As other markets around the world expand in 2007, the American market shrinks. The real price of cars may be the lowest it has been in 25 years, but gas prices are at their highest levels since the second gas crisis of 1981. As Pep Boys' sales of locking gas caps climb by 135%, fewer than 16.2 million vehicles are sold in America, in 2007, versus 16.6 million in 2006.

Before the economic crisis, another contraction, by about a million vehicles, was expected for 2008. Now, for 2009, all bets are off.

Between 2008 and 2020, the U.S. population is expected to grow by 32 million people; and, before the crisis, roughly 6% of the country could be counted on to buy a new car each year.


In both economic and emotional terms, Detroit is perhaps hardest hit by the economic crisis. Indeed, by the time it hits the headlines, it has been brewing in Detroit for some time. A year earlier, in mid 2007, eight Detroit-area suppliers were already in Chapter 11 bankruptcy reorganization: Southfield's Collins & Aikman; Troy's Delphi; Toledo's Dana; Rochester Hills' Dura Automotive Systems; Southfield's Federal-Mogul; Troy's Intermet; Dearborn's Meridian Automotive Systems, and Tower Automotive Systems of Novi.

High costs for raw materials, labor, and health care, combined with the ever-increasing legacy costs for retirees, are burdening American automakers and suppliers. Amid much awaited UAW contract renegotiation talks in the Summer of 2007, Detroit is called "the only city-cum-industry whose quadrennial actions suggest the laws of economics; supply-and-demand and business logic don't apply in its corner of the world" (Detroit News, May 23rd, 2007).

Yet, maintains AutoExtremist.com Editor Peter De Lorenzo, "the center of global automotive development still resides right here, and this is where the innovations for our future transportation solutions will come from.

"Don't believe it? Then why is it that virtually every major auto manufacturer in the world has set up research and development facilities here in the last few years? Why is it that Tesla, for instance - that darling of the green-tinged hordes - had to come and set up an engineering center in suburban Detroit?

"It's because of the talent that is crawling all over the place in this region. Tesla couldn't get their cars to work without enlisting the kind of engineering talent that exists here.

"It's one thing to be the green darlings of the media and political intelligentsia; it's quite another to be able to design, engineer, and build vehicles that actually work in the real world, apparently.

"Tesla has since closed the facility, after they got what they wanted" (AutoExtremist.com, August 12th, 2009).

The 2008 Harbour Report is the latest to have found that Detroit's Big Three are rapidly closing their productivity gap with the transplants. Chrysler ties Toyota as the most productive multi-plant manufacturer on the continent, with both automakers spending an average of 30.37 hours to build a vehicle.

The most productive single plant in North America also belongs to Chrysler, with Toledo Supplier Park taking just 13.57 labor hours to build a Jeep.

GM averages 32.29 hours per vehicle, and Ford, 33.88 per vehicle, both of which improve upon last year's figures.


One of the most interesting pieces of news to come out of Geneva 2008 is that Ford is considering selling its new, European Fiesta hatchback in the U.S. New marketing chief Jim Farley cites research that shows that younger auto buyers do not exhibit the same anti-hatchback bias that older consumers formed decades ago. Due perhaps to shared top-hinged rear doors, these consumers seem to relate hatchbacks to the SUVs and crossovers they grew up with.

North American and European consumer tastes and requirements are converging - "and that's helping us tremendously," confirms Mark Fields, Ford's President of the Americas.


In 1998, subcompact sales in the U.S. amount to just 120,216. Nearly ten years later, with fuel prices rising, sales of subcompacts double in the first quarter of 2007, versus the same period in 2006: 107,942, against 53,328.

In 2007, in total, almost as many subcompacts are sold as in 1995: roughly half a million.


Speaking at the 2008 SAE World Congress, a panel of auto executives suggested that 20% of the vehicles sold in the United States could run on diesel fuels by 2020. The panel also expected hybrid technology to feature in about 10% of vehicles sold by that year.


In a letter to the October 2nd, 2007 issue of the Wall Street Journal, Rep. Joe Knollenberg (R., Mich) wrote: "the Japanese government's policy of maintaining a weak yen is a real issue that deserves scrutiny.

"Since 2001, the Japanese government has intervened repeatedly in currency markets to artificially devalue the yen by upward of 30%. As a result, Toyota and the other Japanese automakers receive a $4,000 to $14,000 subsidy on every vehicle they export to the U.S.

"Japan's currency manipulation is fueling the market share gains of Toyota; Honda, and Nissan in the U.S., and putting downward pressure on UAW wages and benefits.

