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Nash and Hudson Got it Right; GM, Ford and Chrysler Got it Wrong!

By Adam Shapiro

“Who wants to have a gas-guzzling dinosaur in his garage? Think of the gas bills!” - George Romney, April 6, 1959.

Small was big in 1954 and one U.S. car maker got it right.  Not GM (GM), not Ford (F), not Chrysler.  The car company that saw the future, but never lived to see it, was the now dead American Motors. (Triumphant trumpets blow). Toward the end, they produced some of the ugliest cars ever envisioned – Pacer, Gremlin – remember those? But long before some AMC designer first sketched the Pacer and Gremlin (probably on a residual acid trip mid 1970s), American Motors was producing a popular small car called the Rambler. (Angelic harp music plays even though I am a Studebaker man, we must give Rambler its due.)

Romney became American Motors CEO in 1954 after the Nash Hudson merger was completed and George Mason unexpectedly died.  Romney inherited a company on the brink of bankruptcy. AMC lost money in 1955 and 1956 but by 1957 the company moved back to profitability.  How? Romney eliminated the larger cars AMC produced and used the small Rambler to save it!

Romney traveled the country promoting the Rambler speaking to community groups about the need to purchase small fuel efficient cars.  This was the mid 1950’s and while the big three auto makers ignored Romney the buying public listened and liked what they heard.  A 1959 time magazine article profiling Romney quotes an executive from GM saying, “Romney’s been selling a dream — price and economy – but he’s done a good job at it.”  (Nasty music plays here) Even then GM executives failed to get it!  Romney wasn’t selling a dream; he sold a product consumers wanted, a good small car.

In 1957, the U.S. economy was in recession, the big three auto makers were losing millions (sound familiar) and Rambler sales were rising! (HUH?) That Time magazine article profiling Romney says that In 1958 American Motors netted a $26 million profit while Ford and Chrysler lost $61 million.   But here’s the rub, that same article talks about the rising demand for small cars!  American Motors Rambler had 1.6% of the US car market in 1957 by 1959 it captured 6.2% and was the fifth top selling car.  More troubling for GM, Ford and Chrysler, Imports in 1959 captured 10% of the market up from 0.8% in 1954.  (Chorus gasps in horror). That’s right, in six years imports went from 0.8% of the market to 10%. Romney’s so called dream, price and economy turned out to be the big three’s nightmare. This ability to dangerously ignore the market is nothing new for Ford, Chrysler and GM which had no small car offerings until 1960.

Detroit’s big three were running for cover in 1959 attempting to design their own small cars, “compacts”.  Allow me to quote directly from Time Magazine April 6, 1959.  “General Motors is pressing its suppliers in hopes of getting into pilot production in May, is expected to be the first to introduce its compact car, a rear engine job, in August or early September.  Ford’s economy car is scheduled for December introduction, Chrysler’s for February.”   History remembers the Chevy Corvair, Ford Falcon and Dodge Dart as successful cars.  Ralph Nader would object to that last sentence, but those machines were the panicked production of industry leaders that were playing follow the leader and failed to see the future which was not just staring them in the face, it was clobbering them over the head!

Fast forward to December 10, 2008.  Congress approved a multi billion dollar bridge loan to save GM, Ford and Chrysler. Executives at those companies blame the current credit crisis for their problems but I believe the death blow was delivered by their own ignorance 50 years ago.  Out of fairness to Ford, they have been attempting to right their ship since 2006.  Few people expect Chrysler to stay in business, with or without a bailout, past next year and GM which has also been attempting to get it right will be much smaller, forced to shed some of its product lines.  How sad.  Where would GM, Ford and Chrysler be today if they had listened to George Romney, when he said, “The dinosaur perished because he got too big.”