It’s always dangerous to take on economics as a writer. You run the risk that everybody’s eyes will glaze over in the esoterica that is economic theory. But economics is at the heart of today’s tale. I’ve often been asked why the first movers in the compact car field failed so miserably in their earliest iterations. Of the new offerings in the early 1950’s from the independent automakers, only one survived to field a second generation. The rest vanished almost without a trace.
The natural question for car historians (and we car buffs) is why? What caused good ideas to fail so completely when subjected to the judgment of the marketplace? What factors turned good concepts into sales disasters? Was it quality? Price? Let’s peek behind the dry sales numbers and try to reach an understanding of the factors both large and small that killed the first generation of sensible sized cars that came and went all too suddenly.
For the purposes of our discussion, let’s name the first wave. The players: Kaiser-Frazer’s Henry J, Willys’ Aero, Hudson’s Jet and Nash’s Rambler.
All were conventional front engine/rear wheel drive cars and all but the Henry J made a small (by standards of the day) straight six their standard engine. Only the Kaiser entry came factory-equipped with a four cylinder mill, which was later joined by a six that was available in other Kaisers.
Nash started the compact boomlet on April 13, 1950 with its single model Rambler line. The name dated back to the earliest days of the Thomas B. Jeffrey company and gave the car a sporting moniker that was well respected and right in tune with the times. At first, the Rambler was only available in fixed pillar convertible form, but the line was expanded the next season to three models.
Nash’s 173 cubic inch six delivered 82 HP, but the cars’ sturdy assembly and unit body meant that it was heavy and slow. Zero to sixty took 21 seconds. But the little Rambler delivered on economy. Testers of the day reported miles-per-gallon in the low 30s in an era when conventional family cars returned figures in the low 20s. Styling was (and is) always a subjective thing, but the junior Nash looked like a 7/8ths scale model of the full size cars on offer, which was not a bad place to be. Nash scored a solid success with the Rambler, with sales high enough to expand the line for 1951.
It was too bad for Hudson that their stylists didn’t get the message about keeping the dowdy Jet in the mainstream. Despite some real strengths that recommended the car to potential buyers, styling was a deal breaker for a lot of Jet shoppers.
The Jet was well built. In common with its big brothers, the superstructure was welded and braced for a long life. A high profile and elevated seating position made the car seem bigger than its size would suggest, and testers of the day praised its handling and overall road manners.
Unfortunately, its bolt-upright, slab sided profile combined with a rather narrow track (in relation to height) made the proportions ghastly, and buyers rejected the Jet almost out of hand. The Jet made use of the Wasp’s 202 cubic inch straight six, which in the lighter car with tall final gearing returned over 30 miles per gallon. But the Jet faced a mountain that was too tall to climb when shoppers compared its almost $1900 MSRP (stripped down) to an equally de-contented Chevy One-Fifty for $200 less. That sounds like pocket change after 60 years of inflation, but in 1952, this was the difference between a successful car and an abject failure.
Hudson tried everything to move Jets off of dealers lots. The stripped down base Jet was followed in quick succession by the upmarket Jet Liner, but that high price didn’t look any better on a tarted up small car.
The Jet had exhausted the company’s treasury with its development outlay (much of which was borrowed, further driving ups costs with dead weight interest expense) and when the car failed, Hudson had no plan B. In just two model years, Hudson only built a little over 35,000 Jets and when the company merged with Nash, the Jet was sent packing. Newly formed American Motors didn’t have the money to tool and develop two competing compacts, so the Jet became the odd man out and ended as a sad footnote to the history of Hudson.
Meanwhile, over at Willys, by the fall of 1951 the builder of Jeeps was preparing to introduce its first conventional passenger car since early 1942. In theory, the Aero line of cars (CC here) would put Willys back in the mainstream of the industry and better utilize its factories to spread costs over a larger base of sales. With the expansion of the Jeep model lineup after the war, Willys had abandoned traditional passenger cars (where the competition was fierce) and focused on its easy to build all terrain vehicles that had no direct competition in the domestic market. But by introducing the Aero into an as yet unproven market niche, Willys was taking a massive gamble. To hedge its bet, Willys would bracket the market with Ace, Lark, Wing and Eagle models, each in its own carefully focused price point.
But those price points were still too high. The cheapest Aero still cost buyers almost $150 more than the base Chevy. This made it a tough sell when Chevrolet could spread costs over a production run of millions of cars and use a new marketing tool (network TV) to hammer home its value message over and over.
