00:00:00
In late 2008, the CEOs of General
00:00:03
Motors, Ford, and Chrysler pulled up to
00:00:05
the Russell Senate office building in DC
00:00:07
following a 500-mile road trip from
00:00:09
Detroit. Each drove one of their
00:00:11
company's newest, most fuelefficient
00:00:13
hybrid vehicles, a Chevrolet Malibu,
00:00:15
Ford Escape, and Chrysler Aspen in an
00:00:18
effort to repair their tarnished public
00:00:19
image. The previous month, they'd
00:00:21
traveled to DC by private jet. And well,
00:00:24
the media didn't love the optics of CEOs
00:00:27
burning tens of thousands of dollars of
00:00:29
jet fuel in order to beg for a bailout.
00:00:31
This time though, the strategy was to be
00:00:33
more consiliatory. Quote, "We're here
00:00:36
today because we made mistakes." General
00:00:38
Motors' Rick Wagner told the Senate
00:00:40
Banking Committee, "We're sorry to be
00:00:42
asking for this support." This trio of
00:00:45
American auto manufacturers had long
00:00:47
been referred to as the big three based
00:00:49
on their historical dominance of not
00:00:51
only the US but the world auto industry.
00:00:54
And yet here in the United States, the
00:00:57
country where Henry Ford invented the
00:00:58
Model T and car-shaped postwar culture,
00:01:01
the three companies that had built that
00:01:03
legacy were failing. Though the decline
00:01:06
occurred quickly, the circumstances
00:01:07
leading up to it did not. In the
00:01:09
mid-century, the auto industry was
00:01:11
relatively unregulated, and vehicles
00:01:13
were big, loud, and dirty. But
00:01:15
legislation in the early60s started to
00:01:17
target air pollution and automobile
00:01:19
safety through efforts like emission
00:01:21
standards, which required automakers to
00:01:23
cut hydrocarbon and oxides of nitrogen
00:01:25
emissions by more than 50% by 1975, and
00:01:28
essentially made the popular muscle cars
00:01:30
of the ' 50s and60s extinct. This era of
00:01:33
regulation also included the
00:01:34
implementation of seat belts and
00:01:36
bumpers, which while inarguably
00:01:38
worthwhile, shook up the pecking order
00:01:40
of the industry. Everyone had to change,
00:01:42
which made it easier for newer
00:01:43
competitors to step in. Japan was the
00:01:46
biggest threat. In 1958, Toyota
00:01:48
introduced the first Japanese car into
00:01:50
the US market, the Toyota Crown, and
00:01:52
over the next decade, others would join
00:01:54
like Honda, Nissan, Mishubichi, and
00:01:56
Mazda. The timing couldn't have been
00:01:58
better as Americans faced not one but
00:02:01
two oil crises during the 1970s. The
00:02:03
more fuel efficient Japanese vehicles
00:02:05
were increasingly attractive and the
00:02:07
country's exports to the United States
00:02:09
more than tripled in 5 years to upward
00:02:11
of 650,000 cars delivered to America by
00:02:15
1980. This could have been the point
00:02:17
when American car manufacturers
00:02:19
recognized the risk of volatile fuel
00:02:21
prices as an opportunity and they could
00:02:23
have prioritized smaller, lighter, and
00:02:25
more fuelefficient cars. But instead,
00:02:28
the big three, partially driven by
00:02:30
government policy incentives, put their
00:02:32
energy into trucks and sport utility
00:02:34
vehicles. This focus on trucks and SUVs
00:02:37
allowed Japanese automakers to corner
00:02:39
the passenger car market. In 2006, of
00:02:41
the Consumer Reports list of the 10 best
00:02:44
cars, all 10 were Japanese. At the same
00:02:47
time, the American auto industry lacked
00:02:49
the offshoring capacity of Japanese
00:02:50
automakers and depended more highly on
00:02:52
costlier American labor. In the United
00:02:55
States, the United Auto Workers Union
00:02:56
was a source of pride. And yet,
00:02:58
pensions, healthcare, salaries, and
00:03:00
legacy benefits all added up
00:03:02
significantly with labor accounting for
00:03:04
roughly 8% of a car's price. Japanese
00:03:06
auto workers weren't unionized. So, as
00:03:09
Americans experienced yet another oil
00:03:11
crisis in the 2000s, they once again
00:03:13
looked to smaller, more fuelefficient
00:03:15
cars, mostly made in Japan. American
00:03:19
auto manufacturing figures continued to
00:03:21
decline, dropping by nearly 50% compared
00:03:24
to just a decade earlier. The Great
00:03:26
Recession loomed, and the economy
00:03:27
started its precipitous fall, triggered
00:03:29
by defaults on subprime mortgages.
