At the end of 1992 the Ford Taurus dethroned the Honda Accord as the top-selling car in America. The next shoe to drop, in February 1993, was Nissan’s decision to close one of its assembly plants in Japan. By then factory closings were old news in the United States, but Nissan’s move was the first such closing in the history of Japan’s auto industry.
In 1993 the combined U.S. market share of Japanese automakers dropped to 23 percent, down from nearly 26 percent in 1991. It seemed sort of like the Battle of Midway in World War II: after sustaining humiliating defeats, the Americans had stemmed the Japanese advance. At least that’s what many experts believed. “I don’t think they’ll regain the share of the U.S. market they once had,” Jonathan Dobson, an automotive analyst at Jardine Fleming Securities, told the Associated Press. “It’s a case of damage limitation.”
Meanwhile the Japanese still didn’t have much to compete with Detroit’s newest weapon: the SUV. When Bob Lutz drove a new Chrysler Grand Cherokee into the Detroit auto show in January 1992, he was launching not just a new vehicle but a whole new era. Lutz, then the president of Chrysler, didn’t drive through the door. Instead, he steered the company’s newest SUV straight up the steps of the Cobo Hall exhibition center and right through an enormous plate glass window. The stunt was basically bogus, because a special window had been installed beforehand and rigged with tiny explosive charges to shatter at just the right moment. But it grabbed headlines around the country and provided millions of dollars of free publicity for Chrysler’s newest Jeep. The Grand Cherokee retained most of the original Cherokee’s rugged persona but was far more refined, with everything from sleeker styling to a more comfortable interior.
Lutz’s drive was the first of numerous, ever-more-elaborate publicity stunts to launch big pickup trucks and SUVs—the vehicles that symbolized America’s economic boom of the 1990s, just as tail fins had defined the postwar prosperity of the 1950s. Chrysler’s next stunt, at the 1993 auto show, was to drop a new Dodge Ram pickup truck from the ceiling of Cobo Hall—a feat that required painstaking preparation and considerable expense.
The company had removed the truck’s seats and other interior parts to reduce its weight. Then the vehicle was hoisted on a giant forklift that had been hidden behind a black curtain—with only the black-painted (and therefore invisible) twin forks sticking through. After weeks of trial and error, Chrysler engineers figured out how to siphon out the forklift’s hydraulic fluid fast enough to make the pickup truck seem to be in free fall, but not so fast that the fall would kill nearby onlookers. There was a last-minute crisis when Lutz, who relished the notoriety he had received for crashing the Cherokee through the window, insisted on being in the truck when it was dropped. The PR guys talked him out of it, but barely.
The new Ram pickup dropped from the fake suspended ceiling with a loud and convincing thud. Its sales, however, went right through the roof. The truck had been completely reengineered and redesigned, with a”drop-fendered” front end that looked like muscular shoulders and that added a vaguely menacing Mack truck sort of look. The design was developed in consultation with Clotaire Rapaille, a French-born medical anthropologist who viewed burly trucks and SUVs as natural expressions of man’s repressed reptilian instincts.
Adopting the aggressive styling was risky because 80 percent of the attendees in Chrysler’s customer focus groups said they hated it. But Lutz had decided on a new design strategy that was the polar opposite of GM’s. Instead of settling for styling that was inoffensive but also uninspiring, Chrysler would adopt styling that aroused passion in some buyers, even at the risk of offending others. It worked wonderfully.
Chrysler rebounded from an $800 million loss in 1991 to record earnings of $3.7 billion in 1994, partly because Ram sales surged. Chrysler’s share of the pickup truck market, historically stuck at less than 15 percent, soared to nearly 19 percent in 1995, an astounding increase in an industry where companies fought over tenths of a percentage point. Chrysler was becoming a truck company instead of a car company. In 1986 its sales mix had been roughly two-thirds cars and one-third trucks. But by 1995 that ratio was reversed, with 64 percent of overall sales consisting of minivans, pickup trucks, and SUVs. It seemed a brilliant strategic shift. (Nobody knew it would backfire a decade later.)
