Piston Slap: The Ram-ifications of Dodge v. Ford Motor Company
Jay writes:
Do automakers stay competitive in the market by being perceived as modern, cutting-edge, and ahead-of-the-curve? Does it seem that each wants to be seen as the best, most advanced and sophisticated manufacturer?
Automobiles are ridiculously complex—is there an end in sight? All this impacts affordability too, right?
When will this end?
Sajeev answers:
What entertaining series of thought experiments! Let’s peer into the collective minds of your average, publicly-traded automaker to see if we can draw somewhat valid conclusions to these questions.
The Competitive Advantages of Modernity
Be it a self-starting engine, integrated bodies, high-performance engines, lower emissions, safety equipment, or even self-driving software, every decade or so the automakers come up with a “killer app” that everyone needs in their next car. The prevalence of smartphones and their subsequent arrival on the automotive landscape is the lowest hanging fruit for us to pick and savor.
Ford was one of those early adopters in smartphone vehicle integration, having critical success with their first Microsoft SYNC system in 2007. (Not to be confused with its MyFordTouch successor, which was bleeding edge technology personified.) Everyone wanted to capitalize on the popularity of these little gadgets in our pockets, and it didn’t take long for every automaker to have something like SYNC in their vehicles.
But why? Revenue generation from cellphone-savvy drivers is one reason. But once technology became a driving factor in company valuations, there was a good chance that stuff like SYNC could also boost a company’s stock price.
(This is likely why many non-automotive companies now have a veneer of artificial intelligence added to their products/services. The AI boom can make you a lot of money.)
Dodge vs. Ford
Here’s where the title of this Piston Slap comes into focus, as perhaps Dodge v. Ford Motor Co. provides proper context for my answers to Jay’s questions. In 1919, the largest shareholders of Ford Motor Company stock (The Dodge brothers, with 10% of the company) sued for a fatter dividend. While they likely wanted more money to finance their own car company, Dodge’s legal claim hinged on the fact that Ford was sacrificing profits (selling Model Ts for less money over time, $5 workdays, etc.) at the expense of shareholders.
But Henry Ford was perhaps pioneering what we currently see as standard operating practice: Lowering prices to grow the market and gain market share. Ford was looking at long-term success at the expense of short-term profits, and he won the case. While the court’s ruling did not specifically state that a public company must use its resources to maximize shareholder wealth, it does give senior management latitude to invest capital as they see fit.
In today’s world, senior management is more inclined to think about the stockholders these days, often for the sake of their own stock-fueled paycheck. But that’s not to say that big picture thinkers don’t have their place in society. Though we have seen a steady rise in vehicle cost and complexity, just like Henry Ford’s mission to put more of the world behind the wheel, we are beginning to see glimpses that his modern-day counterparts are making a similar play for today’s customer.
Complexity Made Simple?
Jay is right, it is true that automobiles are quite complex these days. This is mostly because of extra mechanical (i.e. why is everything turbocharged, with a million gears in the transmission?) and electrical bits with secret features like the ability to spy on us. There could be an end in sight, as we will discuss in the next section.
But even if there wasn’t such an ending, remember that many vehicles have strong aftermarket services for these complex modules and subsystems. Much in the same way we hire a plumber, an HVAC tech, or a licensed electrician to repair our homes, we have places like UpFix (and their Mom and Pop local counterparts) that rebuild seemingly impossible to repair items: All we do is diagnose the problem, yank the module, and ship it to a rebuilder.
Aftermarket support makes such complexity a lot simpler, but there’s no doubt that modern engines and transmissions will place unnecessary demands as the years turn into decades. And that neediness might accelerate our transition to EVs in many zip codes: Rebuilding oil-starved turbochargers and dead 8-speed cog swappers isn’t as easy as replacing a bad cells in a depreciated Tesla Model 3 or Mustang Mach-E battery pack. (Once EV diagnostic tools are as common as OBD-II scanners, of course.)
Sticker Shock
Being able to afford a new vehicle is likely a big problem for many readers. All this complexity adds a layer of cost that is splitting the market, as even franchised new car dealers sell more used than new cars in some quarters over the past five-10 years.
It’s not just cars, but American retailing as a whole: Dollar General’s CEO once famously remarked, “we do very good in good times and we do fabulous in bad times.” Oh, dear.
Car dealers can pivot between new makes and used models, but alienating an ever larger number of people is bad for an OEM automaker’s long term prospects. Ford’s own CEO wants Americans to fall back in love with small cars, ones that are presumably cheaper. In order to appeal to more folks, they’d need modular body styles, a mix of gasoline and EV technology, and have a smattering of modern electronic interfaces in the same manner of cheap Chinese vehicles. They basically need a modern take on the Ford 24.7 concepts from the year 2000.