00:03:31
Though seemingly distinct, car sales
00:03:33
were also wrapped up in the subprime
00:03:35
mortgage crisis. In fact, some 24% of
00:03:38
automobile sales in 2006 were financed
00:03:41
by home equity lines of credit. And once
00:03:43
people started failing their mortgages,
00:03:44
they also missed car payments just as
00:03:46
others pulled back spending in general
00:03:48
in fear of the recession. Panic gripped
00:03:50
the big three as the threat of
00:03:52
bankruptcy increased. So, they formed an
00:03:54
argument that their failure would be a
00:03:56
problem not just for Detroit, but for
00:03:58
America. The companies asserted that the
00:04:01
crumbling of the American auto industry
00:04:03
could ripple across all parts of the
00:04:05
American economy and beyond, endangering
00:04:07
supply chains and dealer networks beyond
00:04:09
their own. They testified in front of
00:04:10
Congress, saying as much and requesting
00:04:12
billions after disclosing they burnt
00:04:14
through $18 billion in lines of credit.
00:04:17
Senators were skeptical. A vote on a
00:04:20
version of the bailout failed, but
00:04:22
eventually as the risks of bankruptcy
00:04:24
grew ever more concrete, President Bush
00:04:26
went around the legislative branch and
00:04:28
approved 17 billion in immediate funds
00:04:31
with more to follow once Obama took
00:04:33
office. With the bailouts came change.
00:04:36
Given a lifeline by the federal
00:04:37
government, GM literally became a new
00:04:39
company as the General Motors of old
00:04:41
went into bankruptcy, became the Motors
00:04:43
Liquidation Company, and sold its
00:04:45
valuable assets and name over to the new
00:04:47
governmentbacked GM. To get back into
00:04:50
fighting shape, this new company shed.
00:04:52
It shut down the Hummer, Saturn, and
00:04:54
Pontiac brands and sold Saab within a
00:04:56
year. It cut down its plants. It cut a
00:04:59
third of its employees in the US, 35% of
00:05:02
its American executives. and it vowed to
00:05:04
maximize efficiency with its trucks and
00:05:06
to begin to build the cheaper fuel
00:05:08
efficient cars of the future. The new
00:05:10
Chrysler followed a similar strategy. It
00:05:12
lean into the brands that worked, Dodge,
00:05:14
Jeep, Ram Chrysler. It'd make the
00:05:16
suddenly in demand sedans better, and
00:05:18
it'd lean on the expertise of its new
00:05:20
partner, Italian manufacturer Fiat, to
00:05:22
overhaul its light passenger vehicles.
00:05:24
Even Ford, able to narrowly escape
00:05:26
financial ruin without federal funds,
00:05:29
signaled that it was pivoting. It had
00:05:31
rid itself of luxury brands like Aston
00:05:33
Martin, Land Rover, and Jaguar in the
00:05:35
years leading up to the recession. This
00:05:37
along with the development of the
00:05:38
Fusion, Focus, and bringing along the
00:05:40
Fiesta put Ford in a position to lead
00:05:43
what seemed like a quickly transitioning
00:05:45
American automotive sector. Taken
00:05:47
together, America's big three had been
00:05:49
punished for pursuing strategies stuck
00:05:51
in the past and were now vowing to
00:05:52
figure out the smaller fuel efficient
00:05:54
cars of the future. Or so it seemed.
00:05:58
Fast forward 10 years after the world
00:05:59
hailed Ford as the future Ford company
00:06:02
so proactive it was able to outmaneuver
00:06:04
the recession and you find a very
00:06:06
different company. A car company telling
00:06:08
the world it would no longer be making
00:06:11
cars. In 2018, Ford announced that it
00:06:14
was getting out of the business of
00:06:15
manufacturing or selling any passenger
00:06:17
cars beyond the Mustang in the American
00:06:19
market. No more Fusions or Fiestas, no
00:06:23
more Focus. in just a decade, a 180 and
00:06:26
one that seemed inevitable within the
00:06:28
company given lagging sales and build
00:06:30
issues. They weren't the first of the
00:06:32
domestic giants to make the pivot
00:06:34
either. Chrysler made the move in 2016
00:06:36
when it announced that it would be
00:06:38
ending the production of the Dodge Dart
00:06:39
and Chrysler 200, the brand's two
00:06:41
economical sedans, and only continuing
00:06:43
the production of the muscular
00:06:45
Challenger and the comparatively
00:06:46
luxurious Chrysler 300. GM likewise
00:06:49
followed suit. By the 2020s, it had
00:06:51
announced the end of the production of
00:06:52
the Chevy Impala, Cruz, Volt, and
00:06:54
Malibu, the Cadillac CT6 and XTS, and
00:06:58
the Buick Lacrosse. Within a decade of
00:07:00
nearly bleeding out on account of a lack
00:07:02
of intentional adjustments for the
00:07:04
future of the car market that seemed
00:07:05
green, economical, and small, America's
00:07:08
big three had all but stopped making
00:07:10
cars for the American market entirely.
