Detroit's Comeback Story

Everyone loves a great comeback story and recently Detroit has a great one to tell. Beginning in the 1950’s, the American car makers Chrysler, Ford and GM all based out of Detroit helped shape America. The “roaring 50’s” as it was called allowed people to live in Suburbia and yet commute to work because of the car and the government’s road infrastructure build out. When you watch the highlight reels of new car introductions from that era it’s similar to the Apple launches of today. The world would wait and watch in anticipation of what new “awesomeness” would come from Detroit. The job to have back then was working for an automaker. Detroit was the hub of industrial activity, home of Barry Gordy and Motown Records, the first record label for Michael Jackson. Then the late 70’s came and Detroit was no more.

What happened? It was a combination of high oil prices, hubris and Honda. During the 1960’s Detroit was obsessed with cheap fuel, big horsepower and open roads which led to their focus on muscle cars – Chevelle, Camaro, Mustang, Charger, Corvette, Pontiac GTO, and many others. Once the oil crisis hit in 1973, Detroit didn’t have a backup plan and the Japanese took the opening to launch their cars. The fuel efficient Honda Accord debuted in 1976 and quickly made a name for itself. Honda did all the right things and soon the Honda Accord became the number one selling car in America.

In the 80’s American car companies had a bad reputation for shoddy cars, interiors made of cheap looking plastic and designs that only a grandmother could love – case in point the Pontiac Aztec. During the 90’s the Japanese were doing so well in North America they all launched their own luxury nameplates – Acura (Honda), Infiniti (Nissan) and Lexus (Toyota).  This led to them selling even more cars and the Detroit automakers slipped even further in sales. All the American car makers were focused on fleet sales to the rental car companies who only wanted cheap and boring cars to rent which was an easy to market to go after, but margins were slim in that segment.

During the early 2000’s, American car companies were focused on the high-margin SUV market and captured that segment with force. However, once the financial crisis hit most of them faltered. The American car makers from Detroit approached the US government for a bailout and got close to $25 billion.

Since then, the American car makers have been making hit product after hit product. The Ford Fusion and the upcoming Dodge Dart are two examples of products that consumers actually want to buy. In addition, many consumers (myself included) who would have never looked at American cars are actually looking at them once again. The Chevy Cruze in India has been a moderate hit and looks quite nice, also the value for money is another reason its doing well in India.

When I was visiting Los Angeles in August, I was impressed with the number of Ford Fusion’s and Ford Flex’s on the road. Southern California is car crazy and if a car can sell in that hyper-competitive market it will do well anywhere. In fact Honda has their headquarters in Torrance, California and Honda used to reign over this market. Sadly, the hubris that hit the American automakers in the past is starting to appear at Honda. Honda’s highly anticipated Civic re-design was panned by consumers and Consumer Reports dropped the Civic as a recommended model. And the previous number one selling Accord has started to look dated compared to the competition, so the story continues…