Automotive industry in the United States

The automotive industry in the United States began in the 1890s and, as a result of the size of the domestic market and the use of mass production, rapidly evolved into the largest in the world. The United States was the first country in the world to have a mass market for vehicle production and sales and is a pioneer of the automotive industry and mass market production process. During the course of the 20th century global competitors emerged especially in the second half of the century primarily across European and Asian markets, such as Germany, France, Italy, Japan and South Korea.
The U.S. is currently second among the largest manufacturer(s) in the world by volume.

American manufacturers produce approximately 10 million units annually. Notable exceptions were 5.7 million automobiles manufactured in 2009 (due to crisis), and more recently 8.8 million units in 2020 due to the global COVID-19 pandemic.
While production peaked during the 1970s and early 2000s at levels of 13–15 million units.Ward's: ''World Motor Vehicle Data 2007''. Wards Communications, Southfield MI 2007,

Starting with Duryea in 1895, at least 1900 different companies were formed, producing over 3,000 makes of American automobiles. World War I (1917–1918) and the Great Depression in the United States (1929–1939) combined to drastically reduce the number of both major and minor producers. During World War II, all the auto companies switched to making military equipment and weapons. However, by the end of the next decade the remaining smaller producers disappeared or merged into amalgamated corporations. The industry was dominated by three large companies: General Motors, Ford, and Chrysler, all based in Metro Detroit. Those "Big Three" continued to prosper, and the U.S. produced three quarters of all automobiles in the world by 1950 (8.0 million out of 10.6 million). In 1908, 1 percent of U.S. households owned at least one automobile, while 50 percent did by 1948 and 75 percent did by 1960. Imports from abroad were a minor factor before the 1960s.

Beginning in the 1970s, a combination of high oil prices and increased competition from foreign auto manufacturers severely affected the companies. In the ensuing years, the companies periodically bounced back, but by 2008 the industry was in turmoil due to the aforementioned crisis. As a result, General Motors and Chrysler filed for bankruptcy reorganization and were bailed out with loans and investments from the federal government. But according to Autodata Corp, June 2014 seasonally adjusted annualized sales is the biggest in history with 16.98 million vehicles and toppled previous record in July 2006. Chrysler later merged into Fiat as Fiat Chrysler and is today a part of the multinational Stellantis group. American electric automaker Tesla emerged onto the scene in 2009 and has since grown to be one of the world's most valuable companies, producing around 1/4th of the world's fully-electric passenger cars.

Prior to the 1980s, most manufacturing facilities were owned by the Big Three (GM, Ford, Chrysler) and AMC. Their U.S. market share has dropped steadily as numerous foreign-owned car companies have built factories in the U.S. As of 2012, Toyota had 31,000 U.S. employees, compared to Ford's 80,000 and Chrysler's 71,100.

Development history

Production

The development of self-powered vehicles was accompanied by numerous technologies and components giving rise to numerous supplier firms and associated industries. Various types of energy sources were employed by early automobiles including steam, electric, and gasoline. Thousands of entrepreneurs were involved in developing, assembling, and marketing of early automobles on a small and local scale. Increasing sales facilitated production on a larger scale in factories with broader market distribution. Ransom E. Olds and Thomas B. Jeffery began mass production of their automobiles. Henry Ford focused on producing an automobile that many middle class Americans could afford.

A patent filed by George B. Selden on 8 May 1879 covered not only his engine but its use in a four-wheeled car. Selden filed a series of amendments to his application which stretched out the legal process, resulting in a delay of 16 years before the patent was granted on 5 November 1895. Selden licensed his patent to most major American automakers, collecting a fee on each car they produced and creating the Association of Licensed Automobile Manufacturers. The Ford Motor Company fought this patent in court, and eventually won on appeal. Henry Ford testified that the patent did more to hinder than encourage development of autos in the United States.

