David Halberstam’s The Reckoning is the third volume in his examination of postwar America. In the first, The Best and the Brightest (1972), he discussed the Vietnamese situation and American involvement. In the second, The Powers That Be (1979), he discussed the American media and the rise of the broadcasting networks. In this volume, he turns his attention to an examination of the American automobile industry under the dual impact of rapidly rising oil prices and the competition from foreign imports, especially those from Japan. Detroit tried to ignore both developments with its own typical illogic:It was a given that Americans preferred big cars—and only Detroit made big cars. There was a seldom-spoken corollary to this axiom: Big cars meant big profits, and small cars meant small profits. In early 1973 the fact that Detroit was selling what it wanted to sell was considered proof that Detroit, rather than its critics, truly understood the American customer. The future looked brighter than ever. . . . For if there was one benign economic certainty, as far as American industrialists and American consumers were concerned, it was the low price of gas and oil, a price that seemed almost inflation-proof in the postwar era.
Such was the attitude in Detroit in 1973 when Charley Maxwell, an oil economist, arrived to meet with the heads of the industry and provide them with his predictions regarding the future of the oil industry. Maxwell was in the position of predicting something with which Detroit did not wish to concern itself: a radical change in the oil pricing and distribution system that would probably cause shortages and rapid price rises—and, as a result, a clamor for smaller, more efficient cars. The value placed on this information was such that no one at the top management levels of the Big Three automakers would meet with Maxwell. No one placed any great significance on a message which would prove all too true within two years and would be reinforced further when the Shah would be forced to leave Iran in 1979. Unable or unwilling to project beyond the comfortable cycle of annual production and profit increases, American automakers had no plans and nothing to fall back on when the oil flow dried up and the prices took off, and Detroit’s products were quickly relegated to the category of gas dinosaurs. The problem was compounded by the fact that the United States was increasingly relying upon imported oil to fill its daily demand—more than 50 percent of the daily consumption and growing—and the sudden cohesion exhibited by the oil producing countries acting in concert as the Organization of Petroleum Exporting Countries (OPEC) causing the price rise, left the automakers reeling in shock. Waiting in the wings was the second challenge that was to try Detroit—the Japanese. “Almost as soon as the second oil shock struck, in 1979, the Japanese captured an incredibly large portion of the American auto market—some 25 percent.” How the American automobile industry sank so low as to allow foreign imports to capture a quarter of the domestic market and continue to increase their hold and how the Japanese were able to do this is the core story presented in The Reckoning.
The Reckoning is a look at people and institutions that are familiar to the average citizen yet remain something of a mystery. Halberstam chose to explore the auto industry as representative of late twentieth century American industry because the car is “a consumer item, familiar to every reader, and the symbol of America’s surge into middle class—indeed, to the rest of the world, the most American of products.” One American and one Japanese firm were chosen as representative for this discussion.On the American side . . . Ford because [in 1980] Chrysler was too fragile, too near bankruptcy, and GM so large and rich as to be impervious to all but the vastest changes. Having selected Ford, the number two American company, I chose Nissan, the number two Japanese firm, after Toyota, as its Japanese counterpart.
Another reason to concentrate on the Japanese challenge was the fact that in 1968 Japan replaced West Germany as the world’s second largest automobile producer behind the United States.
The problem, says Halberstam, was the change in America and the attitudes of its industrial management. At the beginning of the twentieth century, America’s production leadership was unquestioned. By mid-century, however, this dominance was threatened: “Labor costs were high. Management had become bloated. Few of the men running industrial companies had spent very much time . . . learning the process of manufacturing.” The cost and difficulty of producing goods on machinery that was old and outdated had become high enough that “the definition of quality had eroded badly.” Nowhere was this trend more evident than in the auto industry. Americans had grown lazy and confident about their industry; it was the best in the world, and the imports were cheap, shoddily built, and would not last. The auto industry had shaken down to the Big Three—General Motors (GM), Ford, and Chrysler (plus American Motors to keep the government from interfering with the industry). The market share was relatively secure for each of the firms, and the innovation and competition that typified the prewar years were replaced by stress on annual model changes, increased production and sales, and an unwritten three-year life cycle for automobiles. Management was gradually purged of those who had any firsthand experience in the making of an automobile. These employees were replaced by business-school graduates and whiz kids, whose expertise was in the manipulation of numbers and “systems” and who were responsible for reducing costs and increasing productivity and profits. If this took the form of larger cars with more low-cost/high-profit options, then so be it, as long as the bottom line showed increase profitability per unit.
Research and Development continued at a more conservative pace. Products that could be incorporated into vehicles in the form of low-cost/high-profit options were finding their way into the cars. What was not finding its way into them were innovations that would result in better quality cars with a longer life cycle; refinements in production techniques requiring capital outlay for assembly-line changes that would reduce the profitability per unit but could be recovered over the long run; and state-of-the-art manufacturing techniques.
Detroit was resting on its laurels with what it regarded as a captive audience. America was producing the best cars in the world and the imports be damned. In fact, any vehicle made anywhere other than Detroit was considered inferior:The men of Detroit believed not only that their own cars were the best in the world but also that the Japanese made shoddy, tinny ones. Japanese goods rattled and fell apart. Scratch the bodies of their cars, went the standing Detroit joke (even when the Japanese had been producing the best steel in the world for more than ten years), and you could still see the Budweiser labels.
Innovations such as zinc-steel and a new painting process were held back because of the high cost of implementation and long-term recoupment. The American steel industry had developed a more rust-resistant zinc-steel which cost a few dollars more per ton than the conventional steel used in car bodies. Finance could not justify the outlay for this product because the costs could not be passed along to the consumer or the profitability increased through its use; better spend the money on an option that could add several hundred dollars in profit per unit. Changes in the way bodies were painted were treated in the same fashion. In the early 1950’s, for example, Ford researchers developed a new painting process that produced a more even distribution of paint and ensured that the paint flowed into all the crevices and joints of the body. It involved applying differing electrical charges to the car body and the paint vat. The process would require the conversion of the paint line and new drying...
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