COVER

Driving into a second century

Pat Ohlendorf June 3 1985
COVER

Driving into a second century

Pat Ohlendorf June 3 1985

Nothing in the high-ceilinged, traditionally decorated office suggests the power it houses. The most arresting object on the desk is a bright-green toy dump truck overflowing with paper clips. And when the small man gazing out of the window turns, offering his hand, it is easier to picture his ruddy cheeks and crinkly blue eyes behind the counter of a Main Street grocery store. But as chairman of General Motors Corp., Roger B. Smith sits at the pinnacle of the second-largest corporation in the United States. And he is now in the forefront of one of the fastest-changing industries anywhere on the globe.

In one of his first acts after assuming his position in 1981, Smith announced a multimillion-dollar bonus program for 6,000 GM managers immediately after the union had given up $2.5 billion worth of wage hikes and benefits. The move jangered many critics, who said it was evidence of the arrogance and corruption of the North American auto industry, one which they considered to be a bloated dinosaur, unable to adapt to a fast-changing world, producing inferior products and steadily losing ground to aggressive foreign competition. Since then, GM and the other North American car companies have weathered various unpleasant shocks, and Smith has risen to the occasion: he has shaken the dinosaur, reduced its size and sent it on a daring new course, setting off a series of wrenching changes that have reverberated throughout the entire industry.

To many observers, now is the most exciting and dangerous time in the 100-year history of the automobile. Not since 1885, when Carl Benz of Mannheim, Germany, rode a prototype of his spindly, three-wheeled, chugging invention around his yard—and into a brick wall—has the future been more difficult to predict. For his part, Roger Smith says that the North American car industry—and indeed the car itself—is fighting for its very survival. That, he says, makes him “nervous about a few things.” Still, he says the 100th anniversary of the automobile fills him with optimism. “I feel terrific!” he told Maclean's in his homey midwestern twang.

“We’re starting the second 100 years.” At first glance, that second century appears to be beginning well for the so-called Big Three of Detroit (the others: the Ford Motor Co. and the Chrysler Corp.), whose combined profits of $9.8 billion made 1984 the most lucrative year in the history of the industry. (GM alone profited over $4.5 billion.) Analysts predict continued high sales, and auto executives throughout the continent, from Smith to “New Chrysler Corp.” chairman Lee Iacocca are preaching a new gospel with the vigor of true converts. Said Kenneth Harrigan, president of the Ford Motor Co. of Canada, who reports that over the past four years the quality of Ford vehicles has increased by 59 per cent: “We all came to the rude awakening some five years ago that we could not continue doing things the way we had been. We had to change completely.” Added veteran Detroit-watcher David Cole, director of the University of Michigan’s office for the study of automotive transportation: “The complete reawakening and revitalization occurring right now make this by far the most exciting period in the industry. There is nothing that matches the changes that we are seeing today.”

Still, many observers are skeptical of Detroit’s ability to fulfil its promises at a time when the entire worldwide industry is shifting rapidly. At the same time, radical change can be both invigorating and uncomfortable. Declared Massachusetts Institute of Technology political scientist James Womack, one of the authors of a recent global study, The Future of the Automobile: “If you are an auto executive with a bureaucratic mind-set, then this is the worst of times because nothing is predictable anymore. The rules are undone and everything is up for grabs.”

But one thing at least is clear: the automobile is here to stay. In the 1970s, following two global energy crises and amid unprecedented concern for the environment, many observers predicted that the fire-breathing monster Carl Benz unleashed on the world would never live to see its own centenary. But in the intervening years, a series of mainly technical changes has quietly met the most serious challenge to “automobility” since skeptical neighbors advised pioneer drivers to “get a horse.” In the face of steadily declining fatalities per mile travelled (down 42 per cent in Canada since 1968), such safety advocates as Ralph Nader can no longer claim that cars are “unsafe at any speed.”