Originally purchased by wealthy individuals, by 1916 cars began selling at $875. Soon, the market widened with the mechanical betterment of the cars, the reduction in prices, as well as the introduction of installment sales and payment plans. During the period from 1917 to 1926, the annual rate of increase in sales was considerably less than from 1903 to 1916. In the years 1918, 1919, 1921, and 1924 there were absolute declines in automotive production. The automotive industry caused a massive shift in the industrial revolution because it accelerated growth by a rate never before seen in the U.S. economy. The combined efforts of innovation and industrialization allowed the automotive industry to take off during this period and it proved to be the backbone of United States manufacturing during the 20th century.

American road system

The practicality of the automobile was initially limited because of the lack of suitable roads. Travel between cities was mostly done by railroad, waterways, or carriages. Roads were mostly dirt and hard to travel, particularly in bad weather. The League of American Wheelmen maintained and improved roads as it was viewed as a local responsibility with limited government assistance. During this time, there was an increase in production of automobiles coupled with a swell of auto dealerships, marking their growth in popularity.

State involvement

State governments began to use the corvee system to maintain roads, an implementation of required physical labor on a public project on the local citizens. Part of their motivation was the needs of farmers in rural areas attempting to transport their goods across rough, barely functioning roads.

The other reason was the weight of the wartime vehicles. The materials involved altered during World War I to accommodate the heavier trucks on the road and were responsible for widespread shift to macadam highways and roadways. However, rural roads were still a problem for military vehicles, so four wheel drive was developed by automobile manufacturers to assist in powering through. As the prevalence of automobiles grew, it became clear funding would need to improve as well and the addition of government financing reflected that change.

Federal involvement

The Federal Aid Road Act of 1916 allocated $75 million for building roads. It was also responsible for approving a refocusing of military vehicles to road maintenance equipment. It was followed by the Federal Aid Highway Act of 1921 provided additional funding for road construction. By 1924, there were 31,000 miles of paved road in the U.S.

International trade

The Big Three automakers

About 3,000 automobile companies have existed in the United States. In the early 1900s, the U.S. saw the rise of the Big Three automakers; Ford, GM, and Chrysler. The industry became centered around Detroit, in Michigan, and adjacent states (and nearby Ontario, Canada). Historian John Rae summarizes the explanations provided by historians: a central geographic location, water access, and an established industrial base with many skilled engineers. The key factor was that Detroit was the base for highly talented entrepreneurs who saw the potential of the automobile: Henry Ford, Ransom E. Olds, Roy D. Chapin, Henry Joy, William C. Durant, Howard E. Coffin, John Dodge and Horace Dodge, and Benjamin Briscoe and Frank Briscoe. From 1900 to 1915 these men transformed the fledgling industry into an international business.

Henry Ford began building cars in 1896 and started his own company in 1903. The Ford Motor Company improved mass-production with the first conveyor belt-based assembly line in 1913, producing the Model T (which had been introduced in 1908). These assembly lines significantly reduced costs. The first models were priced at $850, but by 1924 had dropped to $290. The Model T sold extremely well and Ford became the largest automobile company in the U.S. By the time it was retired in 1927, more than 15 million Model Ts had been sold. Ford introduced the Model A in 1927 (after a six-month production stoppage to convert from the Model T), and produced it through 1931. However, while the Model A was successful, Ford lost ground to GM and eventually Chrysler, as auto buyers looked to more upscale cars and newer styling. Ford was also a pioneer in establishing foreign manufacturing facilities, with production facilities created in England in 1911, and Germany and Australia in 1925. Ford purchased the luxury Lincoln automaker in 1922 and established the Mercury division in 1939.

