If opportunity presents itself, will it be wasted again?
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June 23, 2010 01:00 AM

If opportunity presents itself, will it be wasted again?

Richard Johnson
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    Rick Johnson is managing editor of Automotive News

    To my mind it's not the cars that make so many people love the auto business. It's the cash. Even in the worst of times -- even in the most miserable economic environment -- the automotive industry positively gushes money. It just flows and flows.

    Things are never really bad in this business. The thing that determines whether we call them good times or bad times is the breakeven level.

    Even though we are navigating through 11-12 million SAAR waters, cost bases have come down so dramatically that carmakers are reporting big profits. Beaten-down suppliers are ready to spring off the canvas when production picks up -- as it's doing.

    These days feel a bit like February 1984, when I joined Automotive News. The industry was just rounding into shape after an extended recession.

    I was new to covering cars and, holy cow, it seemed like a pretty phenomenal business. All the Detroit companies were reporting gigantic quarterly profits -- "boxcar numbers," as American Motors CEO Paul Tippett called them.

    In 1984 and 1985, the hardest thing GM Chairman Roger Smith had to do when he got to the office each day was figure out how to spend all the money that was rolling in.

    Chrysler was prosperous again thanks to the K-cars and its first minivan, which debuted the previous autumn. Ford's first Taurus would find a huge, welcoming audience when it arrived a few months later.

    Bob Lutz was helping launch America's SUV craze while doing a short stint as head of Ford trucks (seen as a demotion at the time, trucks being a backwater). Lutz took one look at the tall, narrow Ford Bronco II in the pipeline and decided on a wider track, a bigger interior and new styling. It became the Explorer.

    The industry may be on the verge of similar creative spree. But if the rivers of cash flow again in Detroit, the money ought to be spent a bit more sensibly than it was back then.

    Auto historians like to vent about how the Detroit 3 invested the profits they made in the 1980s. The automakers poured resources into automated production equipment; they launched big-budget manufacturing ventures such as Saturn; they conceived high-priced luxury vehicles like "Chrysler's TC by Maserati," and the Cadillac Allante two-seater (with bodies shipped by air to Detroit from Pininfarina in Turin, Italy).

    GM bought Hughes, EDS and Saab; Ford bought Jaguar; Chrysler acquired Gulfstream Aerospace, FinanceAmerica, Electrospace Systems, Lamborghini and American Motors.

    Money well spent? You can argue that some of those extravagances turned out fine.

    But overall it was an opportunity wasted for the Big 3.

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