On September 10, four days before the United Automobile Workers struck General Motors, Chevrolet started selling a small and inexpensive car. The car had been the subject of the longest prenatal advertising campaign ever provided for an American commodity. In April, 1970, it was baptized in sky-writing over downtown Detroit: “Chevrolet Names It Vega 2300.” Its engine was displayed on a velvet-covered pillar at the 1970 New York International Automobile Show. Advertisements for the Vega began to appear in the spring—“Coming Soon: the Little Car that Does Everything Well. Everything? Everything…. Bear With Us. Read Our Future Ads.” “By the time it actually goes on sale,” Chevrolet announced, “we want this totally new car to be as familiar to Americans as a member of their own family.”
The basic Vega sells for $2,091, without optional equipment. It cost General Motors between $100 and $200 million to develop. The Vega project was first described in 1968, by James M. Roche, chairman of GM: the new car would be “GM’s positive answer to the demonstrated need for a small, economical, durable, safe, comfortable and well-styled car built in America to American tastes.” Chevrolet and the Fisher Body Division of General Motors built a new factory for the new car, at a deserted crossroads in Lordstown, Ohio. The Lordstown complex of plants cost $100 million. The Vega engines are cast at a new foundry in Massena, New York, and assembled at a new plant in Tonawanda, New York. Retooling for the Vega is the most expensive investment project GM, or any other corporation, has ever undertaken.
During the ten-week strike by the UAW, General Motors confined its advertising effort to severe statements of the benefits of working on a GM assembly line. The Vega plants in Lordstown, Tonawanda, and Massena were closed. Meanwhile a yellow Vega coupe was shipped to Europe for exhibition at the Paris, London, and Turin motor shows. On November 19 a new local contract was agreed upon at the main Vega factory in Lordstown. In the last week of November, GM started producing Vegas, at a rate of 1,600 a week, and GM recently initiated a new introductory campaign to relaunch the Vega. Now, Chevrolet makes about 6,200 Vegas a week, and has scheduled Saturday overtime at Lordstown.
Nineteen seventy was a dismal year for General Motors; the American automobile industry looks forward to a dismal decade. The UAW strike, and the deterioration of GM labor relations, are consequences rather than causes of GM’s difficulties. The Vega project is an attempt to solve these difficulties. GM’s margin of profit on sales was lower before the recent strike than it had been since 1946: 4.7 percent in the first three quarters of 1970 (which included two weeks of the strike), having fallen steadily from 7.0 percent in 1969, or $1.7 billion after tax, 7.6 percent in 1968, 8.1 percent in 1967, and 10.3 percent in 1965. Private car sales before the strike were the lowest since the 1961 recession. Foreign car sales amounted to more than 13 percent of the total car market. Early this year, GM started to lay off white-collar workers, including one hundred “creative personnel” at Chevrolet’s advertising agency. GM production worker employment was sharply reduced. At the beginning of the year, GM workers earned $175 a week, down from $190 a week at the beginning of 1969; earnings per hour had increased, but there were fewer hours to work each week.
GM executives publicly attribute their afflictions to worker degeneracy, to the national recession, and to the competitive advances of foreign cars. The 1970 GM “Annual Report” contains a Letter to Shareholders from Edward N. Cole (president) and James M. Roche (chairman). Cole and Roche exhort their readers, colleagues, and employees to “redouble our efforts to increase the productivity of the country.” The present inflationary recession has intensified the problems of the automobile business: in a recession consumers put off buying expensive manufactured goods like cars. But the American automobile industry also faces a long-term crisis of insufficient demand and stagnating productivity. The success of imported cars in the US is a symptom of the industry’s general crisis.
In the last twenty years, the world market for American cars has grown increasingly slowly. The early expansion of the American automobile industry depended upon the development of a mass domestic market for automobiles. The selling of American cars, and specifically of GM cars, became a model for consumer goods industries all over the world, showing them how to create and nourish demand. But the US car business has been unable to maintain the rate of growth of demand it generated in the first decades of its expansion. From 1919 to 1941, the number of cars and trucks produced annually in the US increased more than two and a half times. The real value of the output of vehicles increased more than three times. The number of vehicles produced by General Motors increased almost six times. Nineteen forty-one was the last year of peacetime production. In 1948, US vehicle production passed its prewar level. From 1949 to 1969 annual US car and truck production increased by only three-fifths. The real value of output increased less than twice. Annual General Motors production increased one and three-quarters times.
The American demand for automobiles rose more and more slowly because America was saturated with automobiles. The limits of the car market had collided with the limits of human irrationality. In the 1950s American car production increased three times as fast as the human population of the United States; in the 1960s twice as fast. There is now one passenger car for every 2.5 Americans. According to the 1970 “Automotive News Almanac,” published by Automotive News of Detroit, “the Newspaper of the Industry,” the only places which come fairly near to the US in density of cars are the Principality of Monaco, the US Virgin Islands, and, if we count military vehicles as passenger cars, the Panama Canal Zone.