General Motors Corporation (GM), the company that would soon become the world's largest automaker, was founded in 1908 by William Durant. Durant had previously been a carriage maker, and had taken control of Buick in 1904. The company initially acquired Buick, Oldsmobile and Oakland (later to become Pontiac) in 1908. The next year GM acquired Cadillac, along with a number of other car companies and parts suppliers. Durant also was interested in acquiring Ford, but after initial merger talks, Henry Ford decided to keep his company independent. In 1910, Durant lost control of GM after over-extending the company with its acquisitions. A group of banks took over control of GM and ousted Durant. Durant and Louis Chevrolet founded Chevrolet in 1913 and it quickly became very successful. Durant began acquiring stock in GM and by 1915 had majority control. Chevrolet was acquired by GM in 1917 and Durant was back in charge of GM. In 1921, Durant was again forced out of the company. During the late 1920s, General Motors overtook Ford to become the largest automaker. Under the leadership of Alfred P. Sloan, General Motors instituted decentralized management and separate divisions for each price class. They also introduced annual model changes. GM also became an innovator in technology under the leadership of Charles F. Kettering. GM followed Ford by expanding overseas, including purchasing England's Vauxhall Motors in 1925, Germany's Opel in 1929, and Australia's Holden in 1931. GM also established GMAC (now Ally Financial) in 1919 to provide credit for buyers of its cars.

Walter Chrysler was formerly president of Buick and an executive of GM. After leaving GM in 1920, he took control of the Maxwell Motor Company, revitalized the company and, in 1925, reorganized it into Chrysler Corporation. He then acquired Dodge in 1927. The acquisition of Dodge gave Chrysler the manufacturing facilities and dealer network that it needed to significantly expand production and sales. In 1928, Chrysler introduced the Plymouth and DeSoto brands. Chrysler also overtook Ford to become the second largest auto maker by the 1930s, following similar strategies as General Motors.

General Motors wanted automobiles to be not just utilitarian devices, which Ford emphasized, but also status symbols that were highly visible indicators of an individual's wealth. Through offering different makes and models they offered different levels in social status meeting the demands of consumers needing to display wealth. Ford and General Motors each had their own impact on social status and the type of market they were targeting. Henry Ford focused on delivering one inexpensive, efficient product for the masses. Ford's offer was one car, one color, for one price. He not only manufactured a product for the masses, but he provided a $5 a day wage so that there was a local market to buy this product. By contrast General Motors offered a product that catered to those looking to gain status by having that sense of individualism and offering different make, models, and quality.

Great Depression and World War II

The 1930s saw the demise of many auto makers due to the economic effects of the Great Depression, stiff competition from the Big Three, and/or mismanagement. Luxury car makers were particularly affected by the economy, with companies like Stutz Motor Company, Pierce-Arrow Motor Car Company, Peerless Motor Company, Cunningham, and the Marmon Motor Car Company going out of business. The decade also saw several companies with innovative engineering, such as the Doble Steam Motors Corporation (advanced steam engines) and Franklin Automobile Company (air-cooled aluminium engines) going out of business. Errett Lobban Cord, who controlled the Auburn Automobile Company (which also sold the Cord) and the Duesenberg Motor Company, was under investigation by the Securities and Exchange Commission and the Internal Revenue Service. His auto empire collapsed in 1937 and production ceased.

Major technological innovations were introduced or were widely adopted during the 1930s, such as synchromesh manual transmissions, semi-automatic transmissions, automatic transmissions, hydraulic brakes, independent front suspension, and overhead-valve engines. The Cord 810 used front-wheel drive, had hidden headlights, and was offered with a supercharger. Exterior styling designs were more flowing, as shown most noticeably on the Auburn Speedster and the Cord 810/812. Radical air-streamed design was introduced on the Chrysler Airflow, a sales flop, and the Lincoln-Zephyr (both of which used unit-body construction). Packard introduced their "Air Cool-ditioned" car in 1940.

After the United States entered World War II in December 1941, all auto plants were converted to war production, including jeeps, trucks, tanks, and aircraft engines; all passenger automobile production ceased by February 1942. The industry received $10 billion in war-related orders by that month, compared to $4 billion before the attack on Pearl Harbor. All factories were enlarged and converted, many new ones such as Ford's Willow Run and Chrysler's Detroit Arsenal Tank Plant were built, and hundreds of thousands more workers were hired. Many were new arrivals from Appalachia. The most distinctive new product was the Jeep, with Willys making 352,000 and Ford another 295,000. The industry produced an astonishing amount of material, including 5.9 million weapons, 2.8 million tanks and trucks, and 27,000 aircraft. This production was a major factor in the victory of the allies. Experts anticipated that Detroit would learn advanced engineering methods from the aviation industry that would result in great improvements for postwar civilian automobiles.