The truck boom of the 1990s produced a windfall for Chrysler dealers, including one of the newest ones, Gene Benner. In 1994, when the principal owner of Bessey Motors was ready to retire, he offered to sell his 90 percent interest to Benner, and the former football coach jumped at the chance. He depleted his personal savings and borrowed every penny he could lay his hands on—from his retirement account, from local banks, and from Chrysler Financial. When he was still a little short, he made up the difference with a small loan from his mother. Benner was going deeply into debt to bet his future on Chrysler.
And just as in 1984, when he had become a car salesman right when minivan sales hit high gear, Benner’s timing was perfect. Sales of SUVs, pickup trucks, and minivans boomed at his little dealership in Maine, as they were doing in the rest of the country. Benner was able to pay off all his loans within five years, far faster than he had expected. He was riding the wave of Detroit’s truck boom.
The prosperity was also spreading to Fred Young in Belvidere, where Chrysler was putting renewed emphasis on quality. Young was chosen to become a “process team member,” helping design work stations on the assembly line. The really dirty work that Young had done two decades earlier—hopping into a pit to weld car underbodies—had been assigned to robots. His task as a PTM member was to go further and help improve the layout of the assembly line to make it easier for workers to do their jobs.
Chrysler had discovered what the Japanese knew: that better ergonomics would boost quality and productivity and avoid on-the-job injuries that increased workers’ medical bills. The company adopted all sorts of innovations, such as redesigned wrenches that could be used repeatedly without causing stress injuries to workers’ wrists. Young and other team members joked that PTM really meant “part-time management,” because they felt like they were acting as quasi-managers as opposed to workers. But that was a good thing. PTM, whatever it stood for, was just the sort of worker involvement that the Japanese had used successfully for years.
PTM wasn’t perfect. Young believed some members were shirkers who had been named to the team because of their friendship with local union officials and were quick to pad their hours with extra overtime. But he liked the assignment and took it seriously, often traveling to Auburn Hills to work with the manufacturing engineers at company headquarters.
Ford, like Chrysler, was trucking down the road to success. In 1995, for the first time, the company sold more trucks than cars. Two years later trucks totaled nearly 58 percent of its U.S. sales, helped by a new full-size SUV, bigger than the Explorer, called the Expedition. It could seat eight people and, with the optional 5.4-liter V8 engine, could tow boats, horses, snowmobiles, Jet Skis, or anything else that weighed up to eight thousand pounds—much more than any other SUV at the time. A less flattering number was the Expedition’s fuel-economy rating of just fourteen miles a gallon in combined city-highway driving, which drew criticism from the environmental lobby. But who really cared, when gasoline was cheaper than bottled water in most of the country?
Nor did it seem to matter that in 1997, the same year the Expedition debuted, the Ford Taurus fell from first to third place on the list of America’s top-selling cars, to be supplanted by the Toyota Camry and Honda Accord. The Taurus wasn’t important anymore, in Ford’s view. Americans wanted big SUVs, and Ford wanted big profits. The Expedition happily met both needs. There seemed little reason for Ford to invest more money in the Taurus.
Detroit’s come-lately to the truck party was General Motors, traditionally the most cautious of the Big Three. Throughout the 1990s GM remained the only Detroit company that was selling more cars than trucks. It acquired Saab, the Swedish maker of upscale cars, to add to its l
ineup. GM’s competitor for the Grand Cherokee and Explorer was the outdated Chevy Blazer, whose narrow chassis made it feel more “tippy” and less secure than its crosstown competitors—a big drawback, especially with women drivers. But GM had an SUV ace in the hole: the enormous Chevrolet Suburban.
Bigger than any other SUV, this ancient warrior had first appeared in the mid-1930s but didn’t get four doors until 1973. After that GM left the Suburban’s utilitarian body style basically unchanged for a couple decades. In 1996, however, the Suburban got sleeker styling and a 290-horsepower engine, and GM started catching the truck wave too. It became common to see Suburbans sitting in the prosperous driveways of Darien and Lake Forest, right alongside Mercedes and BMW sedans.
The Japanese remained dumbstruck by it all. Honda not only lacked an SUV, it didn’t have anything in the pipeline, much to the dismay of its dealers. Already restive over the bribery scandal, Honda dealers demanded an SUV, forcing the company to toss aside its oft-professed policy to “carry our own torch,” as company executives put it. The result was the pathetic Honda Passport, launched in 1993 as the company’s first SUV. It actually was built by Isuzu and then tweaked a little so it could be badged with an H and sold as a Honda. Inside the company the Passport was an acute embarrassment, because Isuzu’s quality was so uneven that the vehicle depressed Honda’s overall quality ratings in the widely watched J.D. Power surveys.
