Business: Detroit Hits a Roadblock

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The industry has become remarkably homogeneous. It likes to hire its future leaders young; both General Motors and Chrysler operate degree-granting institutes. Competitive pressures push ambitious employees to put in eleven-hour days and six-day weeks if they aspire to the top. Men who make it (and there are virtually no women in top management posts) have spent 25 years or more within their companies.

Dedicated Detroit automen have learned a single purpose in life: to design, build and sell cars that will reap the highest return on the company's investment. Profits traditionally have come from volume and from trading customers up to larger, more expensive "prestige" models. Traditionally a Cadillac cost several hundred dollars more to make than a Chevrolet, but it returned GM a profit of several thousand dollars more. Detroit denies that it rejects new ideas because they are "not invented here," but the industry has been slow to adopt such innovations as disc brakes and radial tires, both extensively used in Europe for a decade. Detroit was equally slow to react to the growing energy shortage.

For reasons of profit and tradition, GM, Ford and Chrysler for years could see little incentive to build small cars. In failing to do so, they ignored a market niche that was first taken advantage of by tiny American Motors Corp. (which commands only 1.5% of the auto market vs. GM's 48%) and increasingly exploited by aggressive foreign manufacturers. First the Germans and then the Japanese found it relatively easy to divert to the U.S. autos built for smaller roads and with more expensive energy markets in mind.

In both 1959 and 1970, the Big Three introduced new small cars to fight the imports. But successful small models such as the Ford Falcon grew heavier and weighted down with options. Others, such as GM's Corvair and Vega, which were widely criticized for poor engineering, sold badly. The imports rebounded unharmed from both assaults. Sales of imported cars, just 498,785 in 1960, had more than tripled by 1973.

When oil was first shut off in the 1973-74 Arab oil embargo, Detroit found itself in serious trouble. Because American automen had few small cars to sell, customers flocked to imported models. By then foreign-built cars had won a reputation for fuel efficiency that most U.S. cars could not approach.

The Big Three were further stung when Congress imposed stringent fuel economy standards. These dictated that each manufacturer's fleet of cars would achieve 18 m.p.g. by 1978, increasing each year, to 27.5 m.p.g. by 1985. Already burdened by costly safety and emission standards, Detroit screamed that the mileage standards were ruinous. With the lead time for all-new cars a minimum of five years, the industry felt it scarcely had time to comply.

In fact, each company already had begun to wrestle with the problem of getting more miles per gallon of gas out of its cars. GM, which stood to lose the most since it had the strongest lineup of big cars, attacked the problem forthrightly. In July 1972, well before any shortages of oil, the company had set up an energy task force. Less than a year later it decided to shrink its car line, beginning with full-size models in the 1977 model-year, and to build new compacts like the Chevrolet Citation that would be introduced starting in 1979.