"As long-standing proponents of free and open financial markets, this is not something the Journal should celebrate in editorials, especially since the profit edge Toyota has over the Big Three is roughly $3,800 per vehicle, or about the same edge it derives from the yen-subsidized Toyota Prius.

"The unfair yen subsidy is particularly egregious considering that Toyota will earn 75% of its profits this year in the U.S., while GM; Ford, and Chrysler will sell less than 20,000 vehicles in Japan.

"In Japan, the line where government ends and corporations begin has long been relatively blurred. Close cooperation between government and industry is the order of the day, and kereitsus - which continue to exist - give Japanese firms another leg up by making it easier to buy from Japanese suppliers."

No French cars have officially been imported to America since 1992. Today, few realize that quirkily utilitarian Renault was, in the mid-1950s, the most successful import in the U.S. market, beating even Volkswagen in those early years. In 1959, Renault set a record, exporting 91,073 cars to the U.S.

The French were first among imports to officially establish a presence in the American market. Renault beat Triumph, by a full year, to opening the first official distributor in the U.S. (in 1953). Quirkily brilliant Citroen followed in 1955. Elegantly utilitarian Peugeot (and Talbot) joined the fray in 1958, at about the same time as Fiat and Volvo. Simca imports became officially tied to Chrysler distribution in 1959.

Between the 1950s and late-60s, French designs straddled two poles: the integrated, modern designs of Detroit's '60s vehicles, with the life-cycles of Volkswagen's seminal Beetle. Volkswagen's famous Doyle-Dern-Bernbach advertising agency had by 1960 begun mastering the art of taking aim at Detroit's planned obsolescence. The Beetle, its ads crooned, was immune to fashion because its shape adhered to the perfection of nature.

The French had (paradoxically enough) too advanced a product to match VW's ads for self-deprecation.

Moreover, the French lacked VW's organization, and were slow to standardize presentations of their brand and product. Writes Phil Patton, "using simple geometric shapes along with the lollipop sign, the round blue VW logo set atop a pole, the crisp white dealerships often were decorated with the image of Mr Bubble Man, the cartoon service technician with his neat bow tie. Contrast VW's clean, efficient image with the often scruffy dealer operations of Renault or Fiat" (Bug: The strange mutations of the world's most famous automobile, Phil Patton, Da Capo Press, 2004).

Moreover, despite the Renault Le Car's 12 inches of suspension travel, and despite Peugeot products' enviable track record in difficult conditions across Africa, most Americans simply never perceived these cars as sturdy.

It might also be ventured that French cars - particularly, those of this era - needed care; some might say, love. Treat one as though an average Asian econobox, and it did (and, in many cases, still does) tend to fall apart.

Writes former Renault/ Jeep mechanic Sonicstereo on The Car Lounge forums, "I had a Renault propaganda poster on my toolbox that read, 'the French copy no one...' I added to that by writing, 'And nobody copies the French.'"

Nonetheless, there can be little doubt that Chrysler's exposure to the French made the company more appealing to Daimler-Benz AG, back when the DaimlerChrysler merger took shape in 1998. Chrysler's front-wheel-drive engineering experience was largely gleaned from excursions in France in the '70s, and honed following its buyout of AMC from Renault in 1986. As Car and Driver Editor-At-Large Brock Yates puts it, "there is no question that the cultural revolution caused by the AMC purchase generated enormous long-term benefits and, in retrospect, may have been the single most important ingredient in Chrysler's success since."

French cars in the U.S. today, now at least fifteen years old, are an enthusiast-only zone.

On January 29th, 1997, Peugeot enthusiast Jay Kenty wrote this rather eloquent entry on the Peugeot Club Archive: "Today, I noticed another shabby, ill-kept Peugeot, and I couldn't help but think that our USA Peugeots are looking more like junk-boxes every day. I seldom see a nice one anymore. Filthy Peugeots with dents; light bulbs not working; exhausts hanging off, etc. are becoming the norm. It's sad to see these beautiful cars come to this.

"No doubt the reason is that they are so cheap here that the poorest people can afford them, but these people are too poor to maintain them. Sadly, a beat-up Peugeot just doesn't have the charm of a Beetle or a VW van. Instead, they remind me of the pathetic sight of a beautiful dancer who has aged and fallen from grace. The image created by increasing numbers of miserable Peugeots just reinforces the lowly reputation of Peugeot in this country. In other words, the situation is worsening, feeding off itself."

In April 2003, Automobile runs a parody advertisement proclaiming Peugeot's triumphant return to the U.S. market. Captioned, Peugeot - more than you deserve, it is an instructive, if exaggerated, view of the French marque's American struggle.