From 1920 to 1950, the American automobile industry expanded on an ecstatic spiral of demand and supply. The demand for cars grew; the output of cars grew; the automobile manufacturers invested more capital in the production process; the productivity of labor grew as car factories became more mechanized and more “rationalized” in the organization of work. By the 1950s, the automobile industry enjoyed an extraordinarily high level of profits. Witnesses at the 1958 Kefauver Commission Auto Industry Hearings testified that between 1947 and 1956 the automobile industry’s “Big Three” corporations had provided a rate of return on stockholders’ investments which was twice as great as the average for all manufacturing companies.
The present crisis of the American automobile business has been intensified by the industry’s insistence on a high and constant level of profit. To maintain a rapid growth of productivity—i.e., to rapidly increase the output maintained by one worker in one hour—an industry, or a corporation, must maintain a high level of investment on labor-saving machinery. But when demand, and output, is growing only slowly, the corporation must accept a falling rate of profit in order to maintain such a level of investment. In 1919, GM’s pre-tax rate of profit on sales was 17.6 percent; in the 1960s the average rate was still 17 percent. Since the 1920s, General Motors has made approximately the same pre-tax profit on sales, and it has invested approximately the same proportion of its income each year. Investment has grown only as fast as sales. But, as we have seen, GM and the American automobile industry are now in a spiral of stagnation: demand grows slowly; profits grow slowly; investment grows slowly; the rate of technological improvement grows only as fast as the flow of new capital equipment; productivity is low.
While US production of cars has stagnated, world production has increased rapidly. In 1955 the US produced 72 percent of all passenger cars, in 1959, 52 percent, and in 1969, 36 percent. Automobile manufacturers in Europe and Japan have recently experienced the spiraling expansion characteristic of the American industry before World War II. The Japanese automobile industry, for example, produced 110 cars in 1947, 79,000 cars in 1959, and 2.6 million cars in 1969. European car production has increased less dramatically, but much faster than American production. One result of the changing pattern of world car production has been a reduction in American productive superiority: American car manufacturers have a smaller and smaller advantage of productivity over their foreign competitors.
The American automobile industry has enjoyed a historically high level of productivity because it has invested large amounts of capital for every worker it employs, and because it has systematically organized the work of each employee. US automobile corporations still own more capital per employee than their foreign competitors: GM world-wide has $14,000 invested per employee, Vauxhall, GM’s British subsidiary, $8,500 per employee, the British-owned British Leyland $5,000, and Nissan Motors (Datsun) $2,300. But the capital advantage of American manufacturers is shrinking as foreign producers acquire new capital faster than American corporations. In 1969 GM spent the equivalent of 4.3 percent of its turnover on capital equipment; Volkswagen spent 9 percent and Toyota spent 13 percent. When capital expenditure is high, the rate of technological advance is also high, because technical innovations yield a profit only when they are applied to new capital equipment. The expensive new Vega factories in Lordstown use the latest advances of GM’s cost-cutting and labor-saving technology.
As American auto manufacturers lose their productive and technological superiority, they lose their ability to produce cars more cheaply than foreign manufacturers. The Chevrolet Vega is advertised by GM as the American equivalent of a Volkswagen Beetle: “More power than the leading foreign import.” It is similar in size and convenience both to the VW and to the Toyota, the second most successful imported car. The Vega sells for $2,091, the VW for $1,780, and the Toyota Corolla for $1,798. GM executives attribute the lower prices of imported cars to the “growing dollar differential between US and foreign wages.” Workers and employers are assumed to have common interests in the face of underpaid foreign competition. But comparative wage rates alone do not account for the low prices and low costs of foreign manufacturers.
The president of Ford International has said in an interview in Autocar that “hourly wages don’t make the difference any more between manufacturers in different countries. The difference lies in techniques and production volume.” He claims that “there are no more than nine or ten hours of manual labor left in the assembly of an automobile. If you add up all the elements of a car, from tires to engine, glass, seats, etc. (without counting raw materials), the total number of working hours embodied in a car is between 65 and 70,” for all major manufacturers. If these figures are correct, the labor cost of producing a small GM car such as the Vega is $300.1 GM generally refers to foreign competitors as having “labor costs one half to one quarter as much as ours.” So competitors, presumably German, who pay their employees only half American wage rates, spend $150 on the labor to make a car. Competitors who pay one quarter of American wage rates, presumably Japanese, spend $75. In fact, Toyota workers make one-third as much as GM workers, so the labor cost of producing a Toyota is $100.2
According to the Wall Street Journal, the average cost of importing a car into the United States, in transportation expenses and customs duty, is $150. Therefore if it were correct that German, Japanese, and American manufacturers were equally productive, the entire labor cost advantage of VWs sold on the American market would be canceled out by transportation costs: the advantage of Toyota makers in labor costs would be only $50. International differences in raw material costs are small; in any case American car manufacturers buy Japanese steel, and Japanese steelmakers buy American coke and ore. Foreign manufacturers produce cars cheaply, then, because they have a high level of productivity, and because they accept smaller profits than American corporations. GM makes about three times as great a profit on each vehicle it produces as its foreign competitors: a profit of $239 per vehicle world-wide in 1969, compared to $75 per vehicle for Toyota, $59 per vehicle for VW, and $57 per vehicle for Datsun/Nissan.