Willys managed to sell just over 35,000 of all series in the first model year. That turned out to be the best the Aero line would do, as production and sales soon began a decline from which the little Aero would never recover domestically. By 1955, Willys Motors (now part of the failing Kaiser passenger car portfolio) packed up the dies and moved Aero production to Brazil, where the car became the iconic car of a generation (much like the ’55 Chevy in the U.S.)
The Henry J, unlike the other domestic compacts, was a cheap car that aimed at the same buyer that might consider a used car or a Volkswagen Beetle (the kind of people who wanted a new car that could seat 5 and return good fuel economy.) The base Henry J (named after the company’s chairman Henry J. Kaiser) came with a 134 cubic inch four cylinder engine that reinforced its image as a penalty box for cheapskates. Kaiser began production of the Henry J in July of 1950 (right behind the Rambler) but was never able to derive any first mover advantage by jumping into the market early.
Part of the problem was the product itself: The Henry J came to market with no deck lid, fixed rear windows, no glove box and an all-around feeling of cheapness. Along with other penny wise but pound foolish shortcuts, the J was shipped with a then unusual 4 cylinder power plant that was purchased from Willys. Desperate, Kaiser even tried selling the car at Sears, where it was known as the Allstate.
Later, a straight six was installed which gave the car good performance, and first year sales were very respectable. But the “early adopters” couldn’t sustain the Henry J for long. As unsold cars began piling up around Kaiser facilities, the company began to drown in the debt taken on to keep the ship afloat. The company tried to stanch the bleeding by finally dropping the Henry J in 1953. Kaiser shacked up with Willys later that year and began to withdraw from the passenger car business .
By the fall of 1955, the first wave of compact cars was off the market and many of their makers were defunct or merged out of recognition. The Rambler name would be affixed to a new AMC model for 1956-57, but the first generation, 100 inch wheelbase car was gone. It would, however, be revived when recession rocked the economy in 1957. The “new” Rambler American would debut that fall and have another successful run through the late 60’s.
What went wrong? Why did the pioneers of the compact car market fail so completely? What really killed the first wave of sensible cars in the U.S.? Here is one analysis that ought to stir thought and no small amount of disagreement.
In many autopsies of these cars failures, I have noticed that many critcs opine that there was no real market for cars of less than full size in these years. I disagree. If you add up the total sales of campact cars in 1950-54, the number is rather impressive. Just over 126,000 Henry J’s, 35,000 Jets, 91,000 Aeros of all types and a further 140,000 Ramblers meant that the total average annual demand was right around 77,000 units. This would have made any one model a solid success. But spread over four makers, the economics were impossible. The high capital demands of the auto industry made it a hurculean task to make money with a niche product.
First, there were no real savings for the makers of small cars in the areas of engineering, labor, marketing or finance. All of those elements cost about the same whether a car was large or small. Print and TV ads actually cost more money when bought in smaller quantities from their vendors. Auto workers made union scale wages whether the car was full size or otherwise. Ditto for engineers and other “back office” input costs.
Only in transportation (more small cars fit on transporters) and materials (less steel , rubber and glass were used by volume) did the compacts have any cost advantage. The development costs for these compacts went a long way toward wrecking their makers’ finances.
For buyers, the calculus was, if anything, even worse. This is not unlike in our own time with snazzy new hybrid drivetrains that add many thousands of dollars to the selling price of a basic, four seat commuter car. The higher initial MSRP was hard to recoup when the cars biggest selling point was exclusively fuel economy. Gasoline averaged just over 27 cents per gallon from 1950-1955. Repair and upkeep costs were a wash, with oil changes and other routine maintenance nearly the same as full size cars.
A big hidden expense for small car owners in those years was depreciation, as small cars tended to drop in value faster than their full size linemates. The second car market was not nearly as developed in the early 50’s and when the initial owners wanted to trade, many dealers were reluctant to take a slow seller as a down payment on a new car.
The irony of the failure of the first wave of compacts in America was that within a half decade, Ford , GM, Chrysler and Studebaker would bring compact models to market that would sell more cars in a year than the other independents did in five. The Falcon, Corvair, Valiant and Lark all found ready acceptance when they hit the market in 1959-60.
Other than the Lark, the second wave compacts were clean sheet efforts that actually made money by selling in sufficient volume to spread their cost over a long production run. But even at that, profit per unit was pretty lean. Thus GM, Ford and Chrysler had cracked the code on how to make money with small cars. The secret turned out to be this: Have very deep pockets and sell a car through a very large dealer network. This practical difference (that was the difference between a small profit and a large loss) is what eluded the pioneers of compact cars that tried to go there first.