"We forgive all you bourgeois pigs," states the ad, continuing, "it is not for us to hold the grudge - not even against ignorant swine. And so we come back to America, where you think your replacement starter should come as fast as your cherished McNuggets. A starter is not a McNugget. It is a creation wrenched from the mind of man. It is a symbol. It is art. Sadly, you cannot understand such things. So this time, like the indulgent parent, we add features expressly designed for Americans..."


In 1919, GM's Billy Durant forms GMAC to help buyers finance purchases. Meanwhile, Harley Earl is hired to introduce style - and price differentiation - into GM's line-up. This, the company has decided, is how it will crack Ford's iron grip on the market.

Indeed, GM surpasses Ford, which closes and retools to match GM's advancements. Just as it begins to catch up with GM, the stock market crashes. Ford never regains its former lead.

The Great Depression stalls the entire industry, including General Motors, as auto sales collapse from 1930 through 1932.

In 1932, Ford produces the first V8 to be adopted by the American mainstream; yet adoption is slow, at first. Customers worry that gravitational forces might cause the bottoms of the slanted cylinder walls to wear out.

Several historians have conjectured that Ford might have declared bankruptcy had it not been for World War II. In 1942, the U.S. Office of Production Management prohibits the sales of new cars and trucks to civilians, while all automakers dedicate their plants entirely to the war effort, producing bombers; jeeps; military trucks, and other equipment.

Military procurement contracts rapidly increase demand, while technological improvements made during the war - including automatic transmissions; power steering and brakes; V8 engines, and air conditioning - surface in postwar automotive production.

The 1947 Studebaker launches the 3-box shape that characterizes so many cars today, while the postwar Jaguar XK120 begins America's love affair with the sports car. Chevrolet's Corvette and Ford's Thunderbird were no doubt inspired by the British legend.

By 1950, the three dominant producers - General Motors; Ford, and Chrysler - are accelerating away from small manufacturers. Kaiser; Studebaker; Packard; Nash, and Hudson exit automotive production, leaving the Big Three, and the "Independent" (American Motors).

'50s American cars draw inspiration from aviation, becoming bechromed, bewinged behemoths which follow the longer, lower, wider maxim of GM Design Chief Harley Earl. In 1955, Ford produces its 2 millionth V8.

In 1961, the Lincoln Continental reintroduces elegant clarity to the American market. It will define the Kennedy era. By the end of the decade, another sort of simplicity has emerged; the Volkswagen Beetle becomes popular, as Americans fall in love with its anthropomorphic looks, unique sound, and the high quality of fit and finish that it offers for the price.

Despite the Beetle's growing popularity, imports represent less than 10% of the market from 1950 through 1967. Gas prices in the United States, and American driving conditions, are quite different to those in Europe or Japan, the latter of which is still in its infant stages and reliant on licensing (and, in some cases, slavishly copying) Western automotive design and technology.

For the domestics, the trouble begins in 1966. Reaction to the vaguely defined, What's Good for General Motors is Good for America, concept - though no one from GM ever actually made the statement - is brewing. Ralph Nader writes Unsafe at Any Speed, which derides GM's innovative Chevrolet Corvair for its tricky handling. The government reacts, mandating safety equipment and emissions reductions.

The onset of the gas crisis in 1973 results in further mandates, this time for fuel efficiency. Government intervention complicates product planning for the American market, while shifting consumer tastes and requirements are changing the very nature of the product itself.

The 1970s bring forth a new generation of sports car, one less temperamental than fragile British roadsters and less expensive than a Porsche: at $3,500 in 1970, the Datsun 240Z costs 35% less than a Corvette. Good looks and reliability seal the deal.

The uncertainties of the mid-70s, in terms of emissions laws; rising fuel prices, and safety legislation, leave the auto industry feeling as bad about itself as America does, in the wake of Vietnam and Watergate. All around, V8s are being emasculated; four-cylinder Mustangs are common, and a 55 mph speed limit is imposed.

Even saddled with ugly running lights and massive impact bumpers, the European automobile's sophisticated ways charm more and more American buyers. Many learn to love the thrift and reliability of Japanese cars. Indeed, Toyota; Honda, and Nissan begin gaining market share with the onset of the '73 gas crisis. One car in particular, the Honda Civic, scores big. The Civic's CVCC engine meets tough 1975 federal emissions standards without a catalytic converter.

The price advantage enjoyed by Japanese companies, and a quality advantage in the production of small cars, combines with the second gas crisis of 1981 to boost the Japanese share of the market.