In order to profit from the expansion of markets and productivity outside the US, American automobile manufacturers have invested increasingly heavily in foreign manufacturing operations. The foreign policy of the auto makers consists not in the export of cars—last year the US and Canada exported fewer than 50,000 cars—but in the export of capital and control in order to set up US companies abroad. GM, Ford, and Chrysler own and manage production facilities in foreign countries. They are usually successful in financing their foreign expenditure with funds raised in local money markets. The auto corporations export control; they import profits, and cars.
More than half the cars produced in the world are produced by American corporations and their foreign subsidiaries, including nearly a third of cars made in the Common Market, over a third of (Federal) German cars, and half the cars made in Britain. Both Ford and Chrysler own parts of the Japanese automobile industry: Ford makes tractors with Hokkai, gear boxes with Toyo Kogyo, and eight other components with eight other Japanese contractors. GM, which is by tradition the most chauvinistic of the “Big Three” auto makers, produces 20 percent of its output of cars outside North America. It has car manufacturing subsidiaries in Germany, England, Australia, South Africa, Mexico, Argentina, and Brazil. In the last ten years GM’s US car production increased by one-half, its German production more than doubled, and its production in Latin America and Africa increased seven and a half times.
The most recent “GM Annual Report to Stockholders” points out, twice, that in 1969 GM’s foreign output of cars rose, while its domestic output fell. It adds, twice, that “the smaller overseas produced units, which sell at a lower average price, could not compensate in terms of dollar sales and profit” for the fall in output at home. GM makes a profit of $269 for each vehicle it produces in North America, and a profit of $114 for each vehicle produced abroad. But the profits of GM’s foreign subsidiaries still increase the total profits of the corporation. GM’s world-wide rate of profit on sales is twice as large as that of most foreign auto manufacturers: 7.0 percent after tax in 1969, compared to Fiat’s 1.1 percent, Peugeot’s 2.8 percent, Toyota’s 4.9 percent, and Datsun’s 3.7 percent. Its foreign subsidiaries are usually much more profitable than locally owned auto corporations. In 1969, GM’s German company, Opel, enjoyed a rate of profit on sales of 8.6 percent. VW’s profit margin was 2.4 percent, and BMW’s 3.8 percent. Eighty million dollars of Opel profits were returned to the US General Motors Corporation in 1969.
The American auto corporations import into the United States not only profits but also cars and the component parts of cars. US imperialism—the export of US capital—reduces the amount of capital available for domestic investment. Commodities produced abroad by American corporations are “re-imported” into the United States where they compete with domestic commodities. The xenophobic exhortations of automobile executives (Workers United to Fight Toyota, or, as Lee Iacocca, president of Ford Motor Corporation and “Father of the Mustang,” puts it: “In the wings are Japanese”) thus appear ludicrous. At least one imported car in ten is in fact a “captive import” produced by foreign subsidiaries of the US “Big Three.” Last year the third best selling make of import, after the Volkswagen and the Toyota, was the Buick Opel.
Of the three multinational auto makers, General Motors has been the most circumspect in “re-importing” car components. Many parts of cars can be produced more cheaply in Europe and Japan than in the United States. Ford and Chrysler have profited from the lower labor costs and higher productivity of their foreign subsidiaries by using foreign parts in cars assembled in the United States. The Chevrolet Vega, the Ford Pinto, the planned Chrysler R429, and the American Motors Gremlin constitute the “new generation of American subcompacts”; they are all comparatively small, comparatively cheap cars.
The R429, which is scheduled to appear in 1972, will have an engine from the British Hillman Avenger, and “other components” made in Britain, France, or Japan. The Pinto, which was launched this September at the same time as the Vega, is advertised by Ford as a modern Model T. It has an engine from the German Ford Capri, carburetors from the English Ford Cortina, Anglo-German transmissions, and steering gear from the European Ford Escort. Even the Vega, “a car built in America to American tastes,” has manual transmissions imported from Opel. The magazine Motor Trend, in an enthusiastic account of the Vega’s engineering, reveals that GM employees test-drove Vega engines in Opel bodies, “without attracting too much attention.”
So long as the European and Japanese car industries continue to expand, American corporations will continue to increase their involvement in these industries, always at the expense of North American operations. But car markets are growing increasingly slowly in Europe and Japan, although still much faster than the North American market. Car manufacturers in all advanced industrial countries will eventually face the same crisis of demand and production as American car manufacturers, and for the same reasons. Japan has the smallest number of cars per person of all the major car manufacturing countries, but it also has 680 people per square mile. The rich car producing countries of northern Europe are already absurdly full of automobiles: there is one passenger car for every 4.9 people in Britain and West Germany, and one for every 3.8 people in Sweden. European manufacturers are looking for new markets: a car survey published by the British Economist eagerly anticipates an increased desire for “fun motoring” on the part of European two-car families, and an extension of northern European traffic conditions to “Portugal, Spain, Greece and even Turkey.”
