Avoidable Contact: Hands of Time
AT 10:45 P.M. ON NOVEMBER 9. 1989, the gates of the Bornholmer Strasse border crossing were thrown open and East Germans began flooding into West Berlin. It was the surprise first salvo of a revolution that would see more than 400 million people freed from the yoke of Communism in the two years that followed. None of the pundits or politicians had anticipated that speed or immediacy with which the Eastern Bloc would fall, but that’s the thing about the future: It tends to arrive sooner than you expect.
Earlier that same year, Americans and Germans had been treated to a considerably less pleasant surprise when the Lexus LS 400 made its international debut at the Detroit auto show. Mere weeks later, the Acura NSX and Mazda Miata appeared at the Chicago auto show. Leo Tolstoy once compared the arrival of great moments in history to the mechanism by which countless revolutions of gears and pulleys conspire to create a single motion in the hands of a mechanical clock; in the case of these transcendent Japanese cars, those components had been spinning for decades. Yet their arrival in 1989 - and their undeniable brilliance - was a shock to the system, a laser-precise predictor of the immediate future, in which the Japanese would assume a leadership position everywhere from two-seater runabouts to V-8-powered supersedans. It also set new gears in motion that turn to this day.
THE SUN ALSO RISES
n the beginning, it was a simple matter of price, profit, and exchange rate. In 1944, the Allied nations entered into the Bretton Woods agreement, which settled the dollar both as global reserve currency and, consequently, as the preferred way to purchase oil. This gave purchasing power that lasted even after the United States discontinued the agreement and stopped backing the dollar with gold. During the mid-Seventies, the exchange rate with the Japanese yen was nearly triple what it is today, which made imports from Japan cheap and exports to Japan ruinously expensive. The most obvious result of this disparity was the 1977 Honda Accord; it could be profitably sold for the same price as a contemporary Chevrolet Nova, despite offering considerably more in the way of technology, complexity, and assembly quality.
Although the exchange rate would drop in the 1980s, the Japanese automakers had already used that profitability to pay for and perfect the processes that would see them take an ever-increasing share of the United States auto market. Hobbled by union costs, outdated production machinery, and their own imperial arrogance, America’s Big Three couldn’t match the short model cycles of Honda, Toyota, and Nissan. Nor could they match the speed with which the Japanese committed to new technology and brought it to market. One example: the Chevrolet Cavalier that arrived in 1981, to fight the second-generation Civc, was still on the market when the fifth-generation Civic got a mid cycle face-lift.
No doubt some of this was due to a historical disdain in Detroit for compact and subcompact cars, long regarded as penalty boxes to be endured until the buyer could stretch to a proper, full-sized Chevrolet or Ford. If the Americans (and Germans) thought the Japanese would be content to remain in that unwanted and unloved segment of the marketplace, they soon found out just how wrong they were.
In hindsight, the LS 400 was obviously the most important
Japanese car to arrive from 1989 to 1990. Born of a six-year, cost-no-object program to develop the world’s finest luxury sedan, the big Lexus offered a four-cam, 32-valve V-8 at a time when the German competition was mostly limited to decades-old, two-valve-per-cylinder designs. Just as important, the LS 400 was sold through an all-new dealer body that prioritized customer satisfaction and an upscale environment.
A different kind of innovation was on offer with the Acura NSX, an aluminum-framed supercar with titanium connecting rods and daily-driver reliability. The MX-5 Miata combined commuter-car consistency with a back-to-basics take on the Lotus Elan. It reinvigorated the market for small sports cars and evolved into the most popular modern platform for amateur road racing.
As significant as these cars were, however, they were mere raindrops in a veritable storm of iconic Japanese cars that arrived in the same time frame. The 1990 Toyota Celica mated the turbocharged All-Trac drivetrain of its predecessor with a controversial, highly sculpted body and a world-class interior. Nissan released a new 300ZX and 300ZX Turbo and brought the Nissan President to the U.S. market as the star-crossed but hugely stylish Infiniti Q45. Mitsubishi debuted the 3000GT VR-4, which offered twin turbos, all-wheel-drive, four-wheel-steering, and active aerodynamics.
In 1975, a Japanese car was an object of curiosity; in 1985, it was the recipient of reluctant respect. Starting in 1989, they were often objects of desire.
THE REACTION: FIGHT OR FLIGHT
This ascendancy of the Japanese auto industry across virtually all segments of the U.S. market put the German and domestic competition in a difficult position. Their response to this new threat helped create the automotive marketplace as we know it today. For instance, the consumer takes for granted that German cars are sporty, obviously futuristic, and available in a wide range of high-power variants. But these seemingly immutable aspects of brand DNA were largely invented as a response to Lexus.
