Business: Detroit Hits a Roadblock

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In 1974 Ford seemed in the best position to ride out the fuel crisis. In addition to the Pinto subcompact, the company was producing the compact Maverick, a successfully promoted economy car. But Ford lacked GM's financial strength and was ruled autocratically by Henry Ford II. The company had decided to introduce a restyled Maverick as the Ford Fairmont and Mercury Zephyr in 1978. But Henry Ford vetoed a decision to spend some $2 billion on a domestically built front-wheel-drive subcompact. Instead he opted to proceed with the less expensive downsizing of the Ford LTD and others.

The decision was disastrous. When LTD reruns arrived on the market in the fall of 1978, they sold poorly. Ford had no modern U.S.-built subcompacts for a market that would soon demand fuel-sipping models. Confessed Henry Ford: "We misread where the market is today. We're not as well prepared for it as we should be, and we're late. It's a big mistake."

Chrysler, with its Plymouth Valiant and Dodge Dart, was surprisingly strong in small cars in the early 1970s. It also judged trends correctly by beginning development of the Dodge Omni and Plymouth Horizon in 1975. However the cash-poor company could not afford to build its own four-cylinder engines for the cars and had to make a contract with Volkswagen for the German company to provide 300,000 a year. Last year Chrysler could have sold more than 300,000 of these cars, but it was unable to get enough engines to meet demand.

This was not the least of Chrysler's problems. Through the '70s the company was hampered by poor new model launches and heavy debt load. Last year's sales slump sent the company to Washington looking for federal aid.

Ironically, just as Detroit was taking its first tentative steps toward adapting to a fuel-short world, American consumers reversed themselves. When gas lines disappeared in the spring of 1974, so did the public's interest in small cars. Or at least so it seemed. Detroit introduced cash rebates for the first time in 1975—to move small cars off the lots. By 1976 the hottest sellers were small pickup trucks, vans and four-wheel drive Jeeps. Says American Motor Corp. President Paul Tippett ruefully: "Consumers buy what they want."