American and foreign car manufacturers are now engaged in expanding the global market for passenger cars beyond the frontiers of the metropolitan or developed world. In the last ten years the purchase of cars has increased almost twice as fast in Africa, Asia, and Latin America as it has in the advanced industrial countries of Europe and North America. All the major automobile corporations have acquired manufacturing subsidiaries in colonial and ex-colonial countries: Toyota, Fiat, and Ford make cars in South Korea, Volkswagen and General Motors in Mexico and Brazil. GM is now negotiating for a South Korean franchise. But because local car consumption is very small relative to the world market—there are more cars registered in Los Angeles County than in the whole of Africa—the auto corporations have not found it profitable to provide their “underdeveloped” subsidiaries with large-scale, labor-saving capital equipment. As a result, the subsidiaries have a low level of productivity: production costs are about 150 percent higher in Brazil and Argentina than in the United States.
To transform any part of the colonized world into a mass consumption society, much less into one approximating the norm of three citizens per passenger car, would require a colossal and impossible transfer of wealth from developed to developing countries. Without such a transformation, the American automobile industry cannot make high profits in Africa, Asia, or Latin America. In 1885, Friedrich Engels described the marketing problems of English capitalism as its imperial hegemony declined: “New markets are getting scarcer every day, so much so that even the Negroes of the Congo are now to be forced into the civilization attendant upon Manchester calicos, Staffordshire pottery and Birmingham hardware.” Today, Ford International is negotiating to produce cars in the Congo—with no greater prospect of success than its English predecessors had.
The “Big Three” American auto corporations have expanded their output and profits by making cars and car components abroad, in developed and underdeveloped countries. They have sold the commodities they produce abroad in foreign and domestic markets. In order to maintain a high level of profit, the corporations have transferred capital and resources away from the automotive sector of the US domestic economy: either abroad, or into newer industrial sectors which have nothing to do with cars. Last year, for example, GM’s “Nonautomotive Divisions” made refrigerators, bomber engines, Apollo navigation systems, and 200,000 M16A1 rifles. Such investments enable GM, Ford, and Chrysler to accumulate capital rapidly; meanwhile the American automobile industry, and Detroit, is becoming a depressed zone of world capitalism.
The day the GM strike began, J. Z. De Lorean, general manager of Chevrolet, addressed the automotive press on the subject of the new Vega. He described the Vega as an all-American car:
We set out to produce an American car with size, economy and performance to serve the American people. We set out to provide jobs for American labor, and built a new plant in Lordstown, Ohio, to produce this car. We set out to improve this country’s balance of trade…. We estimate that 99 percent of the labor and materials used in the Vega will be American, built by American labor in American plants.
The Vega is extraordinary precisely because it is an American car for American consumers. Instead of investing capital abroad, GM has tried in this case to increase the productiveness of domestic auto manufacturing. Instead of importing foreign cars, or selling foreign cars abroad, it is trying to expand the US domestic market for automobiles.
The unprecedentedly expensive Vega project uses all the latest achievements of GM technology. Chevrolet’s factories at Lordstown are the most advanced car plants in the world; the main assembly line can produce more than one hundred cars an hour, most of the welding is done by robots, and the whole production process is supervised by a computer taskmaster. The struggle over local disputes at Lordstown was one of the most vexed issues in the recent GM strike: the strike settlement and the Lordstown developments will be examined in a later article.
Even the selling of the Vega has occupied GM’s computers. Chevrolet research and motivation teams spent five years investigating the stagnation of US demand for passenger cars. The Vega is the result of their studies: a car to stimulate the American consumer. According to the Wall Street Journal, GM has not yet got “a feeling for how its 1971 models are going.” The success of the Vega will depend on consumer susceptibility in the next few weeks of hard selling.
General Motors has predicted that 1971 will be an all-time record year for the American automobile industry. It expects that the five GM car divisions will produce about 800,000 more passenger cars in 1971 than they would have produced in 1970, even without the strike. Of the new cars, at least half will be Chevrolet Vegas. The 400,000 new Vegas are expected to appeal to new customers, to people who do not yet possess Chevrolets. The American demand for automobiles will, it is hoped, expand absolutely: some families, or people, who do not have cars at all will buy Vegas; some families will join the 30 percent of American households owning two or more cars, and will buy a Vega as their second car.
For at least the last ten years, the major selling effort of American automobile corporations has been directed at the second car. The magazine Sports Car Graphic, in a fulsome account of the Vega’s development, reveals that Detroit marketing divisions divide automobiles into two types, Traditional and Contemporary. Traditional cars are not necessarily larger than Contemporary cars, but they are six-passenger, four-door sedans, “conventional in concept,” “more expensive,” and “relegated to family use.” All other cars, including the Vega, are Contemporary, and “new in concept.” They are second or third cars, or cars for people who are poor, young, single, or otherwise eccentric. Traditional cars account for less and less of the total new car market—47 percent this year—as “Contemporary” marketing expands. The Vega is the most systematically developed Contemporary car yet produced in America.