Similarly, after managing to comply with the toughest emissions standards in the world, Detroit engineers have effectively stifled the argument that intolerable air pollution would choke off any future for the automobile. And major strides in fuel efficiency, coupled with a steady increase in known oil reserves, have contradicted predictions that imminent oil shortages would eliminate the luxury of the personal car. The auto industry has been preparing alternative fuels which could be easily substituted for gasoline. Indeed, methanol, ethanol, propane and natural gas are already used a in several countries, including Canada.

One of the most resilient of the recent anti-car arguments is that overcrowded cities and the inherent inefficiencies of automobiles would kill cars in all but the most richly developed countries. Lester Brown, president of the Washington-based Worldwatch Institute, whose 1980 Running on Empty epitomized the gloomy prognostications of the day, wrote only last year that “Other [countries] may join China and ban the private automobile except in special situations.” But in March China officially opened its doors to private automobiles and has initiated arrangements with Peugeot and Volkswagen to build local factories. Said auto analyst Maryann Keller of New York’s Vilas-Fischer Associates: “Conservationists may want the Third World to ride around on bicycles, but the Third World wants cars. They will worry about handling pollution and so on later. That’s just the way things are.”

Indeed, throughout the world, wherever people drive, they love their cars. And a domestic auto industry remains the most demonstrable example of industrial achievement. Even though automation has steadily eliminated jobs over the past decade, some 10 per cent of all workers in industrial countries still depend on the car business for their livelihood. And in developing countries a domestic auto industry is not only a source of national pride, but an essential building block of economic development. Former GM president Charles E. Wilson earned the enmity of millions when he declared in 1953, “What is good for the country is good for GM and vice versa.” But his statement is still true—only on a global scale.

As the industry develops and expands, the products themselves have as well. Compared to what many observers describe as the “rudimentary” vehicles of the 1950s and 1960s, the car has changed almost beyond recognition. For the most part, the changes have been internal, and almost solely due to electronics. The microchip, in fact, has revolutionized the car: now most top-of-the-line automobiles contain the equivalent of several IBM personal computers. In fact, some analysts say they expect the arrival of the self-driving car within a few decades. Declared MIT’s Womack: “You can send it to the corner for a pack of cigarettes.” But most industry insiders dismiss the prediction. GM’s Smith said he enjoys the feel of driving his 1960 Corvette. And the industry has largely abandoned its experiments with such gimmickry as the “talking” car. Said Ford design chief Donald Kopka: “I do not know anybody with a talking car who didn’t end up shouting back at it.”

What remains is undeniably useful high tech. Some of the highlights, either already available or soon to arrive:

“Intelligent” cars which monitor essential systems and electronically inform the driver about such matters as whether the oil needs to be changed or a taillight has burnt out. As well, cars that automatically correct such problems as frosted windows without any participation by the driver at all will soon appear on the market;

Suspension systems which adjust ride firmness and angle automatically according to different road surfaces and speeds;

Antilock brakes, so far available on only a few high-priced cars but soon to become universal, which use microprocessors on each wheel to prevent skids even in panic stops—an advance comparable only to the seatbelt in its effect on car safety;

Wide-angle video displays to replace rear-view mirrors;

Advanced “trip logs” that compute not only elapsed mileage but also fuel economy and average speed, and recommend when to stop for gas;

Cellular radio, currently being promoted in some urban centres, which will allow most business people to use telephones in their cars;

“Satellite navigation systems,” the most dramatic advance currently possible for cars. Already demonstrated on prototypes, the system uses a video monitor to display maps from the size of neighborhood to that of a continent. And on any map, it indicates the exact position of the car with a small, flashing square—making it almost impossible for a driver to become lost. That is accomplished by a receiver in a black box in the trunk of the car, which picks signals from “global positioning” satellites. Those satellites are able to determine distances on earth as small as 300 feet. By 1988, when the U.S. defense department has launched 14 more satellites, these systems will become entirely feasible (although expensive) for round-the-clock driving.

