Ole stopped by to respond to the post, “Gordon Buehrig on Ford’s attitude about small cars circa 1960.”
It wasn’t until the early-1960s that the entire European auto industry produced more cars than Chevrolet or Ford alone in a good year. Those huge economies of scale produced huge profits, which got spent on annual facelifts, expensive United Auto Worker labor contracts, and generous dividend payouts to shareholders.
Selling 20,000-100,000 units annually of a small/cheap car made with UAW labor rates was not going to pay for all the overhead and high living that General Motors and Ford had become accustomed to. This is why the Rambler, Henry J, Hudson Jet never made any money until the 1958-59 recession brought a temporary shift to smaller cars.
A low-end Ford or Chevy was typically the same price or cheaper than U.S.-built small cars, so the only reason to buy one was ease of parking or better miles per gallon (with gas at 25 cents a gallon).
This allowed the cheap-labor Europeans and Japanese to have a niche market for small/sporty cars in the U.S. that the better-run brands could profitably serve (e.g., Volkswagen, Mercedes, Volvo, Opel, MG, Jaguar, Triumph and Datsun), but the badly run also failed in the U.S. (Renault, Fiat, Morris, Austin and Citroen).
Even the successful ones struggled in the 1970s when rising labor costs and exchange rates made European cars much more expensive in the U.S., which created the opening for the Japanese.
The other element that helped the foreigners was the simple fact that there was a market for something exotic for people who wanted something different than the Chevy, Ford, Buick or Dodge that all their neighbors drove.
The only way that U.S. brands could have potentially been successful with small cars would have been to produce them in cheaper places such as Europe and Japan and import them, but the relatively small profits paled in comparison to what the full-sizers generated, so they never got the resources to keep the momentum they had with the short-lived success of the Opel and Capri in the United States.
— Ole
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As far as Opel and Ford of Europe’s Capri – they fate was sealed when the German Mark was revalued to the dollar. The change in exchange rates from 4 DM to the S caused trouble for others too.
The Opel also had another problem of using Buick dealers that saw it as an unwanted corporate mandated stepchild. It might be interesting to know the regional breakdown of sales in the US. I suspect at their best it only did well in certain specific markets.
Differences in labor rates were definitely a major factor. The primary reason Chrysler had its early 1950s concepts made by Ghia in Italy was not because of Ghia’s design talent–Exner did most of the designing in Detroit–but because Ghia could build a one-off car–in metal–for $10,000. When Chrysler did the same in Detroit (for some parade cars that had to last years, so not quite apples-to-apples) the cost was $83,000.
Still, Detroit also did little to increase the flexibility of its manufacturing and otherwise bring down the cost of lower volume products. Even in the 1980s they were far behind the Japanese here. The German companies remained in business even after their labor rates passed those in America. Not long ago I was shocked to learn that South Korean auto workers earn more than American auto workers. Yet Hyundai and Kia are still growing.
Not saying the numbers are wrong but one needs to include not only the hourly wage but the real cost with all the UAW benefits and retirement added in when doing comparisons.
True. And possibly also the corporate tax structure. Hyundai probably pays less for healthcare benefits, but someone has to fund what the government then spends. I don’t know the extent to which this happens through corporate income taxes.
What really put Detroit into a hole it couldn’t climb out of (though Ford is still trying) was the number of people they employed through the fat years, and then had to support as retirees. When you’re supporting multiple retirees for every current employee, that’s hard to sustain. Ideally they would have set aside the necessary funds back when all of those people were still working, but they did not.