Detroit's Uphill Battle

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unique because it could leave the industry permanently weakened. It will take Detroit's Big Three at least another three years and an investment totaling about $80 billion to design and produce the new generation of fuel-efficient cars of the future. During that period, they will be hard-pressed to satisfy the demand for small cars, and the gap will be filled by imported autos, especially from Japan. Already, foreign-made cars have captured as much as 30% of the U.S. market, and Toyota and Datsun now rank right behind GM and Ford as the world's largest auto producers. To win buyers back it will take superior products and strong selling techniques. Otherwise there will be a lasting reduction in U.S. auto production, which would have far-reaching implications for the whole U.S. economy.

General Motors Executive Vice President Roger Smith, the expected successor to Chairman Thomas A. Murphy, who will retire at the end of the year, likens the industry's present plight to a hockey team in the midst of a line change. As soon as all the players are out on the ice, he says, the team will be competitive again. But others are less sanguine. Says David Cole, an engineer and auto expert at the University of Michigan: "It is indeed possible that the relative importance of automobile manufacturing in the U.S. economy will be downgraded for many years, if not permanently. The evidence to date would seem to indicate that almost irreparable harm may be only months away."

The fast, hard fall of the U.S. auto industry will doubtless rank as one of the most remarkable collapses in the annals of American business. Even makers of horse-drawn carriages and buggy whips did not see their markets and profits disappear so quickly. Just 18 months ago, Detroit was fearful that it could not build enough big V-8-powered sedans to meet consumer demand. The industry in 1978 rang up $3 billion in profits. One hot-selling car: the $6,300 Oldsmobile Cutlass. It got a modest twelve miles to the gallon, but it had lots of vroom.

U.S. automakers for 70 years were uniquely successful in profitably satisfying the automobile demands of American consumers. Detroit's cars provided affordable, comfortable transportation across the country or around the corner—and they survived on the minimal maintenance that owners gave them. Consumers kept coming back for more, and best of all from Detroit's point of view, they preferred to buy big. The auto companies responded by producing more V-8-powered, full-size cars, the industry's real moneymakers, and by making its successful compacts, such as the Ford Falcon and the Plymouth Valiant, longer and heavier.

The U.S. Government helped keep behemoths popular by refusing to take serious action against the growing realities of a petroleum-short world. Washington produced no energy policy, kept the price of gasoline artificially low and spent $77.8 billion for the construction of the Interstate Highway System, on which Americans could cruise coast to coast at 70 m.p.h. Admits Transportation Secretary Neil Goldschmidt: "The U.S. Government allowed us to go from a nation importing a third of its oil to one importing almost 50% because there wasn't the political courage to deregulate the price of oil."

Detroit's labor force abetted the industry's slide into decline. Work was often sloppy. Cars built on