The Vega is thus the most ambitious example of a shift which has taken place in the industry during the Sixties. From 1920 to 1960 the automobile industry produced Traditional cars of higher quality and value for more and more families. Since 1960 American manufacturers have produced both family and second cars, Traditional and Contemporary. The expensive and elaborate family car has been associated specifically with General Motors marketing. The principles of selling Traditional automobiles were laid down for GM in the 1920s by Alfred P. Sloan:3
The core of the product policy lies in its concept of mass-producing a full line of cars graded upwards in quality and price…. In later years, as the consumer upgraded his preference, the new General Motors policy was to become critically attuned to the course of American history.
The upgradings of the American automobile since 1920 have ranged from the functional to the absurd. All the major improvements in automobile engineering were developed before 1940: automatic transmission, synchromesh gears, independent suspension. Since the middle 1930s, automobile styling has been altered continually. In his autobiography, Sloan describes the early expansion of automotive value as the “Transformation of the Automobile Market.” His prose becomes more and more rapturous as he remembers the burgeoning of demand. The Birth of the Tailfin. The Annual Model Change. The Improvement of Paint and Enamel:
One of the striking sights of America today viewed from the air in the daytime is the splash of jewel-like color presented by every parking lot. The colors are of an infinite variety, and the finishes are nearly indestructible.
Cars became more comfortable, with power equipment, radios, and air conditioning. In the 1950s, family cars acquired chrome trim, and large engines: the compression ratio, engine capacity, and horsepower rating of the average American car rose to a climax in 1959.
The perpetual variation or improvement of the Traditional automobile generated a high level of profits for the automobile corporations. Each year, cars became cheaper to make as productivity increased; the quality or value of cars increased; the price of cars remained constant, or fell less fast than the cost of making a car; profits per car increased. Between 1923 and 1941, the real profit (measured in constant 1957-59 dollars) made by GM for each vehicle it produced increased from $160 to $420. In 1959, GM’s real profit per vehicle was $560. (During the 1960s, as the long-term stagnation of the automobile industry progressed, and as the industry produced more and more cheap second cars, real profit per vehicle fell to $380 in 1969.)
Since the late 1950s, the American automobile industry has found increasing difficulty in providing a continual flow of product improvements for the family sedan. The tailfin has been discredited. Cars are too powerful even for the acceleration lanes of urban freeways. The creation of conventional car options is approaching saturation. The 1969 Chevrolet “low-priced standard sedans” were sold for a basic price of between $2,800 and $3,500 for a car with no options: 96 percent of 1969 Chevrolets have automatic transmission, 92 percent have power steering, 88 percent have radios, and 62 percent have air conditioning.
While the market for optional equipment like car radios has stagnated, the market for less conventional car accessories has boomed: specifically, the market for “safety options.” In the last two years, the automobile industry has attempted a new mode of product improvement. It has begun, hesitantly, to derive a profit from the phenomenon referred to by Automotive News as the “rising tide of consumerism.” As the federal and state governments impose more and more safety regulations for automobiles, the auto corporations produce safer and safer cars, at higher and higher prices. Instead of being faster each year, more comfortable, or more beautiful, cars will each year become safer. At least, they will look safer.
The optional accessories of the future, on which the auto corporations will achieve their accustomed profit margin, will not be air conditioners and power tailgates: they will be inertial safety belts, self-inflating air bags, self-dimming headlights, catalytic exhaust cleansers. Efficient and elaborate safety equipment for automobiles has a greater social value than efficient and elaborate comfort equipment. Both forms of automotive improvement increase the profits of the automobile corporations: GM is prepared to derive profits from the sale of any conceivable automotive commodity.4
The production of safe and ecologically seductive accessories for Traditional cars is only a recent occupation of the automobile corporations. Their main marketing efforts have been directed at the second, third, or Contemporary car. In the last ten years they have investigated and sold an indiscriminate variety of Contemporary cars: imported cars, small cars, cheap cars, women’s cars, specialty cars, holiday cars. None of these automotive variations has been adequately successful. The Vega is GM’s latest attempt to discover a permanently profitable formula for selling second cars.
The Vega project has inspired the American motoring press to a frenzy of philosophical introspection. The role of the second car has become a study in family psychology: Is the new car for mothers, or for teen-age children; is it for childless couples; is it for single working women? Contemporary marketing becomes a problem of social organization—how is the Vega to be inserted into the crevices of the family group? Sports Car Graphic continues its account of the Traditional/Contemporary dichotomy with a sociological exegesis of the Vega’s circumstances. It explains consumer enthusiasm for Contemporary cars as a matter of “changing life styles”: “At one time, family unity was most important in this country…. Today, family ties have loosened. There is no dramatic reason for having a large automobile….” Motor Trend produced a cover story on the Vega in which J. Z. De Lorean, the general manager of Chevrolet, examined the future of the car market:
I think you’re going to see that the cars under the intermediates will probably account for half of our business…. Still, when going from New York to Los Angeles, there’s nothing like a big car, for the comfort and ability to move around and carry the two sets of golf clubs and enough baggage for the whole family.