Unionization of the auto manufacturers workforce

Due to the difficult working conditions in the auto production plants, auto workers began to seek representation to help improve conditions and ensure fair pay. The United Automobile Workers union won recognition from GM and Chrysler in 1937, and Ford in 1941. In 1950, the automakers granted workers a company-paid pension to those 65 years old and with 30 years seniority. In the mid-1950s, the automakers agreed to set up a trust fund for unemployed auto workers. In 1973, the automakers agreed to offer pensions to any worker with 30 years seniority, regardless of age. By then the automakers had also agreed to cover the entire health insurance bill for its employees, survivors, and retirees.

Decline of the independent automakers

The only major auto companies to survive the Great Depression were General Motors Corporation, Ford Motor Company, Chrysler Corporation, Hudson Motor Car Company, Nash-Kelvinator Corporation, Packard Motor Car Company, Studebaker Corporation, and Crosley Motors. The former three companies, known as the Big Three, enjoyed significant advantages over the smaller independent auto companies due to their financial strength, which gave them a big edge in marketing, production, and technological innovation. Most of the Big Three's competitors ended production by the 1960s, and their last major domestic competitor was acquired in the 1980s.

Crosley Motors ceased auto production in 1952. Packard and Studebaker merged in 1954, but ended production of Packard-branded cars in 1958 and ceased all auto production in 1966.

Kaiser-Frazer Corporation was started in 1945 and acquired Willys-Overland Motors (maker of the Jeep) in 1953. Production of passenger cars was discontinued in 1955. In 1970, the company was sold to American Motors Corporation.

In 1954, Nash-Kelvinator and Hudson merged to form American Motors Corporation (AMC). The company introduced numerous product and marketing innovations, but its small size made it difficult to compete with the Big Three and struggled financially. The French auto maker Renault took control of AMC in the early 1980s, but financial difficulties continued and AMC was purchased by Chrysler Corporation in 1987.

Periodically, other entrepreneurs would found automobile companies, but most would soon fail and none achieved major sales success. Some of the best known included Preston Tucker's 1948 sedan, Earl Muntz's Muntz Car Company, Malcolm Bricklin's Bricklin SV-1, the modern Stutz Blackhawk, Clénet Coachworks, Zimmer, Excalibur, and John DeLorean's DeLorean.

Post-war years

Initial auto production after World War II was slowed by the retooling process, shortages of materials, and labor unrest. However, the American auto industry reflected the post-war prosperity of the late-1940s and the 1950s. Cars grew in overall size, as well as engine size during the 1950s. The Overhead valve V-8 engine developed by GM in the late-1940s proved to be very successful and helped ignite the horsepower race, the second salvo of which was Chrysler's 1951 Hemi engine. Longer, lower, and wider tended to be the general trend. Exterior styling was influenced by jets and rockets as the space-age dawned. Rear fins were popular and continued to grow larger, and front bumpers and taillights were sometimes designed in the shape of rockets. Chrome plating was very popular, as was two-tone paint. The most extreme version of these styling trends were found in the 1959 Cadillac Eldorado and Chrysler Corporation's 1957 Imperial. The Chevrolet Corvette and the Ford Thunderbird, introduced in 1953 and 1955 respectively, were designed to capture the sports car market. However, the Thunderbird grew in size in 1958 and evolved into a personal luxury car. The 1950s were also noted for perhaps one of the biggest miscues in auto marketing with the Ford Edsel, which was the result of unpopular styling and being introduced during an economic recession.

The introduction of the Interstate Highway System and the suburbanization of America made automobiles more necessary and helped change the landscape and culture in the United States. Individuals began to see the automobile as an extension of themselves.

1960s

Big changes were taking place in automobile development in the 1960s, with the Big Three dominating the industry. Meanwhile, with the passage of the $33 billion Federal Aid Highway Act of 1956, a network of regional and interstate roads continued to enhance transportation. As urban areas became more congested, more families migrated to the suburbs. Between 1960 and 1970, 70 percent of the population's growth occurred in the suburbs.