In addition to their dramatic effects on cars themselves, microchips are taking over a multitude of car assembly functions which until now have been handled mechanically. The result should be increased precision and reliability. Currently, the automobile industry is one of the largest consumers of microchips and computers.

For John Withrow, an engineer and executive vice-president of product development at Chrysler, the modern car is one of the most sophisticated pieces of equipment ever built. He also rejects the common claims that the car has not changed much in its first hundred years. Said Withrow: “A computer is typically run by a skilled, trained operator in a sterile atmosphere in which temperature and humidity are closely controlled. An automobile is run by anyone who happens to have a driver’s licence in temperatures that vary from -30° to 100°. It runs in mud and snow and salt, at sea level and at 5,000 feet above sea level. What other industry tries to put 4,000 parts together at the rate of one per minute, with up to seven microcomputers on board, such that an untrained operator can get into it in any kind of environment and have it start up immediately and run perfectly?”

The discipline that has radically transformed the function and the manufacture of the car over the past decade has had an equally dramatic effect on its design. The old Detroit “stylists,” specialists in sheet metal fantasy who once transformed technically static machines with new, grinning grilles or outlandish tail fins in successive model years, have largely disappeared. They have been replaced by a team of industrial designers, engineers and manufacturing specialists who work together, as Ford’s Kopka says, “to get it right the first time.” And because auto companies can no longer afford to produce fleets of brand-new models each year, current designs have to be durable and forward-looking enough to last for approximately six years.

Now, the overwhelming trend in car design, and one with an undeniably functional origin, is aerodynamics. The new teardrop-shaped, sleek, road-hugging cars beginning to crowd dealer showrooms represent more than a fad; instead, they evolved out of a search for greater fuel economy. Declared Kopka, who as Ford design chief heads what many consider the most advanced design studio in aerodynamics: “The aerodynamic shape is the way nature intended cars to look. That shape slices through the dense medium of air—which is almost like a brick wall at high speeds—in the most efficient way, with the least amount of effort.”

Using computer screens and enormous, expensive wind tunnels, designers now devote unprecedented attention to detail in their search for the ultimate wind-cheating shape. Anything that hampers the smooth flow of air over the body of the vehicle is either rounded off or discarded: headlights and windows are being built flush with the car body; grilles, jutting door handles and roof gutters are disappearing; and rear-mounted “spoilers” designed to cut turbulence are beginning to appear on even the most sedate family sedans. Many cars already take in air under the front bumper rather than through the grille, and Kopka said that future radiators will probably be located at the rear of the car to suck in the pocket of air that forms there and creates drag. Designers are also helping to develop computer-controlled suspensions which change the angle at which the car meets the wind for optimum advantage at different speeds. The result is improved performance from smaller, more economical engines. Ultimately, the designers say that they hope to reduce the power required to maintain a car at 80 km/h to 2 1/2 horsepower, about the same amount generated by a lawn mower.

Already, drivers have noted some unexpected benefits from aerodynamic cars. For one thing, the unencumbered movement of air helps to keep a car’s surface surprisingly clean. And at high speeds, the ride is eerily quiet. Said Kopka: “We have had customers tell us that for their first few days with our new cars they catch themselves going much too fast because they were used to associating the speed of their car with the sound they heard, and all of a sudden there is no wind sound.”

When modern car designers say that form follows function it becomes clear just how radically Detroit has changed. But despite the electronic glitter and the new spirit of almost entrepreneurial optimism, almost all auto analysts agree that the future is far from clear. Certainly, the palmy days following the Second World War, when North American producers made 80 per cent of the entire world’s automobiles, will never return. In fact, many analysts argue that the current boom is just an aberration in the otherwise steady decline of the car industry as it is now organized. They credit demand delayed by the recent recession coupled with the so-called voluntary restraints on Japanese imports to North America, which have been in effect since 1981, for the current fast pace of sales.

