Paul Conte stared forlornly out the window of his Long Island, N.Y., Cadillac showroom. Outside, blocking the entrance, a line of cars snaked slowly along the road, creeping toward the Mobil station next door. The guy had been struggling for years,' Conte says of the gas station owner. 'Now he had a fistful of money 4 inches thick, and he didn't take credit cards.'
Until the oil embargo exploded in October 1973, neither automakers nor consumers worried about the price of gas, or how plentiful it was. Then, suddenly, queues of desperate drivers materialized. Those lines, shown on TV and splashed across front pages of newspapers, symbolized the 1973-74 oil embargo, the most serious perceived threat to Americans' freedom of the road since gas rationing in World War II.
Despite the wait, despite the lines, motorists insisted on topping off their tanks as often as possible. It was a lifestyle change as well as an economic change. Many dropped vacation and business travel plans. Small vehicles, previously regarded as undersized for American family needs, became hot commodities.
Even when they hit the highway with a full tank of gas, drivers couldn't legally drive as fast as before because Congress mandated a 55-mph speed limit - and threatened to withhold federal highway funds from states that refused to adopt and enforce the lower limit.
Meanwhile, dealers like Conte wrung their hands.
We were losing money. We were bleeding, he recalls. Customers canceled orders for Cadillacs. He put the shop on a four-day workweek and laid off some salespeople. Buyers who still wanted a Cadillac got lower trade-in allowances for their big Buicks, Cadillacs and Lincolns. He considered acquiring a franchise for smaller cars, but none were available.
We were demoralized, recalls Conte, who now owns Paul Conte Cadillac in Free-port, N.Y., not far from the original dealership where he endured the oil embargo. We were locked into the business and felt nothing could go on forever. Luckily for us, some customers said, 'I may have to drive less but I'll never give up my Cadillac.
The crisis began when members of an international cartel, the Organization of Petroleum Exporting Countries, or OPEC, reduced their own oil production and imposed the embargo on the West as a result of the Arab-Israeli War. The Arab cutbacks accounted for only 7 percent of world supply, but that proved enough to trigger panic among oil companies, governments and consumers. Bidding went wild. OPEC raised its prices to record highs.
Conte's observation came true: The embargo didn't last forever. But when it ended in 1974, it had forced major changes onto the U.S. auto industry and the consumer.
The 1976 corporate average fuel economy standards were one significant legacy, University of Michigan business historian David Lewis explains. U.S. makers had felt the American dream tied in closely to large cars, no matter how much gas they guzzled.
After you got those CAFE requirements, you had to rethink your fleet, Lewis says. You had to have a smaller car even if you couldn't make money from it. At that time, the typical U.S. car weighed 4,000 pounds.
Manufacturers then thought of what would be called econoboxes, somewhat smaller and lighter,' Lewis says. Automakers assured their customers and dealers that smaller cars were coming, but redesign and retooling took time.