Imported vehicles grew during the 1950s and 1960s – from a very low base. In 1966, the ''Big Three'' (GM, Ford, Chrysler) had market share of 89.6% (44.5% in 2014). From 1966 to 1969, net imports increased at an average annual rate of 84%. The Volkswagen Beetle was the biggest seller.

The compact Nash Rambler had been around since 1950, and American Motors Corporation (AMC) expanded into a range of smaller cars than were offered by the Big Three. By 1960, Rambler was the third most popular brand of automobile in the United States, behind Ford and Chevrolet. In response to this the domestic auto makers developed compact-sized cars, such as the Ford Falcon, Chevrolet Corvair, Studebaker Lark, and Plymouth Valiant.

The four-seat 1958 Ford Thunderbird (second generation) was arguably the first personal luxury car, which became a large market segment.

Pony cars were introduced with the Ford Mustang in 1964. This car combined sporty looks with a long hood, small rear deck, and a small rear seat. The car proved highly successful and imitators soon arose, including the Chevrolet Camaro, Pontiac Firebird, Plymouth Barracuda (actually introduced two weeks prior to the Mustang), AMC Javelin, and the two-seat AMX, as well as the "luxury" version of the Mustang, the Mercury Cougar. Muscle cars were also introduced in 1964 with the Pontiac GTO. These combined an intermediate-sized body with a large high-output engine. Competitors were also quickly introduced, including the Chevrolet Chevelle SS, Dodge R/T (Coronet and Charger), Plymouth Road Runner/GTX, Ford Torino, and AMC's compact SC/Rambler. Muscle cars reached their peak in the late-1960s, but soon fell out of favor due to high insurance premiums along with the combination of emission controls and high gas prices in the early 1970s.

While the personal luxury, pony, and muscle cars got most of the attention, the full sized cars formed the bulk of auto sales in the 1960s, helped by low oil prices. The styling excesses and technological gimmicks (such as the retractable hardtop and the pushbutton automatic transmission) of the 1950s were de-emphasized. The rear fins were downsized and largely gone by the mid-1960s, as was the excessive chrome.

Federal regulation of the auto industry

Safety and environmental issues during the 1960s led to stricter government regulation of the auto industry, spurred in part by Ralph Nader and his book: '' Unsafe at Any Speed: The Designed-in Dangers of the American Automobile''. This resulted in higher costs and eventually to weaker performance for cars in the 1970s, a period known as the '' Malaise Era'' of auto design during which American cars suffered from very poor performance.

Seat lap belts were mandated by many states effective in 1962. Under the National Traffic and Motor Vehicle Safety Act of 1966, Federal Motor Vehicle Safety Standards required shoulder belts for front passengers, front head restraints, energy-absorbing steering columns, ignition-key warning systems, anti-theft steering column/transmission locks, side marker lights and padded interiors starting in 1968.

Beginning in 1972, bumpers were required to be reinforced to meet 5-mph impact standards, a decision that was revised in 1982.

With the Clean Air Act (United States) of 1963 and the Vehicle Air Pollution and Control Act of 1965, emission controls began being instituted in 1968. The use of leaded gasoline began being curtailed in the early 1970s, which resulted in lower-compression engines being used, and thus reducing horsepower and performance. Catalytic converters began being widely used by the mid-1970s.

During his first term as EPA Administrator, William Ruckelshaus spent 60% of his time on the automobile industry, whose emissions were to be reduced 90% under the 1970 Clean Air Act after senators became frustrated at the industry's failure to cut emissions under previous, weaker air laws.

1970s

As bold and confident as the Big Three automakers were in the 1950s and 1960s, the American auto makers in the 1970s and 1980s stumbled badly, going from one engineering, manufacturing, or marketing disaster to another, and this time is often referred to as the '' Malaise era'' of American auto design.

