Troubled Asset Relief Program), and both went into Chapter 11 bankruptcy to enable them to emerge as slimmed-down versions of their old selves. The priority for the Obama administration was to save General Motors. Chrysler was considered expendable.
And Chrysler was ticketed for oblivion until Sergio Marchionne, the feisty CEO of Italy’s Fiat, arrived on the scene, ready to take the reins. We – the U.S. government – were so delighted to have a possible savior of the company that we said: “You want Chrysler? Here, take it, please.” So Fiat now controls Chrysler even though it only owns 20 percent of the shares. And it didn’t have put up a single lira for it. Chrysler’s largest shareholder is the United Auto Workers retiree healthcare trust. It owns 55 percent.
The reshaping of the auto industry has been dramatic. GM discarded its Oldsmobile, Pontiac and Saturn brands. It sold off Saab and Hummer. Ford shut down its longstanding Mercury brand. Ford also gave up on Volvo passenger cars, Jaguar, Aston Martin and Land Rover, brands it had acquired along the way. Volvo went to a Chinese company, Geely. Jaguar and Land Rover are now owned by the big Indian conglomerate, Tata.
We are no longer the world’s largest automaker. That distinction belongs to China, where output is over 15 million cars a year, compared to the 11.5 million rolling out of U.S. factories. And GM is no longer the No. 1 automaker. That title belongs to Toyota. Ironically, China has become GM’s biggest market. The Chinese are nuts about Buicks. More Buicks are sold there than in the U.S. And they are being built there.
In Germany, after bitter bumper-to-bumper combat over four years, Volkswagen and Porsche are about to be melded into one company. It’s not clear who is buying whom. They will have a portfolio of ten brands: Volkswagen, Audi, SEAT, Skoda, Bentley, Lamborghini, Bugatti, Porsche and Scania. The Rolls-Royce brand now belongs to BMW.
Everyone is the world wants a car but the United States is no longer the prime supplier. As for me, I’m driving a Honda Civic.