Note what the Germans did not do: face Lexus head-on with products that matched the LS 400 for durability, desirability, and affordability. A concerted engineering and marketing effort was instead made to establish autobahn performance as a unique selling proposition, as though a 150-mph V-8 LS 400 would somehow be useless on the A96 outside Munich. Mercedes brought AMG in-house, BMW extended the reach of its M brand, and Audi began building S-variants of its bread-and-butter cars. The W210 Mercedes-Benz E-class, which debuted in 1995, touted emotional new styling. It, along with the sleek 1996 A4 and 3-series BMWs, were attempts to hit the marketplace where Lexus wasn’t. Meanwhile, the Germans drastically cut costs. Although there were plenty of quibbles with the perceived interior quality of the new Benzes and the outrageous styling of the new Bimmers, the results were profitable enough to set future product plans in stone.
If the German response to 1989’s tsunami of first-rate Japanese product can be described as “fight,” then the American strategy must be characterized as “flight.” Both General Motors and Ford had already abandoned the idea of engineering a competitive small car, choosing instead to partner with Toyota and Mazda, respectively, for the new Nova and Escort. A combination of massive fleet-sale programs and fire-sale discounts would keep the Ford Taurus atop sales charts for a few more years, but retail buyers were voting with their wallets for the fourth-generation Accord that debuted in 1989.
Luckily for the Big Three, a unique combination of market circumstances created a secret weapon. The fuel crisis was well and truly over. Customers were ready to get rid of their Eighties-era four-cylinder, square-rigger penalty boxes. A loophole n federal fuel-efficiency standards allowed truck-based sport-utility vehicles a license to guzzle. There were plenty of paid-off compact-truck platforms available. The net result of this synchronicity? The 1990 Ford Explorer. By blueprint, it was nothing but a 1984 Ranger pickup with four doors and a metal roof. Buyers saw a high-riding, adventure-oriented sport-utility vehicle that offered big-bore torque and all-terrain capability. Ford couldn’t build them fast enough. The vast majority of Explorers left the factory loaded with options that sent sticker prices far above that of the Taurus or even its full-size Crown Victoria. The idea of the SUV as a lifestyle accessory was hardwired into the American consciousness.
BACK TO THE FUTURE
For the Japanese themselves, 1989 marked the beginning of a golden age, punctuated by the likes of the incomparable 1992 Toyota Camry and 1997 Acura Integra Type R. Yet behind the scenes, the wheels of Tolstoy’s clock were already spinning toward the future.
Between 1990 and 1995, the value of the yen doubled. This was a delayed, and harsher-than-expected, consequence of the 1985 Plaza Accord in which the United States, Japan, West Germany, France, and the United Kingdom agreed to take steps to strengthen the yen against the dollar.
Unfortunately for the Japanese automakers, much of the product already in showrooms had been developed with a more favorable exchange rate in mind. Prices soared, particularly on small-volume sports cars. Ambitious new efforts like the 1993 Toyota Supra and 1992 Mazda RX-7 found themselves priced against the LT1-powered, refreshed Corvette. The Celica and 240SX, similarly, were forced to compete with Camaros and Mustangs offering up to twice the power. Faced with dwindling sales and disappearing profit margins, the Japanese automakers elected to simply discontinue the bulk of their sporting offerings.
Not even the alpha dog of the Japanese-automaker pack was immune from this reversal of fortune. In 1994, Lexus released the Series 2 LS 400. The new car was faster, quieter, and roomier, and it offered a suite of new luxury features. But under the skin, it was the same car. The most noticeable change was the price: from $35,000 in 1989 to $51,000 just five years later.
It was the end of a brief but glorious era, a Japanese Camelot in which the manufacturers were free to indulge their whims and accomplish their dreams. Two and a half decades later, the products of that time are still revered by modern-day fans who collect, restore, and obsess over everything from the twin-turbo Supra to the Honda CRX Si.
You could say it was a thrown stone, landing in a pond and producing ripples that are still felt in the current day: in the peerless excellence of Corvettes developed by a team that was driven to beat the fourth-generation Supra, in Ferraris that draw their balance of everyday utility and brilliant handling from the original NSX, in the feature-filled cockpits of German luxury cars evolved to compete with Lexus. Or you could say it was the logical consequence of currency fluctuations, evidence writ large in steel and aluminum by an invisible economic hand. Or you could say it was the clock of history, a chorus of furious but mostly invisible motion waiting to ring in the future, always arriving just a little sooner than we expect.
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