Revisit the Decade That Changed Everything Automotive

As the 20th century’s final decade began, Tom Cruise felt the need for speed in a Chevy Lumina, the coolest new music came from Seattle, and NikeTown was the next big thing in retail therapy. The Berlin Wall had fallen, and with it the Soviet Union began its collapse. The Cold War was over. The good guys won. This was, declared political scientist Francis Fukuyama, the end of history.

Except it wasn’t. The 1990s would see the usual catalog of war and misery and political intrigue that has plagued humanity since the beginning. It would also see the invention of technology that would profoundly reshape global culture, the world wide web. And it would be the decade that remade the auto industry.

For carmakers, the ’90s delivered a decade of unprecedented acquisitions, mergers, and alliances. Conventional notions of vehicle form and function were increasingly blurred if not completely outdated. It saw the death of the American family sedan, the rise of the SUV, the democratization of the luxury car, and the return of the roadster. The pickup became a lifestyle vehicle, and the primacy of the internal combustion engine was seriously questioned for the first time since the dawn of the automotive age. By the end of the ’90s, the Germans would be engineering Bentleys and Minis, the Japanese would be building pickup trucks in Texas, and the Americans would own the entire Swedish car industry.

By 1990, Detroit’s Big Three had dominated the industry for more than eight decades, making and selling more cars and trucks than anyone else in the world. Detroit boasted plenty of imagination and technical skill, but little of it seemed to actually reach the road.

The GM CERV III’s production-ready interior. It also had a 650-hp mid-mounted V-8, all-wheel drive, and four-wheel steering.

General Motors’ CERV III was a prime example. One of the stars of the 1990 Detroit auto show, this mid-engine supercar had a 5.7-liter twin-turbo V-8 that funneled its 650 hp and 656 lb-ft of torque earthward via an all-wheel-drive system with traction control. It featured active suspension, antilock brakes with carbon rotors, and four-wheel steering. It could hit 60 mph in about 4.0 seconds and reach 225 mph, and it met all the federal safety and emissions standards of the time. But 30 years would pass before GM turned the thinking behind the CERV III into the C8 Corvette.

After a decade of billion-dollar debacles—the GM10 platform, the purchase of EDS, a botched reorganization, Saturn—GM, which practically invented the modern automobile company, seemed unable to get out of its own way. “You know what is astounding about General Motors?” auto industry analyst Maryann Keller said as the ’80s came to a close. “In spite of everything that has happened in the past 10 years, it still has difficulty doing the things it ought to be doing.”

Ford’s Contour concept, a four-door sedan unveiled at the 1991 Detroit show, featured a 3.4-liter straight-eight engine mounted transversely in an extruded aluminum space-frame chassis, with drive coming from a spiral bevel gear at the center of the crankshaft. The concept allowed front-wheel drive, rear-wheel drive, or all-wheel drive at little additional cost, and it boosted interior room. But the Ford Taurus revealed in 1996, which reportedly cost a staggering $3 billion to develop, was an uninspiring front-drive sedan with weird bubble styling that singularly failed to do the one thing Ford intended it to do—beat Toyota’s Camry.

1996 Ford Taurus.

Afterward, Ford, whose Model T put America on wheels, lost interest in cars. And with good reason: In 1997, F-Series sales topped 750,000 units in the U.S., more than the two top-selling sedans—the Camry and Honda Accord—combined. Further, Ford’s research showed only about one-third of all F-Series truck buyers ever used them for business purposes, and only 14 percent identified work as the truck’s primary use. By early 1999, this, combined with strong Explorer sales—it was first shown in 1990 as a Bronco replacement—meant a strategy document circulated among Ford product planners did not include a single new car development program. Trucks and SUVs, cheaper to make and with higher profit margins, were where the money was.