00:07:12
In an era that experts refer to as
00:07:14
perhaps the most disruptive decade in a
00:07:17
century of automobile manufacturing, it
00:07:19
was then telling that the big three all
00:07:21
announced that in the wake of cars,
00:07:23
they'd now be again focusing on SUVs and
00:07:26
trucks. Now, on the surface, such a move
00:07:28
makes sense as the demand for SUVs and
00:07:31
light trucks in the US has appeared
00:07:32
insatiable since the Great Recession.
00:07:34
But that demand is rather artificial in
00:07:37
nature. Auto bailouts may have saved
00:07:39
jobs, restructured seauite, gave core
00:07:42
American companies a new lease on life,
00:07:43
and presented a future of more
00:07:45
reasonable and efficient Americanmade
00:07:47
vehicles, but they didn't fix a critical
00:07:49
shortcoming in the American car market.
00:07:51
The definition as to what exactly counts
00:07:54
as a car. This is a graph of the share
00:07:57
of total light vehicle sales between
00:07:58
passenger cars and light trucks. Nearing
00:08:01
80% in recent years, the share of light
00:08:03
trucks in the US has hit a truly absurd
00:08:06
number. But this number becomes easier
00:08:08
to fathom once one considers what is
00:08:10
actually labeled a truck. This, for
00:08:13
example, by definition, is a truck, as
00:08:16
is this and this. And that's thanks to
00:08:18
legislation dating back to the 1970s.
00:08:21
With the energy crisis of the '7s came a
00:08:23
push to mandate better fuel efficiency.
00:08:26
With that mandate came the corporate
00:08:28
average fuel economy standards, which
00:08:29
allowed the National Highway Traffic
00:08:31
Safety Administration to set fuel
00:08:32
efficiency mile standards on passenger
00:08:35
cars. In doing so, there needed to be a
00:08:37
definition as to what was a passenger
00:08:40
car and what was not. So came this
00:08:42
definition for a light truck. 6,000 lb
00:08:45
or less designed to transport property
00:08:47
or people or generally designed to work
00:08:49
off-road. These qualities, especially
00:08:51
the latter, are all pretty nebulous in
00:08:54
nature. Aside from weight, they simply
00:08:56
don't exist in black and white. But the
00:08:58
ability to match these qualifiers comes
00:09:00
with an advantage, a lower required
00:09:02
mile. These lagging fuel efficiency
00:09:05
requirements are the bedrock of what's
00:09:07
referred to as the SUV loophole. But
00:09:10
building on that, another component of
00:09:12
this loophole has to do with the 1964
00:09:14
chicken tax. Legislation that puts a
00:09:17
retaliatory tariff of 25% on trucks
00:09:19
manufactured abroad. Another legal
00:09:21
particularity that has made trucks and
00:09:23
therefore SUVs a safe bet for domestic
00:09:26
automotive manufacturers. Now, over the
00:09:28
years, foreign automotives have adapted.
00:09:31
Toyota makes trucks here. Honda makes
00:09:32
its SUVs here and Hyundai here, but the
00:09:35
chicken tax presents further
00:09:36
justification for domestic manufacturers
00:09:38
to build SUVs as their competition is
00:09:41
hamstrung by the fact that they too have
00:09:43
to employ American workers to build SUVs
00:09:45
that effectively count as trucks in the
00:09:47
US. While not a loophole, a final
00:09:50
justification as to why the big three
00:09:52
have turned their businesses back to
00:09:53
trucks and increasingly only trucks is
00:09:55
the fact that the profit margins are
00:09:57
just better. There isn't much of a
00:09:59
difference from sedans in terms of labor
00:10:01
requirements. While they're bigger, the
00:10:03
additional material is negligible. But
00:10:06
because they're so advantaged through
00:10:08
the SUV loophole, domestic manufacturers
00:10:10
have spent decades marketing high-
00:10:12
yielding SUVs and trucks as safer, more
00:10:14
reliable, more capable, and just plain
00:10:17
necessary for every and all Americans,
00:10:19
urban or rural, blue or white collar.
