10 ways 1973 oil embargo changed car industry

By James B. Treece, Crain News Service

DETROIT (Oct. 15, 2013) — Oct. 17 is the 40th anniversary of the first Arab oil embargo, which launched the Organization of Petroleum Exporting Countries (OPEC) and fundamentally changed the auto industry.

Some of the changes really kicked in after the so-called second oil crisis of 1979, but it all started 40 years ago. This list is not comprehensive, but it indicates the magnitude of the changes Oct. 17, 1973, brought.

1. The rise of the Japanese and other foreign auto makers

In 1972, all import brands combined held just a 13 percent share of the U.S. market. That shot up to a then-record 15.8 percent in 1975. They never looked back. It wasn't just the Japanese; German brands also got a boost when their small but powerful engines got a second look from shoppers.

2. CAFE standards

Washington insisted that auto makers meet corporate average fuel economy (CAFE) standards but took no actions that would have encouraged people to buy the cars that auto makers had to build to meet those CAFE standards. Some auto makers had to put heavy incentives on small cars to meet the mandate; others just paid the fines.

3. Ruined reputations

Hasty, ill-planned and poorly executed forays into making small cars proved devastating to some brands' reputations. Think Cadillac Cimarron and Lincoln Versailles.

4. Auto maker tie-ups

A desire to add a fuel-efficient car to the showroom led to a flurry of courtships. Examples include Ford and Mazda; GM and Suzuki, Isuzu, Toyota, Fiat and Daewoo; Chrysler and Mitsubishi; Daimler and Smart.

5. 55-mph speed limits

The much-maligned limits meant the U.S. industry would never trumpet German-style Autobahn performance.

6. The rise of pickups and SUVs

As auto makers made cars smaller to meet CAFE mandates, consumers searching for more space gravitated to pickup trucks that had less-stringent CAFE targets to hit. It's the rule of unintended consequences: The oil embargo gave birth to the Hummer.

7. The death of the muscle cars

As car makers initially struggled to meet fuel economy targets, horsepower and performance went out the window.

8. The rise of alternative fuels

The quest for better fuel economy, lower fuel bills and so-called energy independence brought die-sel and ethanol, and alternative powertrains, such as hybrids and electric vehicles.

9. Globalization

When consumers in all markets think gasoline is expensive, then the same fuel-saving technologies appeal everywhere. Alan Mulally's One Ford would never have worked without OPEC.

10. Innovation

The original round of downsizing brought a passel of lousy cars. But the push to trim weight and boost fuel economy brought a wave of technology innovations that continues, including turbocharging, lightweight materials, front-wheel drive, eight-speed transmissions, direct fuel injection and many others. And as innovation flourished, the shape of vehicles changed. The behemoth station wagon disappeared, replaced by the minivan.

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This report appeared on the website of Automotive News, a Detroit-based sister publication of Tire Business.