By 1969, imports had increased their share of the U.S. auto market with smaller, inexpensive vehicles. Volkswagen sold over 500,000 vehicles, followed by Toyota with over 100,000. In 1986 South Korea entered the American market. In response to this, the domestic auto makers introduced new compact and sub-compact cars, such as the Ford Pinto and Maverick, the Chevrolet Vega, and the AMC Gremlin, Hornet and Pacer. (Chrysler had to make do with importing the Dodge Colt from Mitsubishi Motors from their affiliated Rootes Group.) However, design and manufacturing problems plagued a number of these cars, leading to unfavorable consumer perceptions.

GM had a string of miscues starting with the Chevrolet Vega, which developed a reputation for rapidly rusting and having major problems with the aluminium engine.

The problems with Ford's Pinto became nationally famous and Ford's reputation was harmed after media accusations that its fuel system was prone to fire when the car was struck from behind. It was also alleged that Ford knew about this vulnerability but did not design any safeguards in order to save a few dollars per vehicle and that the company rationalized that the cost of lawsuits would be less than the cost of redesigning the car. Historical analysis of the facts don't support the "death trap" reputation attached to the Pinto but the damage to Ford's reputation had been done.

Auto sales were hurt by the 1973 oil crisis Arab embargo as the price of gasoline soared. Small fuel-efficient cars from foreign automakers took a sharply higher share of the U.S. auto sales market. Under the Energy Policy and Conservation Act the federal government initiated fuel efficiency standards (known as Corporate Average Fuel Economy, or CAFE) in 1975, effective as of 1978 for passenger cars, and as of 1979 for light trucks.
For passenger cars, the initial standard was 18 miles per gallon (mpg), and increased to 27.5 mpg by 1985.

General Motors began responding first to the high gas prices by downsizing most of their models by 1977, and lowering their performance. In 1979, the second oil price spike occurred, precipitated by political events in Iran, resulting in the 1979 energy crisis. By 1980, the economy slid into turmoil, with high inflation, high unemployment, and high interest rates. The automakers suffered large operating losses. Chrysler was hurt most severely and in 1979 received a bailout from the federal government in the form of $1.5 billion in loan guarantees. One quick fix was a Detroit-built version of their then-new French ( Simca) economy car, the Horizon. As a result of its financial difficulties, Chrysler sold its British and French subsidiaries, Rootes Group and Simca to the French automaker Groupe PSA for $1.

Cadillac damaged their reputation when the four-cylinder Cadillac Cimarron was introduced in 1981 (a gussied-up Chevrolet Cavalier at twice the price) and the "V8-6-4" engine didn't work as advertised. GM's reputation was also damaged when it revealed in 1977 that they were installing Chevrolet engines in Oldsmobiles, and lawsuits from aggrieved Oldsmobile owners followed. Likewise litigation ensued when a trio of diesel engines, designed from gasoline engines and used in GM cars from 1978 to 1985 suffered major problems. Class action lawsuits and efforts from the Federal Trade Commission resulted in buybacks of the cars from GM. Chrysler also suffered damage to its reputation when its compact cars, the Plymouth Volaré and Dodge Aspen, were developed quickly and suffered from massive recalls and poor quality.

1980s

In 1981, Japanese automakers entered into the " voluntary export restraint" limiting the number of autos that they could export to the U.S. to 1.68 million per year. One side effect of this quota was that Japanese car companies opened new divisions through which they began developing luxury cars that had higher profit margins, such as with Toyota's Lexus, Honda's Acura, and Nissan's Infiniti. Another consequence was that the Japanese car makers began opening auto production plants in the U.S., with the three largest Japanese auto manufacturers all opening production facilities by 1985. These facilities were opened primarily in the southern states because of financial incentives offered by state governments, access to the nation via the interstate highways, the availability of a large pool of cheaper labor, and the weakness of unions. The Southern states passed right-to-work laws and the UAW failed in its repeated union-organizing efforts at these plants.

The Big Three began investing in and/or developing joint manufacturing facilities with several of the Japanese automakers. Ford invested in Mazda as well as setting up a joint facility with them called AutoAlliance International. Chrysler bought stock in Mitsubishi Motors

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