I asked my wife to take a look at the new Mustangs down at the Ford (F) dealership, but she said the last good American car came off the assembly line back in 1965.

Years ago there were just a few car models to choose from, but you could pick any color you wanted as long as it was the four colors offered by the dealer. But back then we were in love with our cars. We all had actual emotional attachments to our cars. Some people even named their cars. And U.S. carmakers were the biggest, most profitable companies in the universe.

People used to drive a new car off the dealer’s lot and parade it around like it was a prize because they were excited about their new car. They felt good about buying the car and enjoyed it for many years until they traded it in for their next car, usually at the same dealer.

So what went wrong for U.S. carmakers?

Is this the next big market for U.S. automakers?

Smart car vending machine
coming to your town soon

Maybe Henry Ford number one started all the trouble. I heard he would send mechanical engineers to junk yards to gather parts from abandoned Ford vehicles. They would tear apart what they brought back to determine which components had not worn out as fast as the others. Then Mr. Ford would know which parts he could cut costs on so the entire car wore out at the same rate. Why spend money on a part that could not be used to its maximum?

I was fresh out of college with hopes of a bright future loaded with disposable income when I was shopping for my first car.  I went around to all the fine auto dealers in my area. Many offered free donuts on Saturday mornings. My shopping stretched out to months. When I sat in a U.S. car, the dashboard and controls seemed like they were designed as an afterthought. But foreign carmakers had a knack for designing cars with interiors that fit like a glove. This is what being behind the wheel of a jet fighter must feel like. Everything was located where you would expect it.

Most of the things we buy are emotional purchases. Cars are a perfect example.  If it was not emotional, we would all be driving a gray-colored Ford Taurus. Companies like Mercedes Benz, BMW, Volkswagen, and Jaguar would be out of business because that Taurus can get us from point A to point B just as reliably as one of these other cars that could cost over four times as much. 

U.S. cars used to be reasonably priced. You could find some personal transportation that would fit your needs and compliment your wardrobe for maybe a few months pay.  Sure, you might finance it through a bank like Wells Fargo (WFC), CitiBank (C), or Bank of America (BAC), but your monthly payments would be lower than your home mortgage and you wouldn’t need a six-year loan. Detroit let costs and car prices get out of control. 

The only cars that will currently meet
Washington’s gas mileage targets

This car is the answer to Detroit’s
problems. And mine, too.

IIt’s a little harder to get excited about a car when you know you overpaid for it. Part of the reason cars are so expensive is because the company has to keep prices high to pay the pensions and benefits for the 50% of their former workforce that has retired to some lake with a fully-equipped fishing boat and 36-hole brand named golf course.

If a company like McDonalds (MCD), Kraft (KFT), or Clorox (CLX) had to significantly raise their prices to cover the generous retirement and medical costs of former employees, customers would go elsewhere to buy their products. That’s part of what happened to U.S. carmakers. They could not deliver a price competitive product.

So where can U.S. carmakers go from here?