Chevrolet and General Motors applied a vast research effort to investigating the possible markets for second cars. They claim that the Vega is the “direct result of the most expensive program of scientific market analysis ever undertaken by General Motors.” The program, a “national probability study,” consisted of eleven separate research studies, based on interviews with 8,600 consumers, 400 Chevrolet dealers, and 600 “key Chevrolet wholesale personnel.” The findings of the research teams were used by an undisclosed number of Vega “study groups,” such as the Product Assurance Group, the Engine Group, and the Pleasability Group.
The Vega probability study examined all the qualities attributed to successful second cars: smallness, foreignness, excitingness. GM’s computers digested the probability study and produced the Vega. The only thing American motoring correspondents dislike about the Vega is its lack of spontaneity: according to one journal the Vega is engineered within an inch of its life, another calls it a “numbers car,” and a third pronounces that the Vega looks as if it were designed by a computer.
Importedness. The most extensive section of GM’s probability study was designed to find out why Americans buy foreign cars. The investigation revealed, encouragingly enough, that:
…a majority of existing foreign car owners are not prejudiced against a small car built in this country if it offers more features and value than the car they now own. Over 60 percent of those owning foreign economy cars said they would be willing to consider buying a domestic small car….
GM’s perception of the patriotism of the American consumer has not prevented it from selling the Vega as an exotic, almost foreign car. Vega: sounds Italian. 2300: engine capacity in cubic centimeters, a foreign measure, as in BMW 2500, or Alfa Romeo 1750 Berlina. The Vega looks like a Fiat: one motoring magazine comments that GM should be paying a styling fee to Pininfarina. GM publicists refer coyly to the VW as Brand X: the Vega will have “nearly twice the power of the leading foreign import.”
In the last fifteen years, as foreign cars have accounted for an important and increasing section of the American car market, domestic auto manufacturers have been preoccupied with the psychological appeal of imported cars. Do Americans buy imports simply for their foreignness; can the jaded tastes of the second car consumer be titillated only by outlandish commodities? Automotive News remembers the lost days of the mid-Fifties, when imported cars “were oddities to buy capriciously and own defensively.” Volkswagens were the first foreign cars that Americans owned aggressively.
J. Z. De Lorean of Chevrolet has provided many explanations for the “mystique” of the Volkswagen, including the speculation that “the foreign car buyer has an image of craftsmen in the Black Forest, building cars by hand.” In the last three years, American consumers have become acquainted with the new image of ruthlessly efficient Japanese wage slaves. Toyotas are now the second best selling imported cars in the United States, and the second best selling cars in Canada. Toyota has more than 800 franchised dealers in the US, who receive all the payola of a major marketing operation, free trips to Toyota City in Nagoya, Japan, Seven-Point Sales Programs, magazines called Toyota Today and Toyota Topics.
If the competitive successes of foreign cars are attributable to a capricious and fetishistic desire for exoticism, Americans will continue to buy imported cars. The foreign insignia of the Vega will not be sufficient to preserve the second car market for domestic products. But the domestic manufacturers are hedging their bets. GM is expanding its Opel imports, and has investigated the possibility of Japanese investment. A report in The New York Times speculates that GM is negotiating to take over Toyota’s entire US marketing operation, including the payola, the trips, and the magazines.
Smallness. The second major section of GM’s research project examines the irrational desire of consumers for smallness in cars. Chevrolet held “product clinics” with “small car enthusiasts,” “space clinics,” and “space utilization clinics.” Its findings are expressed in the physical dimensions of the Vega—a little longer and broader than the Volkswagen, and eight inches lower—and in the extraverted copy of Vega publicists. The GM researchers discovered that Americans buy small cars not only for convenience but also because such cars represent a “life style which is practical, fun-loving, simple and out-going.” Chevrolet advertisements describe the Vega as small, but also big, strong, luxurious, roomy, and substantial. J. Z. De Lorean has summarized the mystifications of Vega marketing:
Automobile size, including smaller size, refers to a concept and not merely to physical facts.
American auto manufacturers produced comparatively small cars ten years ago—the original generation of compact cars. The first compacts, Corvairs, Falcons, Comets, Valiants, F-85s, became larger and larger throughout the 1960s. In fact, they are now Traditional cars: a two-car family might buy an Oldsmobile F-85 for transcontinental touring, and a Chevrolet Vega for riding around town. The Vega is GM’s new attempt to derive profit from the convenience of small cars. But the industry is not confident that smallness alone can sell second cars, or that smallness is the only attraction of imported cars. Even Automotive News comments, under the headline “New Problems for Detroit”:
Some observers suspect that all of Detroit’s research and motivation crews have not discovered the real reason for the imports’ success in the US…. Detroit has come up with a small package (the Vegas and Pintos) and to this it is adding the typical Detroit touch of more power, more styling, more options. Could it be that Americans who have been buying a million imports a year, are buying quality, simplicity, straightforward design and a cachet of status in a car that only happens to be small?
