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backAMERItalk April, 2012
How The U.S. Automobile Industry Has Changed
For decades, through the boom and bust years of the 20th century, the American automotive industry had an immense impact on the domestic economy. The number of new cars sold annually was a reliable indicator of the nation's economic health.
But when the recession hit in 2007-2008, new car sales declined precipitously, reflecting the overall decrease in consumer spending.
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Although Ford had a cash reserve of billions as a hedge against hard times, other automakers like General Motors (GM) and Chrysler faced bankruptcy and the United States government stepped in with bailout money from the Troubled Asset Relief Program (TARP) to rescue the sinking firms.
In early February 2012, however, news reports showed the multi-billion dollar U.S. automotive industry was enjoying a brisk recovery, and both GM and Chrysler have paid back the government bailout loans. Big profits were posted again. GM, Ford and Chrysler, Detroit's so-called "Big Three," were flourishing. American auto making companies reigned worldwide in 2012 as the biggest and most profitable. Few could have foreseen the industry colossus which rose from its inauspicious origins more than a century earlier.
Growth
With the invention of the automobile and the mass production techniques of Henry Ford, which made the machine affordable, the American economy has been transformed by this key element in its prosperity.
Tens of thousands of jobs were created as the industry grew. Workers were required for the assembly lines on which they were constructed. Part by part, Ford's model Ts became the first most popular, affordable, mass produced cars.
The steel industry and machine tool makers also flourished as the automotive industry required ever-increasing supplies and components for the engines, chassis and other metal fixtures of the cars. Beyond these basics, every car needed a battery, head lights, interior upholstery and paint. Entirely new businesses, or subsidiaries of existing business, were created to meet the needs of the automobile industry as it grew incrementally year after year.
Other unexpected economic effects rippled outward into numerous additional industries as more people bought and operated automobiles and eventually became an essential mode of transportation and commerce.
Creation
Cars required insurance coverage, which accounted for hundreds of millions in revenue for insurance companies. Nationwide advertising campaigns for cars added millions to ad agencies and print and broadcast media. The maintenance and repair of cars became a major business. One of the biggest winners of all was the petroleum industry which sold gasoline for the ever-expanding numbers of cars on the road.
When World War II began, the automotive industry geared up for military production. The Jeep, a highly maneuverable, overland vehicle first built by the Willys Company, was manufactured in large numbers for military use. Chrysler retooled to build tanks.
In the immediate years after World War II, pent up demand for new cars gave the industry a boost in profits. Under the Eisenhower administration in the early 1950s, a national network of interstate highways was built. When the system was completed, a driver could cross the country on the four-lane roads from New York to Los Angeles without encountering a single red light.
Suburbia
As Americans became more mobile, millions moved into the developing and evolving suburbs just beyond the metropolitan limits of the country's large cities. Suburban housing construction boomed to serve the lodging requirements of families leaving cramped cities for relatively spacious ranch homes on a sizable plot of land. Countless returning veterans were among the new suburbanites, encouraged and enabled to purchase homes by the generous terms of government insured loans for people who had served in the military.
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Source: San Francisco Chronicle - GAI
How The U.S. Automobile Industry Has Changed
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