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Things have been bad before, but never this bad

Even during the Depression, people knew the industry would bounce back

John K. Teahen Jr., now Automotive News’ senior editor, as a young man
I have been around this business for 54 years as a reporter and editor at Automotive News, and I have never seen anything even approaching today's problems.

We can go back even further. My father was a Fisher Body executive when I was born in 1925 (he retired in 1953). The auto business was our life, especially General Motors' share of the business. Fisher Body became part of GM in 1926.

Mother and Dad's friends were auto people. When they were together, they talked about "the business." I guess some of it rubbed off on the little kid playing in the background.

The Great Depression was a troubled time. But it was "Happy Days Are Here Again" compared with today.

A personal memory: Somehow or other Dad managed to save $2,500 from the 1929 collapse of the stock market. He thought of putting it into GM stock when the price fell below $3 a share. But he didn't. He figured that money might be needed for food or rent down the line.

My point is that in the early 1930s, Dad and others had confidence — enough confidence to consider putting the family's nest egg into an auto stock. They were sure the nation's economy would rebound. They had no doubt that the Depression was no more than a temporary glitch in the upward path of the automobile.

I don't find that 1930s confidence today. Now auto people are scared. Those who have lost their jobs are scared of the future. Those who are still working are scared of the bad news that tomorrow may bring.

The auto business is like no other line of activity. It's a business of swells and swoons. Boom today, bust tomorrow. Why? Because it deals with a highly desirable yet highly postponable purchase.

There was a recession in 1920 that pushed founder Billy Durant out of GM for the second and final time. Ten years later came the Depression.

1938 was a bummer

Few recall it, but there was a pretty serious recession in 1938. Sales had fought back to 4 million in 1937 from a Depression low of 1.3 million in 1932. Then, inexplicably, deliveries dropped to 2.2 million in 1938, a decline of 45 percent in a single year. Not even the Depression had brought such a sales calamity. It was a one-year setback. An upturn began in 1939.

All bets were off during World War II. No cars; thus no sales. The nation had more important things on its mind. The Up, Up and Away Days began after the war, a period of automotive prosperity that seemingly would never end. But it did, in 1958.

That was a terrible year. Car-truck sales fell 21.9 percent, to 5.1 million, and there seemed to be no reason for it. Generally, it was a face-lift year, but 1958 saw the intro of two giants: the Chevrolet Impala and the Pontiac Bonneville. What more do you need for success? Apparently, the industry didn't have the answer.

When the industry settled down after the 1958 sales calamity, I had lunch with the general manager of a Big 3 car division, Jim Wagstaff of Chrysler's DeSoto Division. We chatted about this and that, and I mentioned imported cars. He shook his head, intending to set the kid (me) straight.

"They're no problem," Wagstaff said. "They're poorly made and can't stand up to our kind of driving."

Dealer associations led the ‘You Auto Buy Now’ campaign in 1958.

'You Auto Buy Now'

The 1958 sales decline, severe though it was, didn't infuse panic in the hearts of the automakers. Maybe in those days of year-after-year gains, it took two bad years to shake up the manufacturers.

Most of the efforts to perk up sales were at the local level and were spearheaded by dealer associations. Most prominent were the "You Auto Buy Now" campaigns that were staged in some 300 American cities.

I recall that one of the principals in Detroit's campaign was Johnny Greene, formerly a star pass receiver for the Detroit Lions.

There was a temporary sales setback in the winter of 1973-74 when the Arab sheiks shut off the flow of oil to the United States, but the next recession struck in 1980. It was a rough three years, and I remember interest rates shot up to 20 percent. It cost a dealer about $330 a month to keep a $20,000 car in inventory.

In 1975 the industry was trying to climb out of a hole. Enter the customer cash incentive, which began its 35th year in January. Not bad for a promo that was designed to sell a few cars, then give way to a newer idea.

Looking for someone to praise or blame? It's Chrysler Corp. Day after day, night after night, radio and TV were bombarded by Joe Garagiola screaming, "Buy a car, get a check!" Garagiola was a light-hitting catcher for the St. Louis Cardinals who became a top-flight sportscaster after his playing days.

The Chrysler promo began on Super Bowl Sunday in 1975, and the early givebacks were small-time stuff — $200 to $300. Compare that with today's offers of $8,500 or more.

Recession was the cover story on April 28, 1980.

'We'll be back'

In the recession of the early 1990s, sales dropped 15.2 percent from 1989 to 1991, but there was little hand-wringing. It was another case of autodom saying, "We'll be back soon, stronger than ever."

Truer words were never uttered. In 1999, the industry entered the land of milk and honey and feasted there for nine years: nine years (1999-2007) of sales of more than 16 million. Before 1999, the industry had topped 16 million only once (in 1986).

So the auto industry has had its share of down days, but in the past, there was no panic. The automakers seemed to be guided by a Field of Dreams principle: "If you build it, they will come." The auto version was "If you build them, they will sell."

I recall driving by the Pontiac plant during one of the downturns. Never had I seen so many unsold new cars in one place. Pontiac wasn't alone. Chrysler had its pre-Iacocca sales bank with thousands of surplus cars clogging acres of land at the Michigan State Fairgrounds in Detroit.

The auto companies are smarter today; they cut production when sales plunge. But wasn't the old way a sign of confidence in the future, a way of saying "This, too, shall pass"?

Compare that with today. No sobs, no tears, but the factory people seem bewildered. It's not an air of defeatism — but, darn it, it's close.

The U.S. auto industry is in crisis mode, and every hourly worker, middle manager and high executive recognizes that and is terrified.

Yes, "terrified" is the proper word.

You can reach John K. Teahen Jr. at autonews@crain.com



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