Cheapness. GM’s Vega advertisements imply that the consumer of Contemporary cars is a creature of whim and mood. Of all consumer whims, the most alarming for GM is the whim to avoid spending large sums of money on second cars. If the main attraction of second cars is their cheapness, then consumers must wish to limit the total proportion of their income that they spend on cars. If consumers are preparing to limit their total car expenditure, then the profitability of the car business must also be reaching a limit.
A car market in which most families own two cars, or where the ratio of people to cars is less than two to one, will not generate increasing profits if the cars involved are inexpensive relative to real income. Cars are already comparatively cheap in America: an American earning the average wage for production workers in manufacturing industry has to work eighteen weeks to buy a Vega sedan; an English production worker must work for thirty-five weeks to buy the cheapest sedan made by GM’s English subsidiary.
Cheap cars are less profitable than expensive cars proportionately as well as cumulatively. Each cheap car yields a smaller profit than each expensive car. The margin of profit is also smaller on cheap cars than on expensive cars. The economic consequences for GM of producing a cheap or small car were explained by the corporation in 1958. Harlow H. Curtice, the president of GM, appeared before the Kefauver Committee Hearings on Administered Prices in the Automobile Industry. He was questioned by the Committee about GM’s efforts to combat the menace of foreign cars, and about the import of German Opels. Curtice’s language is reproduced as it appears in the official transcript of the Hearings:
Sen. O’Mahoney: Do you plan to build a small car here in the US to compete with imported small cars?
Curtice: For over the years that has been a subject that we have constantly studied. Thus far it has not been practical from the standpoint of the economics to offer the small car, on the basis that because you take the value out so much more rapidly than you can take the cost out.
In effect, what Curtice was saying was that all American cars cost approximately the same to produce, from compacts to Cadillacs. Fortune estimates that the profit on a modern standard sedan, with a basic price of $3,000, is $300, or 10 percent of the price. When the price of the car drops by a third, the profit drops by a half. The lower the basic price, the more sharply the profit declines.5 Cheap cars are also proportionately less profitable than more expensive cars because cheap cars are sold with less optional equipment. The profits to be made making cars are less than the profits to be made making car parts and optional equipment for cars. GM makes exceptionally high profits on its spare parts and accessories business. In fact, according to Fortune, car manufacturers often make a profit of 50 percent on sales of optional equipment.
The Vega is the most expensive of the new cheap American cars.6 The cheapest Vega costs $2,091, the cheapest Pinto $1,919, and the cheapest AMC Gremlin $1,899. The Vega comes in four different models, a basic sedan, a “hatchback coupe with a fastback roof line,” a station wagon, and a panel delivery truck. The Vega coupe costs $2,197, and the wagon $2,329. All Vegas are available with many optional extras. Vega is being sold as a car which is cheap but also luxurious. GM could have built a car costing less than $2,000, according to J. Z. De Lorean, but “that wasn’t our intention. We wanted to build a high value car.”
Cars selling for less than $2,000 yield only a minimal profit. American manufacturers will only sell such cars when they can use the cost and productivity advantages of foreign subsidiaries and associates: as Ford has in importing parts for the Pinto, and as GM has in its Opel operations, or would if it took over the US marketing of Toyotas.
Woman Appeal. Exoticism, smallness, and cheapness are the most important qualities attributed by GM to the Chevrolet Vega. GM has also tried to locate the Vega more precisely within the two-car family. The Vega sedan is a woman’s car. GM’s advertising effort implies that when the man of the house chooses the Traditional car, the woman will skittishly demand a Vega. Automotive News recently published a five-page guide to “How to Pitch Subcompacts to Today’s Women”: it points out that women are the “prime market” for cars like the Vega, and urges dealers to remember that women often “move from subcompact to a station wagon overnight.”
Youth. J. Z. De Lorean has expressed the hope that the Vega will appeal to the youth market, schoolgirls and schoolboys, including “a significant number of college students.” The Vega Pleasability Group employed young engineers (called “Pleasability Engineers”) whom Chevrolet public relations officers described as “tuned in to youth.”
Musclebound. Chevrolet advertises the Vega as the “Little Car that does Everything Well.” Even in gender, the Vega is overequipped. The standard Vega is for wives; the Vega fastback Coupe hatchback GT has machismo appeal. Motor Trend road-tested the Vega GT, and found it “sporty,” attractively adrenalin inducing, and styled with “a lot of Camaro and a dash of Maverick in the rear.”
Sporty, masculine cars have been for the last ten years the most profitable Contemporary cars. The Ford Mustang was launched in 1964; more than 400,000 people bought 1965 Mustangs. Cars like Mustangs and Camaros are sold to single men, and to rich husbands. They are specialty cars, expensive cars with two doors and many optional accessories. Alfred Sloan defined specialty cars as “special cars at higher prices,” and he attributed their success to the growing interest of Americans in leisure and pleasure.