As for Toyota, until the mid-1990s its 4Runner SUV basically was an underpowered pickup truck with an enclosed back end. The 4Runner got high quality ratings, but the absence of defects couldn’t make up for the lack of interior space or for an awkward seating position that made drivers feel like they were sitting in a living room recliner. The company’s Previa minivan, introduced in 1990, had an anemic four-cylinder engine that was crammed under the front seat. Nissan had a more conventional minivan, the Quest, but it was actually built by Ford in Ohio.
The Japanese were missing the truck boom, while Detroit’s Big Three were selling ever more powerful, sophisticated, and comfortable trucks right in the market’s sweet spot. Profits on the Chevy Suburban topped $10,000 per vehicle, and those on the Expedition, Grand Cherokee, other SUVs and pickups weren’t far behind. One Chrysler executive told his colleagues, “We wish we could just shrink-wrap the way it is right now.” But things were about to get even better for Detroit, or so it seemed.
On the afternoon of Wednesday, May 6, 1998, a group of weary Chrysler road warriors piled into a van after attending a daylong preview of their new cars near Atlanta. Suddenly everyone’s cell phone began ringing, with each person getting the same message from his or her boss: There’d be an important special meeting at five P.M. back at the hotel. When the meeting convened, the bosses confirmed a report from The Wall Street Journal that morning. Chrysler would be joining Germany’s Daimler-Benz AG, parent company of Mercedes, in a transatlantic merger that would redraw the map of the global auto industry and perhaps create a template for a postnational corporation. “We started jumping for joy,” recalled a Chrysler PR man some years later. “Mercedes-Benz was a great brand name with enormous prestige. It had what we at Chrysler aspired to—sort of like penis envy.”
Chrysler executives had more concrete reasons to rejoice. Even though Daimler was the acquiring company, the deal was billed as a “merger of equals.” For the next three years Daimler’s Jürgen Schrempp and Chrysler’s Bob Eaton would serve as co-CEOs of the new DaimlerChrysler. The terms called for Daimler-Benz to exchange more than $38 billion of its stock for Chrysler, a 30 percent premium for each Chrysler share. Chrysler’s top thirty or so executives would reap a windfall of nearly $1 billion on their stock options. Chairman Eaton alone would get an immediate $70 million, plus new stock options in the combined company that could be worth tens of millions more.
The biggest winner was Kirk Kerkorian, Chrysler’s largest shareholder. In 1995, five years after first buying his stake in Chrysler, Kerkorian had tried to acquire the entire company and take it private—only to be rebuffed by Eaton. It was the luckiest miss ever for Kerkorian. After dropping his bid, he had maneuvered behind the scenes for Chrysler to be acquired and had assured Schrempp he would support the deal. In 1998 Kerkorian owned nearly 14 percent of the company and stood to reap profits of nearly $5 billion on his original investment.
After toasting their deal with champagne in London’s Dorchester Hotel on the night of May 6, the next morning Eaton and Schrempp strode into a press conference in the city’s Docklands to be greeted like rock stars, almost blinded by flashing cameras and bright television lights. Analysts projected that “synergy savings” of $3 billion a year would flow from the deal, about half of that in the first year. Schrempp immediately began talking about yet another mega-merger, maybe buying one of the weaker Japanese car companies, such as Mitsubishi or Nissan. “We’ll have the size, the profitability, and the reach to take on everyone,” the Daimler chief said as he beamed at the press conference.
After a full day of media interviews, Eaton hopped on a helicopter with Chrysler’s PR chief, Steve Harris, to head for the airport. As the sun set over the ancient city of London, shedding the day’s final rays on some of the best-known buildings in the world, the existential moment moved Eaton to eloquence. Not about synergies, or about developing great new cars, or about making further acquisitions: instead, Chrysler’s CEO rhapsodized about the the riches that he and Chrysler’s other executives would reap from the deal.
Back in America, Chrysler dealers were rejoicing as well. Chrysler’s marriage to one of the most prestigious car companies in the world, they figured, surely would give them more and better vehicles to sell. When the deal was announced, Gene Benner was at a used-car auction for dealers. He returned later that day to find a surprise gift from his employees—the three-pointed Mercedes-Benz logo—sitting on his desk.