Both of those factors have afforded domestic producers a somewhat artificial market success. The reality of that success is currently being put to the test in the United States, freed since March of the quotas. (Ottawa, for its part, is still debating whether or not to extend Canadian quotas.) But with or without trade barriers, auto executives now generally admit that the success of their recent reforms will be measured against a yardstick labelled “Made in Japan.”

What the Japanese auto producers have done over the past 15 years, in fact, is undeniably one of the greatest industrial triumphs of the century. It ranks with Henry Ford’s invention of the assembly line as one of the three great transformations in the auto industry, according to the authors of The Future of the Automobile (the other was the exporting of Europe’s highly diversified automobiles following the Second World War). An island with one-half the population of the United States, one-twenty-fifth the land area and almost no natural resources managed to outperform mighty Detroit—a victory symbolized dramatically last year when Japan produced more than seven million cars compared to 6.8 million made in the United States. North American auto executives still call it “the Japanese invasion,” with mingled consternation and admiration.

Some of those executives who served during the complacent days of the 1940s and 1950s remember the first Japanese visitors: they arrived in small armies, bearing cameras and clipboards, noting every detail of an industry that they were about to build from scratch. They neither had to reorganize outmoded systems nor convert conservative auto executives. And they instituted a management style strikingly different from that of their North American counterparts, one that emphasized worker responsibility, participatory management and teamwork.

The first Japanese cars imported to North America gave little indication of the trend that would develop. Consumers bought the imported autos because they were cheap, and they liked them because they were surprisingly reliable. But by the mid-1970s, with their basic market established, the Japanese began shipping cars that by any objective standard were superior to equivalent North American models. As sales rose, many Detroit executives continued to dismiss them as toys, attributing their success to the transient energy crisis. Even now, some U.S. industry insiders withhold their admiration because, they say, many ingredients of the Japanese success were based on U.S. technology and management styles. But increasingly, that comforting argument is also disappearing. Said Womack: “What is important is not who invented something, but who was able to implement it.” And now, the Big Three are so busy copying the Japanese that they no longer have time for the old arguments.

Most North American auto executives have learned to accept that situation realistically, even philosophically. Said Chrysler’s Withrow: “U.S. auto companies are becoming more worldly, and are looking around more. We are making sure that we have completely analysed the way the Japanese are doing things, like they did here in the late 1940s and 1950s and even into the 1960s. Clearly, there are things we can learn from them.” Workers in almost all North American plants now check the quality of vehicles at almost every point on the assembly line—not simply at the end as they once did—inventory is no longer stacked up wastefully but arrives “just in time,” Japanese style. Perhaps most importantly, managers are learning to treat workers less as hired hands than as minds to be tapped in the team effort of improving production.

At Ford Canada the new management style began in 1980, when Detroit designers arrived at the Oakville, Ont., assembly plant with clay models of the company’s Tempo and Topaz compact cars. They asked workers for their ideas on the assembly of the vehicle, and incorporated 80 per cent of the 300 suggestions they received. Now, that approach—including regular “participative management” courses for managers and supervisors—is standard. The result is that over the past four years production at the Oakville plant has increased to 60 from 42 vehicles per hour.

So far, none of the Big Three has copied a common Japanese practice and composed a company song that employees are required to sing every morning en masse as they do their daily exercises. But at the Fremont, Calif., factory operated jointly by GM and Toyota, domestic industry has taken imitation one step further with a laboratory periment to determine how well Japanese management and unionized U.S. workers can produce cars together. For Toyota, New United Motor Manufacturing, Inc. (NUMMI) allows easier access the American market and valuable experience with American workers and suppliers. For the United Auto Workers, the joint venture provides jobs for 2,500 previously laid-off workers and a work environment radically different from the situation at the plant when it was operated by GM alone—and labor relations were often contentious. Smith says GM will learn valuable lessons that it can incorporate into other plants.