In the middle and late Sixties, most specialty cars were “high performance units,” “muscle units,” or “super cars.” They had huge engines, and could sprint away from traffic lights. Now, specialty cars provide the appearance of raciness without the performance: insurance rates on high performance cars are exorbitant for even the most prosperous bachelor. Specialty cars are sold with musclebound options, including sporty painted stripes, racing mirrors, and other improvements known to Automotive News as “appearance items generally identified with muscle cars.”7
The androgynous Vega is available with many such accessories, on which GM achieves its usual profit margin of about 50 percent. Publicity photographs of the Vega coupe show the car parked in a leafy glade, with a girl model. The coupe can be equipped with special engines, air conditioning, power steering, a deluxe instrument panel, deluxe seats, deluxe interior trim, twin carburetors, an anti-roll bar, oval tires, and a large number of other optional variations.
The Vega is thus GM’s newest contribution to the expansion of the American automobile market, in which Americans are buying cars less and less enthusiastically. The car market grew more slowly in the 1960s than in the 1950s, and more slowly in the 1950s than before the Second World War. The auto corporations expect continuing stagnation in the 1970s. Fortune has complained that it can no longer systematically predict the growth of demand for cars. In the 1970s, it says, the “important questions about the auto market” will be mysterious, or political, social, medical (ecological), and technological. American families may no longer buy extra cars when their children learn to drive, or when the head of the household gets a raise; they may even stop replacing their old Traditional sedans.
Since 1950, Traditional family cars have become bigger, smaller, and bigger again. They have been equipped with tailfins, lidded headlights, and emission control systems, with jewellike and life-preserving accessories. Meanwhile, American manufacturers have sold a succession of second cars, cheap cars, small cars, women’s cars, and specialty cars. They have also sold foreign cars manufactured by their foreign subsidiaries. The Chevrolet Vega is an all-purpose second car, designed to combine the attractions of all previous models. It is being sold with the accumulated coquetry of twenty years of serious second car marketing. Chevrolet publicizes its post-strike 1971 models as, simply, changed: “Change. That’s what it’s all about this year.” The Chevrolet Monte Carlo has been refined. The Chevelle is resculptured. Vega is so new that “It wasn’t changed from anything.”
Even if the American demand for cars increases, the cars sold may be disappointingly unprofitable. The Vega is probably the least profitable car GM has ever sold in America. Of the 400,000 people whom GM expects to buy Vegas in 1971, some will be buying a car for the first time, and some will be trading in a foreign car. Many will buy Vegas in exchange for larger, more profitable GM cars. Like other small cars and economy cars, Vegas sell for a low price, with a low profit margin. American families will only buy second and third cars if the extra cars are comparatively cheap. Lee Iacocca, president of Ford Motor Company, has predicted that “routine demand” for cars in America will reach 13 million units a year in the 1970s, a demand nearly twice as great as the average demand in the 1960s. To sustain such a level of demand, Iacocca said, the auto corporations would have to turn themselves “inside out to find new ways of increasing productivity”: “There can’t be a market for 13 million safe, clean, and satisfactory cars that are priced beyond the reach of the average consumer.”
The selling of the Vega uses the most advanced and most absurd techniques of GM marketing. Like the market for calico in Manchester in 1890, the American automobile market is reaching a limit of profitability. The auto market has been a model for other markets in consumer commodities: other American markets—the kitchen equipment market, for example, or the market for television sets—may also reach similar limits. The American automobile industry now faces a double crisis of insufficient demand and stagnating productivity. To sell more cars, manufacturers must produce cars more cheaply. To produce cars more cheaply they must increase the productivity of their operations. They must use elaborate and expensive machinery, as Chevrolet has done in its new Vega factories. They must fire workers, restrict working conditions, and make each worker’s job more demanding to perform. The most bitter conflicts in the recent GM strike were to do with the pace and control of production. As the stagnation of the industry continues, the conflicts will become more bitter, and more frequent.
This is the first of two articles on GM.
February 25, 1971
In 1970 before the recent strike, GM paid its US workers an average of $4.65 an hour. ↩
Automotive News, May 18, 1970. ↩
Sloan, an entrepreneur of roller bearings, joined General Motors in 1918. He was president of the corporation from 1923 to 1941. His business autobiography, My Years with General Motors (1965), records the development of the industry from its hopeful beginnings to the launching of the Corvair. ↩
The promiscuous vicissitudes of the automobile market are illustrated by, for example, the history of leaded gasoline. In his account of the “Evolution of the Automobile,” Alfred Sloan devotes an enthusiastic passage to the development of leaded gasoline. Like many other GM automotive improvements, lead additives for gasoline were manufactured by GM’s parent company Du Pont. (Even the indestructible lacquer which Sloan found so jewellike was a paint called Duco, developed jointly by Du Pont Laboratories, the GM Research Corporation, and the GM Paint and Enamel Committee.) Sloan describes the “long story” of GM’s cooperation with Du Pont in producing lead additives for gasoline: ↩
Fortune, March, 1969. ↩
In obedience to Alfred Sloan’s principles of profitable marketing: “We proposed in general (in 1921) that General Motors should place its cars at the top of each price range .” ↩
Motor Trend, the Playboy of the muscle car enthusiast, publishes a regular series of Motor Trend Guides to optional equipment. “How to order your new Corvette: Even with all the options available, getting the right Corvette for you is still a dilemma .” “Buying a new Camaro is akin to when you were a kid and lost in the candy store .” ↩