General Motors and Ford executives in Detroit also figured that the new DaimlerChrysler would become a competitive powerhouse. But for the moment GM and Ford were themselves enjoying unprecedented prosperity. GM earned $6 billion in 1999 and Ford earned $7.2 billion, a new record for any car company in history, surpassing the previous record Ford had set a decade earlier. It was all because of America’s love affair with the SUV.
And even better results promised to come. In early 1999 Ford’s senior sales executives, in giddy anticipation, privately unveiled a new vehicle to a handful of company officials. It was a bitterly cold day, typical of Detroit in winter, and the attendees huddled in their topcoats in the company’s drafty design studio. When the cover was pulled off the new vehicle, however, not everyone in the room shared the sales staff’s excitement. Some attendees gasped, “Oh my God!” and “Jesus Christ!” Others shuffled away and averted their eyes.
The vehicle was the new Ford Excursion, the biggest SUV the world had yet seen. Nearly as big as a small hotel room in Tokyo, the Excursion had a V10 engine, weighed more than three and a half tons, and was fully seven inches longer than the Chevy Suburban. Its fuel-economy rating would be barely ten miles a gallon—even less when it was loaded with people, luggage, and maybe a ten-thousand-pound boat on the towing hitch. Ford’s PR people knew the Excursion would send the Sierra Club and other environmental groups into a frenzy of anti-SUV outrage. But company executives had been feeling their own penis envy over the Suburban, and they didn’t intend to let GM’s fat profits on its behemoth continue unchallenged.
At the close of the millennium, times were good in Detroit: The cycle of crisis and recovery during the preceding two decades appeared to be gone forever. For the first time the Japanese car companies were on the defensive, beset by scandal, by currency swings, and by their gross underestimation of America’s appetite for trucks. Nissan was suffering with lackluster cars and inept management, hovering on the brink of bankruptcy. In 1999 Japan’s second-largest car company took a once-unthinkable step. The company sold a controlling block of its stock to the leading French automaker, Renault, which dispatch
ed one of its own executives—a non-Japanese—to take Nissan’s helm.
On January 8, 1999, The Wall Street Journal carried a front-page article declaring the end of the twentieth century to be the dawn of a new golden age for General Motors, Ford, and Chrysler. It would be different from the Big Three’s oligopolic dominance of the 1950s and 1960s, to be sure, but a plethora of exciting new products to meet every consumer taste would make it in many ways better.
The year 2000 would bring the debut not only of the Excursion but also of Chrysler’s hot PT Cruiser, which sported 1930s retro styling that made it a cross between a small station wagon and an Al Capone squad car. “It’s wonderful to be in this industry now,” a product development executive at Chrysler told the Journal. “We’ve come from where all those dummies said we were going to die in 1980 to now, where it’s more products than ever.”
EIGHT
POTHOLES AND MISSED OPPORTUNITIES
With Detroit on a roll, General Motors announced it would build “the largest auto show exhibit ever in North America” for the January 2000 Detroit auto show. The company’s publicists reached for superlatives. If the exhibit’s 230 tons of steel were melted down and laid end to end, GM announced, the beams would stretch seven miles—equivalent to rounding the bases at the Tigers’ ballpark ninety-nine times, crossing the Ambassador Bridge between Detroit and Canada four times each way, or running the length of a soccer field 105 times. As a final flourish, GM said the steel would rise three times higher than Mount Fuji. Take that, Japan.
Detroit might have been entitled to some hyperbole. General Motors, Ford, and Chrysler had mounted odds-defying comebacks from their near-death experiences in the early 1980s and early 1990s. Profits stood at record levels, and the stock prices of both GM and Ford were close to their all-time highs. (Chrysler, as part of Daimler-Chrysler, didn’t have its own stock anymore.) The Big Three were the market leaders in light trucks, the fastest-growing—indeed, the only growing—segment of the American car market. In 2001 Americans would buy 8.7 million minivans, pickups, and SUVs compared to just 8.4 million sedans, coupes, and station wagons. For the first time trucks actually outsold cars 51 percent to 49 percent—which was amazing, considering that the ratio had been 80 percent cars to 20 percent trucks just twenty years earlier. All this was good news for the Big Three.
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