00:10:22
While big three executives will mention
00:10:24
high demand for light trucks as the
00:10:26
reason they've given up on cars, their
00:10:27
strategy and marketing created that very
00:10:30
demand. With this focus, the big three
00:10:32
seated market share and today only
00:10:34
comprise 40% of the US industries, a far
00:10:37
cry from their glory days. But part of
00:10:39
their disinterest in competing in the
00:10:41
car market has to do with the fact that
00:10:43
they're no longer very good at it.
00:10:45
Consumers just don't trust US
00:10:47
automakers. In 2024, Chrysler, Ford, and
00:10:50
GM initiated the first, second, and
00:10:52
fourth most recalls amongst car brands
00:10:54
in the US, respectively. In 2025, no
00:10:57
Detroit brand cracked the top 10 in
00:11:00
Consumer Reports auto reliability
00:11:01
rankings. And only one time has a big
00:11:04
three brand, Buick, cracked the top 11
00:11:06
in the last 3 years. Beyond rankings and
00:11:09
recall statistics, there's been some
00:11:11
reputational black eyes along the way,
00:11:13
too. While far smaller in scale,
00:11:15
Chrysler, like Volkswagen, found itself
00:11:18
embroiled in an emissions testing
00:11:19
scandal in the 2010s. Certain Jeeps and
00:11:22
Ram trucks built from 2014 and 2016 were
00:11:25
found to be violating emission
00:11:26
standards, even though they had passed
00:11:28
lab tests before hitting the market.
00:11:30
This resulted in over a billion dollars
00:11:32
in settlements and fees for Fiat
00:11:34
Chrysler and eventually a guilty plea to
00:11:36
a criminal conspiracy to cheat emission
00:11:38
testing. In 2025, GM ordered a recall of
00:11:41
some 600,000 vehicles powered by the L87
00:11:44
engine. The general consensus was that
00:11:46
it was a long time coming. In fact, far
00:11:49
too long. For 6 years, consumers have
00:11:51
been registering complaints about the
00:11:53
massive 6.2 L V8 that powers Suburbans,
00:11:56
Taho, Silverados, Escalades, Sierras,
00:11:58
Yukons, and any other big GM vehicle
00:12:00
completely and catastrophically failing
00:12:02
within 100,000 mi of ownership. GM
00:12:05
looked into it internally in 2022, 23,
00:12:08
and 24, but nothing came of those
00:12:10
investigations. Not until the NHTSA got
00:12:13
involved did it come to light that
00:12:15
certain crankshaft, connecting rod, and
00:12:17
engine bearing malfunctions were common
00:12:19
across some 28,000 registered
00:12:21
complaints. And more troubling, some 12
00:12:24
crashes and injuries along with 42 fires
00:12:26
were potentially associated with these
00:12:28
engine problems. Across the board, the
00:12:30
big three just don't make very
00:12:32
dependable or trustworthy vehicles
00:12:34
anymore. And increasingly, it doesn't
00:12:36
seem like they aim to. Take Chrysler,
00:12:39
which merged with PSA and became a part
00:12:41
of the new Dutch automotive group
00:12:43
Stellantis in 2021. By 2023, after some
00:12:47
bold restructuring on the American side
00:12:48
in brands like Jeep and Dodge, Salantis
00:12:51
produced a record year, turning a $20
00:12:53
billion profit, paying out $7.5 billion
00:12:56
to its shareholders and compensating its
00:12:58
CEO with $40 million for the year. The
00:13:01
massive year has come with cost, though.
00:13:03
What set the stage for 2023 was a
00:13:05
combination of price increases across
00:13:07
its American fleet of Dodges and Jeeps
00:13:09
in concert with a series of factory
00:13:11
layoffs and the closure of an entire
00:13:12
assembly facility. The real cost of the
00:13:15
short-term boost became apparent quickly
00:13:17
with factory workers going on strike,
00:13:18
the Jeep and Dodge brands taking
00:13:20
reputational hits as signs of corner
00:13:22
cutting and cheap assembly became more
00:13:23
apparent, and their new car sitting on
00:13:25
the lots waiting to sell for days longer
00:13:27
and longer on average. But the strategy
00:13:30
isn't changing. After a bumpy 2024,
00:13:32
Stalantis went into 2025 with another
00:13:35
round of layoffs. And while they've
00:13:36
paused stock buyback programs,
00:13:38
shareholders did vote to maintain
00:13:40
shareholder dividend payouts. For some
00:13:42
then Stalantis is working. It's making
00:13:44
them money. But for someone who happens
00:13:46
to own a Stalantis car or work in a
00:13:48
Stalantis factory, the situation feels
00:13:51
different. And therein lies the problem.