Judging by the chatter on social media I hear about Chinese automaker BYD (once the mainstream media realized they are a better story than non-stop Tesla coverage), it’s entirely likely that younger folks priced out of today’s new cars would buy something that we’ve traditionally considered a penalty box. And if they do, others will follow. Just like they’ve always done.
When will this end?
Answering your final question takes the shiniest of crystal balls, but I’ll give it a shot. As previously mentioned, complexity aside, the writing is on the wall for big vehicles, and we haven’t even discussed the general rise in traffic fatalities in the last 10 years.
I am not suggesting the strong sales of full-size trucks, SUVs, Crossovers, and heavy luxury vehicles shall disappear via radical forces like government intervention or a popular uprising. I am merely suggesting that a neglected market for simpler, more affordable, and smaller vehicles is finally showing signs of interest by both the automakers, and the mainstream media. Combine that with the sales of the uniquely American Ford Maverick trucklet, and we have a darn good chance of a more balanced, nutritious product mix of automobiles in America in the next decade or so.
How BYD fares in Mexico could also be a bellwether for the rest of North America. Success isn’t gauranteed, as it could fail like the Tata Nano in India if automakers don’t get the mix of product, price, and promotion correct. (That case study may be less of a problem here, because so many of us need a car to function in our sprawling society.)
Perhaps one final sentence can wrap up this whole thought experiment:
“Fear not, for the need of automakers to seek profit (above all else?) will end our increasingly worrisome lack of affordable, pragmatic modes of transport.”
Sanjeev Sajeev Mehta
Have a question you’d like answered on Piston Slap? Send your queries to pistonslap@hagerty.com—give us as much detail as possible so we can help! Keep in mind this is a weekly column, so if you need an expedited answer, please tell me in your email.
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Dear Sanjeev (ratz, can’t make this crossed thru) Sajeev –
Once again, and entertaining and yet thought-provoking Piston Slap piece, and thanks to both you and Jay for providing it. It is indeed a very complex issue, not only historically, but in that crystal ball realm where you so often venture. As far as comparing the two (history and ‘where-do-we-go’), I’m not certain it can be done. Just as Henry’s idea to serve the masses at the expense of profits was eventually overruled by corporate greed, and simple, basic Model Ts were replaced by vehicles more complex than moon landers, the ways of designing, building and marketing cars and trucks today and going forward will likely little-resemble how it’s been done in the past. Musk – like him or loathe him – turned the industry on its ear, as did things like Carvana, and my sense is that there are yet to be more dramatic changes to come (introduced by more dramatic people). Look at the music industry – virtually nothing is done today to sell songs like it was just a decade ago, let alone when I was a teen.
At any rate, wherever it’s headed, it’s going to be fun to watch for us automotive geeks. And it’s going to be even more fun to read what you write about it. Thanks for a great attempt at answering Jay’s questions!
If you are open to learning the tiniest bit of HTML, you can do it:
njeev. Simply use the HTML tag for strikethrough:(no spaces), followed by the text, and end with the end-strikethrough tag:.Oops: <S>your text</S>
I’m certainly open to learning – just the memory banks aren’t so open to retaining what I’ve learned! 😒 But that’s a great tip, Tim, and I’ll do my best to recall it (or at least remember to search up this article again) the next time it’d be appropriate to use. Thanks, man! 👍
Actually the Dodge brothers weren’t the largest shareholders in Ford. Henry Ford himself was the largest with just under 60% and his head of operations James Couzens the second largest at 11% compared to the Dodge brothers who owned 5% each.
And, as I recall the history, Hank was paying big bucks to buy components from the Dodge Bros for his Model T’s. It was a win-win-win for the boys, and it drove crazy Hank to be even meaner than before. They were using his money to start their competitive car company! As a note, they were engineering geniuses and died way too young, whereas Henry lived way too long.
When it comes to complexity, all you have to do is look at your consumer practices. Would you buy a car with no infotainment system, manual windows, manual steering, a third pedal, etc… 40 or so years ago, some people said yes, and we had simpler cars. Now people want all of these things and more, like cars that correct your steering and apply the brakes for you.
We have become a very spoiled society, and people have grown to expect conveniences, which leads to complexity. I don’t particularly care for a lot of these things, and am indifferent about a lot of others, but I am in the significant minority, and there are enough old cars around to keep me happy… for now. I suspect in another 10 years or so I will be figuring out how to remove all of the telecommunications and nanny controls from the cars of this era.
Not entirely true.
I tried to order a manual transmission GM 2500 4×4, was told no, tried to find one and only 2 were available in the entire U.S. and both were reg cabs. It was (seemingly) simple – Ext Cab, V8, LS trim, 4×4, manual transfer care and manual transmission. I was flexible on everything else.