The last of the U.S. auto industry’s old-school titans left the building in 1992. Lee Iaccoca’s salesmanship, the cost-conscious K-car program, and the first minivan saved Chrysler, Detroit’s perennial underdog, during the ’80s, but as the ’90s dawned, the K-cars looked dull and outdated, along with Iaccoca’s old-timey huckstering. A string of spectacular concepts designed under Tom Gale’s direction helped make the Detroit show internationally relevant for the first time in history, and the decision to turn some into production models—most notably the Dodge Viper and Plymouth Prowler—helped distract attention from the K-cars while Chrysler retooled to build the swoopy and stylish LH sedans. But the LHs were ultimately let down by indifferent quality, and like GM’s Saturn, the vaunted Dodge Neon, launched with much fanfare in 1994, proved Detroit simply couldn’t build a Corolla killer.

Plymouth Prowler.

America’s automotive hegemony was certainly under threat. Indeed, Jacques Nasser, who became Ford CEO in 1998, recalls seeing a graph circulating around World Headquarters in Dearborn that showed, based on global car production over the previous 30 years, Toyota was set to overtake Ford by the turn of the century and GM a couple of years later.

Toyota indeed seemed unstoppable. In fact, Japanese manufacturers were the masters of the automotive universe at the beginning of the 1990s, and not just because they could build mainstream, mass-market cars at higher quality and at lower cost than the Americans and Europeans, or that their product development times seemed impossibly quick. They were also, with cars such as the Lexus LS400 and Honda NSX, threatening upscale market segments the Western automotive establishment believed it owned.

Even as the more enlightened executives at American and European automakers devoured The Machine That Changed the World, the 1990 book by MIT researchers James P. Womak, Daniel T. Jones, and Daniel Roos that explained how Toyota’s lean production system made it quicker, more efficient, and more profitable, the ground was shifting beneath Japan Inc. On December 29, 1989, the Nikkei stock index hit a record high, nearly six times its value a decade earlier. Since then, however, the trajectory had been stubbornly downward. Japan’s bubble economy had burst, and bills were coming due.

By 1998 only Toyota and Honda looked relatively secure as vehicle sales in the Japanese market stubbornly remained 20 percent down on 1990’s record of 13.5 million units. The following year Nissan, groaning under debt that was nearly 10 times its cash reserves, announced an alliance with Renault that would humiliatingly install a foreigner—Renault executive vice president Carlos Ghosn—as chief operating officer of what was once Japan’s flagship automaker.

The Acura NSX (left) and Lexus LS 400 shocked the automotive elite.

Nevertheless, 1990s Japan gave the world some remarkable cars, ranging from the R32, R33, and R34 Nissan Skyline GT-Rs and the triple-rotor Mazda Cosmo to the Subaru WRX and Mitsubishi Lancer Evo to the mid-engine Toyota Previa minivan and the tiny Honda Beat roadster. Mazda’s Miata single-handedly revived interest in the affordable front-engine, rear-drive roadster, a vehicle format many believed safety regulations had killed, and ironically spawned near copycat cars from the European elite, including the BMW Z3 and the Mercedes-Benz SLK.

In terms of sheer imagination and audacity, the 1990s belonged to German automakers. Germany’s reunification following the Berlin Wall’s collapse seemed an impossibly daunting task, but the billions spent by the German government was a bonanza for Germany’s auto industry as the Ostländer rushed to trade their Trabants and Wartburgs for Opels and Volkswagens.

The Miata spawned copycats from European elites like BMW and Mercedes-Benz.

Shortly after becoming Mercedes-Benz’s head of vehicle development in 1993, Dieter Zetsche announced the company would evolve from a three-line luxury carmaker to an exclusive full-line manufacturer offering high-quality vehicles in all market segments. The three-pointed star was already the world’s most elastic brand, effortlessly able to reside on heavy trucks and taxis without diminishing the prestige of an S-Class limo or the respectability of an E-Class sedan. Mercedes engineers were already working on the A-Class, the most innovatively packaged small car since the 1959 Mini, and on an all-new premium SUV that would be built in, of all places, Tuscaloosa, Alabama. (Embarrassingly, in 1997 the A-Class failed a Swedish automotive magazine’s “moose test,” rolling over during a violent swerve-and-recover maneuver, which forced a hurried recalibration of its steering and stability control.)