00:13:53
The short-sighted business strategy of
00:13:55
Detroit automakers has kept the big
00:13:57
three afloat in a post-recession market.
00:13:59
But it's all but ensured that they
00:14:01
struggle to innovate, maintain any
00:14:02
semblance of quality control, and get
00:14:04
passed up by a host of ambitious
00:14:06
upstarts. There are, of course, American
00:14:09
car companies succeeding. While
00:14:11
Detroit's big three have turned back to
00:14:12
their historically tried and trueue,
00:14:14
domestic manufacturers like Tesla and
00:14:16
increasingly Rivian have helped usher in
00:14:18
a new era of American auto innovation.
00:14:21
Tesla has dominated electric vehicle
00:14:22
market share in the US across the 2010s
00:14:25
and early 2020s, and the story of its
00:14:27
rise has been well documented. In some
00:14:29
ways, the company built from the ground
00:14:31
up around electric vehicles has
00:14:33
advantages over legacy manufacturers
00:14:35
trying to make the hasty pivot into the
00:14:37
EV market. Rather than retrofitting and
00:14:39
retraining, Tesla had the benefit of
00:14:42
starting with electric as its sole
00:14:43
focus. Much of the same can be said
00:14:45
about Rivian in this decade with light
00:14:48
trucks. While still very much at the
00:14:50
front end of its rise, the company could
00:14:52
well do for electric trucks what Tesla
00:14:54
did for electric cars a decade prior.
00:14:56
Unlike the legacy manufacturers trying
00:14:58
to keep up in the EV space, neither
00:15:00
Tesla nor Riven had to retrofit assembly
00:15:03
plants or business models or deal with
00:15:05
labor unions to accommodate what
00:15:06
increasingly feels like the future of
00:15:08
automotives. In this way, the efforts of
00:15:10
the big three to maintain a foothold and
00:15:12
some relevance in the EV space seems
00:15:14
admirable given that Chevy and Ford had
00:15:17
the second and third highest US EV
00:15:19
market shares at 5.7 and 5.4%
00:15:22
respectively in 2023. But foreign EVs
00:15:25
are pushing their way into the US, too.
00:15:27
Hyundai's and Kia are eating into market
00:15:29
share with popular and relatively
00:15:31
affordable EVs, while Japanese
00:15:33
manufacturers are preparing to launch US
00:15:35
EVs like Honda's Prologue. And beyond
00:15:37
the future, the big three are giving
00:15:39
ground in the present. Take the number
00:15:41
one selling vehicle in the US in 2024.
00:15:44
It was a vehicle classified as a light
00:15:46
truck assembled in the US, but for the
00:15:48
first time in decades, it wasn't the
00:15:51
Ford F-150, but rather Toyota's RAV 4.
00:15:54
Perhaps it's just for a year, but it is
00:15:56
telling that in the US, in a car
00:15:58
category set to uniquely benefit
00:16:00
American companies in light truck
00:16:02
manufacturing, it is a Japanese vehicle
00:16:04
that Americans have come to trust as a
00:16:06
reliable, versatile, and dependable
00:16:08
vehicle more so than any other. Whether
00:16:11
it's in EVs then or trucks and SUVs, the
00:16:14
market is tightening for America's big
00:16:16
three, the walls are closing in and for
00:16:18
now at least, it's not looking like
00:16:20
Detroit really cares to keep up.
00:16:24
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NordVPN multiple times per day as I just
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constantly find reasons to use it. And
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I'm pretty confident Nord is the best
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VPN as I've tried plenty. Their speeds
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are so fast that I don't even notice the
00:17:20
VPN is on, and they have so many
00:17:22
different server locations, which both
00:17:24
allows me to route my traffic through
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the country I want and gives me plenty
00:17:27
of options if a site is attempting to
00:17:29
block VPNs. I'd really recommend you
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give them a try and you can do so risk-f
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free with a 30-day money back guarantee
00:17:36
when you go to nordvpn.com/wendover.
00:17:39
That link will also get you an exclusive
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deal with 4 months extra. So go sign up
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at nordvpn.com/wendover
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today.
