Since the early twentieth century, thousands of businesses, large and small, have participated in the manufacture, marketing, and sale of motor vehicles, providing employment for millions of Americans and requiring huge capital investments.
Gasoline-powered vehicles were invented primarily by Europeans during the late nineteenth century, but they were improved and made into the center of a large-scale industry in the United States. Over the years, many domestic companies have tried to manufacture automobiles, but the vast majority failed to earn a profit. In 1900, there was only one car for every ninety-five hundred Americans; ten years later, the ratio was one car per two hundred; by 1930, the ratio had shrunk to one for every five Americans. The history of the industry has always involved numerous interrelated components, including innovations in technology, marketing strategies, and adaptations to changing needs and cultural values. American manufacturers–particularly General Motors (GM), the Ford Motor Company, and Chrysler Motors–maintained global dominance from the early twentieth century until the last two decades of the century, but thereafter Japanese and Korean products grew more successful, at Detroit’s expense.
Many people in many different places were responsible for the invention of the automobile. Étienne Lenoir, a Belgian, made the first successful internal combustion engine in 1860, and twenty-five years later Carl Benz, a German engineer, was the first to build a usable vehicle powered by such an engine. In 1893, Charles E. and J. Frank
During the 1890’s, numerous entrepreneurs were competing in an attempt to develop a commercially profitable vehicle. In 1897, Colonel Albert A.
In 1902, Henry M.
The majority of the earliest automobile manufacturers paid a royalty of about 1 percent to the
During the first two decades of the twentieth century, Ford’s company emerged as the leading American manufacturer of automobiles. In 1906, Ford successfully produced a popular vehicle, the Model N, which he priced at $500, significantly undercutting his competition. By 1908, Ford had sold twelve thousand Model Ns. His basic strategy was to design a car for a mass market and then search for the means to produce it as cheaply as possible. Based on his intuition and a long heritage of American manufacturing, he emphasized five principles of production: standardization of product, interchangeability of parts, efficient mechanization, continuous flow production, and the minimal use of skilled labor.
In 1908, Ford introduced his famous
With the need for military vehicles and trucks during World War I, annual investments in new plants grew from $600 million in 1914 to $2.5 billion in 1918. Detroit was the fastest growing city in the country, going from a population of 465,000 in 1910 to 994,000 in 1920. The prosperity of the 1920’s was a boon to the industry, as was the
For many years, Ford’s River Rouge Complex, which was constructed between 1917 and 1928, was the largest integrated factory in the world. By 1921, the Model T controlled over 55 percent of the U.S. market. Ford continually improved mechanization to employ fewer skilled workers, and by 1914, three-fourths of the company’s workforce was unskilled. Many were immigrants, and it was said that they needed only to understand one command, “hurry up.” Most of the savings from mechanization were passed on to the consumer. The price of the Model T, which was $690 in 1911, dropped to only $265 in 1927, the last year of its production. By then, more than 15 million Model T’s had been sold.
During the 1920’s,
Credited with coining the term “professional manager,” Sloan emphasized order, careful research, and joint decisions based on the bottom line. In organizing GM’s autonomous divisions, his goal was “decentralized operations with coordinated control.” In contrast to Henry Ford’s pragmatic view of the automobile as simply a means of transportation, Sloan recognized that an automobile was a personal statement of aspiration and status. Appreciating the differences in consumers, he used the motto “a car for every purse and purpose.” Under Sloan’s leadership, GM’s sales grew from $304 million in 1921 to $1.5 billion in 1929.
Although the U.S. government prohibited production of passenger automobiles during
By the 1960’s, a growing
Until the 1970’s, American manufacturers increasingly built vehicles that were larger and more powerful. During the 1960’s, a small number of Americans were purchasing small and relatively inexpensive Volkswagens, and during the 1970’s, manufacturers became alarmed about the growing popularity of Japanese imports. Detroit was unprepared for the explosion of oil prices in 1973 and 1979, which increased demand for small, energy-efficient cars. Factories closed, and some 300,000 workers were laid off. After the downturn almost forced
With growing automation and the continuing challenge of foreign competition, the number of U.S. autoworkers continued to decline. In 1978, 2.4 million Americans were employed in the industry; four years later, the number dropped to 1.8 million; by 2002, the number had dropped to 1.16 million; and by 2007, there were only 860,000. The share of the market held by the Big Three companies declined from 70 percent in 1998 to 49.4 percent in 2007. With their huge losses, financial analysts warned that one or more of the companies could be forced into bankruptcy. The crisis of the Big Three was due to a combination of factors, including a general decline in demand, legacy costs not faced by competitors, the public’s view that foreign automobiles were of better quality, and rising gasoline prices that caused consumers to prefer smaller vehicles. Toyota had become the largest producer of automobiles in the world. The number of
In 2008, with rising gasoline prices that made sport-utility vehicles (SUVs) and trucks less popular and a credit crisis in the fall, the Big Three (and the Japanese automakers as well, although to a lesser extent) saw their sales and profits drop. In October, the Big Three automakers appealed to the federal government for financial aid, as Chrysler and General Motors faced possible bankruptcies. On December 19, President George W. Bush announced that $13.4 billion in emergency loans would be made available to keep Chrysler and General Motors afloat, with an additional $4 billion to be available in February. However, the automakers were given the loans on condition that they make major concessions and organizational changes by March 31, 2009, to demonstrate that they could return to profitability. Ford, which was in a better financial state, was not expected to make use of the federal loans. On February 18, 2009, General Motors and Chrysler asked for an additional $14 billion in aid, while presenting restructuring plans designed to return their companies to profitability.
Halberstam, David. The Reckoning. New York: Morrow, 1986. A well-written account of how and why the automobile industry experienced relative decline as it struggled to meet the challenge of Japanese competition. Maynard, Micheline. The End of Detroit: How the Big Three Lost Their Grip on the American Car Market. New York: Doubleday, 2004. Argues that the Big Three’s decline since the 1990’s was primarily due to the failure to provide quality and fuel efficiency at reasonable cost. Pelfrey, William. Billy, Alfred, and General Motors: The Story of Two Unique Men, a Legendary Company, and a Remarkable Time in American History. New York: AMACOM, 2006. Compelling and scholarly account of how William Crapo Durant founded the company and how Alfred P. Sloan developed it into one of the most successful enterprises in U.S. history. Rae, John R. The American Automobile Industry. Boston: Twayne, 1984. A succinct general history with many fascinating anecdotes, providing an excellent introduction to the topic. Shimokawa, Koichi. The Japanese Automobile Industry: A Business History. London: Athlone Press, 1994. A relatively brief account of the dramatic growth of the Japanese industry after World War II. Watts, Steven. People’s Tycoon: Henry Ford and the American Century. New York: Knopf, 2006. Puts forward the thesis that Ford’s great success was shaped by the emergence of consumer capitalism, bureaucracy, mass culture, and the corporate state.
American Automobile Association
Arab oil embargo of 1973
Chrysler bailout of 1979
Ford Model T
Ford Motor Company