The Fremont assembly line has been moving at half-speed as the U.S. workers learn their new responsibilities. Workers are encouraged to make suggestions and will be rewarded for good ones; they are individually responsible for stopping the assembly line if they notice faults; and they work in teams with far fewer restrictive job categories than normal for a North American car factory. At one Ford plant, where workers were also allowed to stop the line, defects plunged from an average of 17 to less than one per car.

Last month Chrysler chairman Iacocca—within days of dropping an antitrust suit against GM and Toyota—announced a similar joint venture to NUMMI with Mitsubishi Motors Corp. of Japan. And already there are several wholly owned Japanese auto plants in North America, most operating with nonunion labor and maintaining Japanese standards of quality. (Even South Korea’s Hyundai, whose Pony became Canada’s best-selling imported car last month in its first year on the market, has announced plans to build an assembly plant in Newmarket, Ont.) In overseas plants Japanese companies lose most of the $2,000-$2,500 cost advantage per car that they enjoy when using Japanese suppliers and workers. But in the long run, continued insularity would be as detrimental to Japan as it is to Detroit.

The Japanese-American connection is just one of a bewildering array of international partnerships that are transforming the industry. They include: France’s Renault owning 46 per cent of American Motors and 10 per cent of Sweden’s Volvo; Honda and British Leyland producing cars together in Britain; Volkswagen about to assemble its new Polo in Brazil, for export to the United States; Nissan assembling Volkswagens in Japan and owning 37 per cent of a Spanish auto company at the same time that it operates a joint venture with Alfa Romeo in Italy; and a new line of Fords being designed by Mazda in Japan for construction in Mexico.

Co-operation is attractive because it helps to bring down the cost of developing new models (currently $1 billion, according to Iacocca). And for the most part, industry executives, including Smith, dismiss the criticism that partnerships will lead inevitably to the creation of a few enormous corporations that will control the global industry. But to a labor force already threatened by automation and plant closures, they represent another potential setback. Declared Canadian UAW president Bob White: “The government sits on the sidelines and watches these multinational corporations—who really do not care where they make their money—make more and more investment decisions outside of the country. We have put a policy in place that says, ‘We don’t care what you’re called; if you’re going to sell in this market, you have to make commitment here.’ Otherwise, they just export jobs.”

In general, management welcomes Japanese and other foreign auto plants in North America as enthusiastically as labor does. Indeed, a 1984 joint management-labor committee recommended that the Canadian government move to extend the production guarantees of the 1965 Auto Pact to Japan. So far, Ottawa has shown no sign of accepting the recommendation. And management says it is determined to fight move to curtail its right to tap cheap labor sources abroad. Said Smith: “You ask the guy on the line what he wants. He really wants job security. But all job security guarantees in the whole world aren’t worth the paper they’re written on if you aren’t competitive. what are you going to do? Go get your unemployment compensation from bankrupt company? That doesn’t make any sense.”

Smith wants to keep his options open. He says that copying the relentlessly improving Japanese will not ensure GM’s long-term survival. But as he drags his truculent company into the future, he says he intends to rely less on Third World labor than on the so-called hightech fix—a bid to incorporate superior American techniques into the making of cars. It is a step with so much promise that the international experts who wrote MIT’S The Future of the Automobile have already tentatively labelled it “the fourth transformation” in the history of the industry. But Smith has his own name for it: the Saturn Corp.

It is a measure of Smith’s growing stature in the GM pantheon that Saturn will become the company’s first new division since 1918 (the others are Chevrolet, Pontiac, Buick, Oldsmobile and Cadillac). With an unprecedented initial investment of $5 billion, Saturn will produce 500,000 subcompact models each year with only 6,000 employees at an as yet unnamed location. But the car itself is the least important aspect of the project. Although Smith describes the Saturn prototype he has driven as “an outstanding vehicle, a fabulous automobile” which will “sell itself” when it becomes available sometime before 1990—perhaps appropriately the year of his scheduled retirement—it is the Saturn factory that holds revolutionary promise. Said Smith: “Saturn is to Japanese auto plant what a Japanese auto plant is to Henry Ford’s assembly line. It is that big a leap.”