Detroit's response to both the gas crisis and the emissions standards is at first haphazard, then panicked. Quality suffers. As sales plunge, UAW membership remains high, giving the union bargaining power that becomes increasingly out of touch with the realities of the global market. As the Big Three attempt to retool, profits fall, Chrysler slides into near bankruptcy, and Ford and the United Auto Workers (UAW) petition the government for import relief.

Under President Carter, the U.S. government grants emergency loans to Chrysler (a major defense contractor). Under President Reagan, voluntary quotas on Japanese exports from 1981 through 1985 are negotiated. Japan's automotive sales in the U.S. are limited to 1.83 million cars per year, beginning in April 1981 and rising slightly over time. These Voluntary Export Restraints (VERs) help real profits per vehicle jump 50% higher in 1983 than in 1975 (a year of similar vehicle sales).

Yet the Japanese are moving more of their production facilities to the United States. By the late-80s, imports remain lower than the permitted amount, yet the Japanese are selling more cars.

Meanwhile, the luxury sedan market is increasingly dominated by European brands, while the American companies pioneer the light-truck market segment with minivans, SUVs, vans, and trucks.

In 1989, Lexus' LS400 luxury sedan launches at a price 40% less than a Mercedes-Benz S-Class. Asking a 10-20% premium over Cadillac and Lincoln, the LS400 rockets past pedigreed German competition.

The imports' market share in the U.S. rises steadily from 25.8% in 1985, to 34.4% in 2000. Import-brand manufacturers gain 2 million sales in that period, and add 2.1 million units of annual vehicle capacity in North America. In the same span, the Big Three's traditional brands lose 319,000 sales.

In 2005, fuel prices reach their highest levels since the second gas crisis of 1981.


Contrary to popular belief, automotive manufacturing in the United States did not begin in Detroit; rather, the first American automaker, the Duryea Motor Wagon Company, arose in Springfield, Massachusetts, in 1895.

America's auto industry quickly grew to encompass as many as 3,000 firms, more than half of these clustered in the Northeast. Most never entered into commercial production. Indeed, the state of the automotiv industry at the turn of the 19th century could be compared to the Internet boom of the 1990s. Mergers; divestitures; entries, and exits characterize those first years.

By 1903, America's three leading automotive producers are located in Michigan: Oldsmobile, producing 4,000 cars annually, and Ford and Cadillac, with an annual rate of 1,700.

In 1900, just 22% of American cars are powered by gasoline engines (38% are electric, 40% are steam-powered). Michigan becomes the state of choice for automaking as the gasoline engine grows in prominence. Machine shops that specialize in gasoline engines are scattered across southeastern Michigan. Automotive pioneers Ransom E. Olds and Henry Ford are themselves gasoline engine machinists.

Moreover, a preponderance of carriage makers are centered in southeast Michigan. One is led by William Durant, the founder of General Motors.

In 1904, Michigan is the center of production for 42% of all cars. By 1909, this figure has climbed to 51%.

Introduced on October 1st, 1908, Ford's Model T quickly becomes the country's most popular car. Ford dominates production until the 1920s; indeed, by 1920, half of the cars in the world are Model Ts.

Bolstered in size and technology by the demands of World War II, U.S. auto manufacturing continues to grow. Neither rising wage costs, nor an infamous price war in 1955, pose severe problems until the first gas crisis of 1973, after which increasing import gains put pressure on labor contracts.

Detroit's response to both the gas crisis and the emissions standards is at first haphazard, then panicked. Quality suffers. As sales plunge, UAW membership remains high, giving the union bargaining power that becomes increasingly out of touch with the realities of the global market. As the Big Three attempt to retool, profits fall; Chrysler slides into near bankruptcy, and Ford and the United Auto Workers (UAW) petition the government for import relief.

Under President Reagan, voluntary quotas on Japanese exports from 1981 through 1985 are negotiated. Japan's automotive sales in the U.S. are limited to 1.83 million cars per year, beginning in April 1981 and rising slightly over time. The Voluntary Export Restraints (VERs) help real profits per vehicle jump 50% higher in 1983 than in 1975 (a year of similar vehicle sales). To some degree, then, it has been argued that the protectionist shield assists domestic economic recovery.

Yet the Japanese are moving more of the production facilities to the United States. By the late-80s, imports remain lower than the permitted amount, yet the Japanese are selling more cars.

Toward the end of the '90s, global consolidation sees Mexico playing an increasing role in North American vehicle production. Delphi is spun off from General Motors as an independent firm. Parts manufacturers consolidate, taking on an increasing role in vehicle design, which itself becomes more modular. Manufacturing rises to meet the challenge, with promised improvements in productivity.