Detroit's Uphill Battle

COVER STORY

New cars, new plants and a strong new emphasis on quality for U.S. autos

When Detroit's Jefferson Avenue assembly plant rolled out its first Chrysler in 1925, there were 56 optimistic American automakers. Along with familiar names such as Ford, Chevrolet and Cadillac were ones that have now become quaint, like Stutz Bearcat, Reo and Jordan. This year another new car is coming off the Jefferson Avenue assembly line. But today's Detroit is far more sober about its debut. Only four U.S. auto companies remain, and two of those, American Motors and Chrysler, are in danger of going the way of the Stutz Bearcat.

In these late summer days, Detroit's automakers are bustling to complete billion-dollar programs that they hope will turn the fortunes of their industry. The Jefferson Avenue plant, for example, is daily turning out 400 new Dodge Aries, Chrysler's front-wheel-drive K-car that will determine whether the company survives as a major automobile producer.

Twenty-five miles away, at Ford Motor Co.'s Wayne, Mich., plant, workmen are busily assembling the company's new subcompacts, the Ford Escort and the Mercury Lynx. Developed at a cost of $3 billion, the new cars are the first autos that Ford has built from the ground up since the Model A in 1927.

At General Motors' testing track near Milford, Mich., the giant automaker's J-car, which will be released next May or June, is being put through punishing road tests. The J-car will get an estimated 28 m.p.g. in the city and can seat five people in modest comfort.

Nothing less than the survival of the U.S. auto industry in its present form depends on the success of these new 1981 models. Sales of U.S.-made cars have fallen from 9.3 million in 1978 to an estimated 7 million this year. Last week the latest ten-day figures showed that the Big Three automakers sold the fewest cars for any mid-August period since 1967. Chrysler has already lost more money ($2 billion in the past 18 months) than any other company in the history of American business. The firm only exists today because of the $1.5 billion guaranteed loan approved in May by the Federal Government. Ford is expected to lose more than $2 billion on its North American car operations this year. Even mighty General Motors was $412 million in the red from April through June, and is likely to lose money during the whole year for the first time since 1921.

Close to 300,000 blue-and white-collar workers are now out of jobs. Nearly a dozen auto plants have closed, probably forever, and 1,469 car dealers have boarded up their doors. Looking at a worst of all possible worlds, which would be the result if recent trends continue, Chrysler Chairman Lee A. Iacocca says: "If you take that scenario, by next April we're bankrupt. By October, Ford is bankrupt. By the following October, GM is bankrupt."

Such a brush with doom has been a stunning shock for an industry that once represented all that was right about American business. In 1913 Henry Ford and his assembly-line method for making the Model T become an inspiration for the new industrial age. Detroit's auto technology spread throughout the world, even to the mountain towns of Argentina and Spain, and the big luxurious American auto became the very epitome of U.S. know-how and cando.

Today, however, autos are in the forefront of