Within a company that is bolstered but also burdened by 75 years of tradition, Saturn is GM’s attempt, said Smith, to “start all over again from scratch, with a clean sheet of paper.” In fact Saturn is intended to be a “paperless” plant where computers are integrated fully into administration, design, manufacturing and marketing. Construction will be modular, using large preformed parts rather than several small ones—ideally suited for computer design—and employees will work in teams.

Indeed, the traditional assembly line may disappear. GM also plans a separate dealer network for Saturn cars, whereby customers will place orders by punching their specifications into a computer connected directly to the factory. But the main aim of Saturn is to create an ideal model that will eventually teach all the other GM divisions how to make cars again. Said analyst Maryann Keller: “Saturn’s real aim is to break up all of the remaining loggerheads in the auto industry, the places that are most reluctant to change: the dealer body, labor unions and management.”

Labor is accepting that turn of events as gracefully as possible. In fact, UAW representatives were active in planning Saturn. Said the UAW’S White: “It is a realistic view among our people that in the long term, there will be fewer jobs because of the increased technology. But a lot of people do not understand the amount of retraining going on in the auto industry today. Almost whole plants are being retrained now. So workers feel more secure about the introduction of technology.”

Another possible outcome of Saturn—as well as similar but less developed projects at Chrysler and Ford called Liberty and Alpha respectively—is a new image for Detroit cars. Said Wall Street analyst Keller: “The most significant problem in the American auto industry is luring the young buyer, because domestic cars have no image.” Indeed, Detroit has been steadily losing ground in the important Yuppie market to foreign competition. Added Womack: “This country really needs a winner in basic manufacturing—we really got beat up. But unfortunately, the history of technical leaps forward at General Motors has been that General Motors always ends up on its face. I just hope they can pull it off this time.” There is a widespread conviction in Detroit that the high-tech fix will be cheaper in the long run than producing in developing countries, and that it will also eventually pull the U.S. industry ahead of the Japanese. Said the University of Michigan’s Cole: “Saturn really represents a major step forward, and one that is going to be very difficult for the Japanese to emulate. Software is the Japanese Achilles’ heel. They are fantastic at hardware, but computers are worthless without software.” In Detroit that view is pervasive and comforting. But recent history shows that the Japanese have been far more innovative than Detroit. In fact, Japanese companies were responsible for more than half the world’s new automotive patents in 1981, while Detroit’s share fell steadily through the 1970s to less than a quarter.

The General Motors Technical Center near Detroit, housing 6,000 scientists, engineers, designers and support staff, and the world-famous wind tunnel, extends over 330 acres. Theoretically, the best of the pure-science research projects that flourish there will eventually improve the design and manufacture of GM automobiles. The first stop on the tour of highlights is with a scientist who has developed three impressive systems—using TV cameras, computers and robot arms—that can “see” and pick up target shapes even when they are partly hidden by other objects. His name is Ichiro Masaki.

Masaki is momentarily bewildered when asked why he works in Detroit, not Tokyo. To him, the answer is obvious: he would have been unable to find a pure research position in his native Japan. “Japanese are good at executing, not developing things for the future,” said the Japanese scientist, who has spent the past three years at GM developing technology for the future.

The irony seems lost on Masaki, but it goes to the heart of the uncertainty about the future that currently pervades the global car industry and, because of that industry’s continuing predominance, the industrial world as whole. No easy solution will ever again confer on one country the near-monopoly that the United States once enjoyed in the car industry. But that very uncertainty is producing massive changes in the way cars are built and in the way they perform—changes that will likely continue well into the next century. And as the car enters its second century, it will almost certainly become an even more vital part of daily life.