2023

 

It's been 50 years since the troubles really began to mount for Detroit in 1973

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• In 1973 Detroit was very good at making large automobiles and muscle cars but they also had been producing compact and subcompact models to fight competition from overseas.  

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• In the late 1950s, responding to the foreign competition which mainly came from the VW Beetle, US automakers introduced  the Chevrolet Corvair, Ford Falcon and Plymouth Valiant.  This was effective for a time and they regained share ... then the imports started making headway again in the late 1960's.  Detroit responded with subcompacts like the Chevy Vega and Nova, Ford Pinto and AMC Gremlin.  Problems with the Pintos catching fire in rear end collisions cast doubts about US made smaller cars plus the styling and quality of the imports made them formidable.

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• Full sized cars were stylish, comfortable and gave people a sense of security.  There was a legitimate fear of being involved in and accident in a small car.  The muscle cars were very fast and across the board both of these categories of cars were gas guzzlers averaging 12 mpg and had a lifespan of roughly 100,000 miles.

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• In 1973 gas was cheap ... only 25 cents per gallon and the government was reluctant to place significant taxes on it, so there was little incentive to worry about gas efficiency.   Europe and Japan were a different story ... to raise revenues for road maintenance and domestic spending gas was taxed at a much higher rate there and as a result they produced cars with significantly better mileage ... more than twice those produced in the US.  

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• The US was becoming more and more dependent on oil from the middle east. Earlier in 1973 the government had loosened import restrictions to 6 Million Barrels Per Day vs 2.2 in 1967 due to increased consumption here.

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• Later that year this move would backfire as OPEC, which was a coalition of oil producing countries primarily in the middle east … hit the US with an embargo that created shortages and increased the price of gas four fold.  A rationing policy was put into place and long lines at gas stations were common.  People panicked.

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• There was another spike in oil prices in the late 1970's.  Japanese and European auto companies found an increasingly receptive market here for their cars … leading to a major decline of market share for the GM, Ford and Chrysler all of which were located in Detroit.  

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• Aging plants became part of the problem, not only from a productivity standpoint, but also because new regulations to reduce pollution of the air and water were coming out of Washington.  Keeping the plants operational would require huge investments to retrofit them to meet new standards.

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• The need for more modern and productive plants played a roll in the automakers making the decision to shift production to the suburbs of Detroit where plants could be spread out on large tracts of land and not require multiple levels and disconnected operations.  Lower labor costs down south and financial incentives offered by the states to locate there, led to some plants moving out of Michigan altogether.

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• Detroit was able to hang on to market from 1980 to 1996  by developing the light truck market with mini vans, SUV's and pickup trucks, but then began to erode again in the late 90's as foreign completion came out with their own lines of light trucks.   

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• From 1950 to the time of the bankruptcy Detroit lost roughly two thirds of its population.  The auto plants and consequently jobs were moving out of the city and expressways made the suburbs more accessible,  It should be noted that the Detroit metro area is very nice with appealing small towns, lots of lakes and the land was very affordable.  To many who grew up in small towns and moved to Detroit to work in the factories, the idea of going back to a more rural environment appealed to them.  

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• Doctors, lawyers and small businesses … retail stores followed the people leaving behind vast numbers of abandoned houses and buildings.

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• The reduced tax base made it more difficult to provide basic services and meet the mounting obligation to fund the pension funds etc.​

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• Mounting debt and financial obligations left the city with no choice than to file for Chapter 9 Bankruptcy.  For more information on the Bankruptcy and how it actually helped Detroit click on the Links tab above to find more in-depth information.