This paper will try to analyze the entry of Japan into the American car market and the effect on the American auto industry. Many thought it folly when in the late 60's; Japan entered the U.S. auto market. It was a time when the U.S. auto industry was, fat from its huge exclusive clientele, driving up prices and allowing quality to stagnate while its unionized workers complained about the dehumanizing aspect of their work, at the time, the highest paying blue-collar jobs in America. The Japanese had entered in the market at an even lower status than the Volkswagen, with small ugly cars that were not all that well made and contained unimpressive safety features, but were superior to American designs in one way: they were fuel-efficient.
Then, three historic "accidents" had come to Japan's aid. The American Congress, upset with the greed of the oil companies who wanted to charge world prices for their products, had placed a cap on the wellhead price of domestic crude oil. This froze American gasoline prices at the lowest level in the industrial world, discouraged new oil exploration, and encouraged the auto industry to make large, heavy, fuel-inefficient cars. Next, the 1973 war between Israel and the Arab states had placed American drivers in gasoline lines for the first time since World War II. This development stunned a country that had considered itself above such things. Only then did American consumers stop to realize that their cars drank gasoline at such a high rate. The "compact" cars that American manufacturers had started making in the 60's had almost immediately grown to midsize, and were no more fuel efficient than the larger models, and, also weren't that well made. Worst of all, American manufacturers, had recently invested money in large car plants, a fact that was almost the undoing of Chrysler. The oil shock had not lasted long, but long enough for America to rethink its buying habits.