Not even GM would help, no one would take my order, or even entertain my willingness to pay cash.
I reluctantly bought an automatic, the rest I’ve shared numerous times.
Bottom line, there is more profit in automatic transmissions, power windows, infotainment systems, etc. So buyers order what makes the most money.
I get certain options not being profitable. With all the rules around EPA testing for drivetrain combinations it’s pretty easy to see why options are narrowing.
Dealerships are very guilty of stocking mostly top-spec offerings as well.
Some of the “extras” are legislated (at least in some areas) so that cost is added above inflation when comparing a 30-year-ago vehicle to today.
It is frustrating when the “build and price” websites let you configure something and they won’t let you order it and none exist within ten hours of your location –so why can I configure it?
Trucks are interesting because fleet ordering does still cause options out there (manual crank windows) that other vehicles just don’t have anymore.
I think the lost opportunity is one of the lesser-selling brands to just own a niche. Nissan for example instead of chasing a few luxury truck sales go the opposite end and offer the most basic version you can actually move units of. They did this in a way by not changing the Frontier for 15 years but then the dealers only stocked full-jam Frontiers which weren’t the best buy compared to the competition at that price point.
I work for state government. I’m not sure what all goes into the set up of the fleet vehicle contracts, but I do know that for 10+ years all of the full size trucks available to us for purchase from state contracts have been base model trucks with no options, but still included power windows, power locks, FM radio, automatic transmissions, and A/C. Depending on the make, some included power mirrors. Of all those conveniences, other than A/C of course, power mirrors are the most helpful due to having different drivers all the time.
I do enjoy the simplicity of my daily driver 98 F150 XL. It is automatic unfortunately, but it has a cold A/C and nothing else. Bench seat, manual windows, manual locks, non-tilt wheel.
The same with GSA leased vehicles for the federal government. Makes a bit of sense — vehicles with auto, AC, PW, etc. have a higher resale value and are easier to sell at auction once the lease is up. That’s probably the same reason for the state vehicles having that equipment.
The future is going to be based on government regulation and economy.
It is not enough to just make money to survive. Automakers must sell the models that hold the highest return on the dollar. So they are not going to make de contented vehicles as there is little to no profit in the few they sell.
It is like when power windows became standard, Why? It was cheaper vs offering two different styles. Pure economics of the day.
EV is not going away and tech will make it more affordable. Regulations may make them required.
As for Chinese cars. Everyone complains about them like Walmart but yet people gravitate to what 5hey can afford. If we do not stop them from under cutting our industry they will do much damage.
Look for odd thing like the GM line CUV models like the track. People love it but no AWD. They added a bit of size but no AWD to save weight. You can get AWD in the smaller Trailblazer.
Odd things like this will come. You will still have size but it may limit other things due to weight.
The rear hatch open floor vehicle will remain due to utility. Small sedans just don’t haul much anymore. Sedans will last in higher price low volume classes. Same with performance.
Automakers will hold onto ICE as long as possible. But they will continue the EV path due to coming laws by stated mostly CARB based.
More automakers will merge or partner on EV. Only Toyota, GM and the VW group can go it alone. Nearly everyone else will need a dance partner. Tesla will survive only as long as their stock remains inflated and on how much Musk pumps in himself.
A lot of the standard items in vehicles cost less than if you were to, by most peoples thinking simplify them to older systems. Digital watches , for example , were once cutting edge tech. and a bit pricey for what they were. Now they’re more bottom of the barrel items to be picked up for a few bucks vs any mechanical not to mention an automatic.( I used to get a free digital with any order over 20 bucks for Chinese takeout that said ” Chinese food is good food ” that was my work watch until it would die after a few months. ) So the added cost of making ‘low brow’ basic vehicles and higher end units doesn’t financially wash often considering the different tooling etc that would be required to make both. Standardization rules. Yea, I get it. I don’t need heated seats or side view mirrors . And many people find if they want this or that it’s only available in the next up package that also has these enticing comforts that sound great at the dealership, that they’ll in fact never use. And the salesman dances because he/she doesn’t know exactly how they work either. However the cost of certain things does go down as they become more common ,frequently used and perfected. The danger is two items that on spec. appear the same when new but soon after brand B …cheap chips from the lowest bidder. Giving credit where credit is due this has become less and less common in vehicles.
I would like a car with 90’s level tech and an easy to replace double din car stereo slot so I can add nav if I want from my phone. The never ending battle of screens and tech is making things too expensive.
Ford’s CEO wants to us to go to smaller vehicle’s that they no longer make! Ford does not make a sedan any longer.