Number of words: 190

The Big Three, with labor as a fixed cost and no freedom to cut earnings in bad times (as Toyota and other Japanese manufacturers could), were caught in an infernal cycle. They could not close factories quickly enough to adjust capacity to falling demand. This made them even less competitive against the Greenfield, non-union plants the import brands opened in the southern states. The only answer seemed to be to keep production going as high as possible, to keep the cash coming in. All through the 1990s, when America enjoyed unheard-of prosperity and when the ups and downs of the economic cycle that used to convulse Detroit virtually disappeared, things went from bad to worse. All seemed plain sailing, but the sales incentives were the only source of buoyancy, while profits made on financing consumers’ purchase of cars were the only way to stay profitable. Running the companies for cash and short-term survival was no match for the careful, long-term product planning and investment of their Japanese competitors.

Excerpted from Page 42-43 of ‘Zoom: The Global Race to fuel the car of the future’ by Iain Carson and V Vaitheeswaran