Zetsche, who’d spent a year in the U.S. running the Mercedes-Benz-owned Freightliner heavy-truck business, was among the first to spot America’s shift to both SUVs and premium brands, trends driven by innovative forms of financing such as leasing that effectively lowered the upfront cost of car ownership. More significant, Zetsche, like product planners at Ford and GM, whose Lincoln Navigator and Cadillac Escalade would prove the most profitable vehicles either automaker would build during the decade, also spotted where the two trends intersected.

Mercedes’ growing love affair with America stunned everyone when, in 1998, it announced a “merger of equals” with Chrysler. In truth, the so-called $37 billion deal was an outright takeover, cunningly executed by ruthless Mercedes-Benz CEO Jürgen Schremp. Although it ended ignominiously in 2007 (Zetsche, by then CEO, would effectively pay private equity firm Cerberus Capital Management to take Chrysler off his hands), for almost 20 years it provided hardware that underpinned some of the most successful Chrysler products ever built, such as the Dodge Charger and Challenger and the WK Jeep Grand Cherokee.

BMW, which 35 years earlier teetered on the brink of bankruptcy building tiny bubble cars designed by Italian scooter manufacturer Isetta, bought Rover Group in 1994. The purchase would, like Mercedes’ takeover of Chrysler, prove a financial disaster. “We made the mistake of thinking we had bought a functioning car company,” one insider said, horrified at the shambolic state of Rover’s ancient factories and the paucity of new products in the pipeline. But in the early days CEO Bernd Pischetsrieder and product development chief Wolfgang Reitzle talked excitedly of bringing back storied British brands such as Austin Healey and Riley, whose names they now owned. That didn’t happen, but they splurged billions on developing an all-new, brilliantly retro-styled Mini and the L322 Range Rover, the vehicle that would provide the template for the 21st century luxury SUV.

Late in the decade, BMW even snatched Rolls-Royce, the crown jewel of what remained of the British auto industry, right from under the nose of Volkswagen boss Ferdinand Piëch. A grandson of Ferdinand Porsche, Piëch was the man who, among other things, engineered the Le Mans-winning Porsche 917 before leaving the family firm in 1972 to work for Audi. He was also the 1990s’ most influential auto executive. While GM and Ford CEOs obsessed over financial engineering to make their stock prices look good, Piëch obsessed over engineering cars.

Dowdy, plodding Volkswagen was reinvented with products such as the B5 Passat and the Mark IV Golf, both of which combined sharply styled sheetmetal with interiors that would befit a luxury car. To lower costs, vehicle architectures and powertrains were shared with the more premium Audis, as well as with cheaper cars sold by brands Seat (VW acquired the Spanish company in 1986) and Škoda (VW would later turn a part-ownership and manufacturing deal signed in 1990 with the first post-communist Czech government into full ownership).

Crucially, all these shared-platform cars not only looked dramatically different but also drove differently. This meant smug Audi owners were blissfully unaware their A3s were fundamentally the same car as a Škoda Octavia or that their chic A4s were Passats in fancy dress. Piëch later bemoaned that his one major mistake with this clever architecture- and powertrain-sharing strategy was telling everyone about it.

Still, Piëch pushed both Audi and Volkswagen upmarket, allowing Seat and Škoda room to grow underneath. But he also saw—as the impact of 1990s globalization and the dot com boom began to create unprecedented wealth around the world—growing demand for ultra-luxury cars. In late 1997 he outbid BMW at the last minute to acquire both Rolls-Royce and Bentley from British heavy engineering specialist and defense contractor Vickers plc, which had owned them since 1980.

Photo: Getty Images

It was a coup, apart from one small detail: The Rolls-Royce brand name and logo were owned by Rolls-Royce plc, the aircraft engine manufacturer that was wholly separate from the automaking business. And Rolls-Royce plc had a joint venture with BMW’s in-house aerospace arm. (BMW got its start making aircraft engines in 1917; the company’s famous blue-and-white roundel badge if often mistaken as a propeller spinning against the sky.) Rolls-Royce plc granted BMW rights to the brand name and logo in 1998 for $66 million. As part of the deal, Piëch had to grit his teeth and build Rolls-Royce cars until 2003 while his Munich rival worked on what would become the seventh-generation Rolls-Royce Phantom.

Piëch’s acquisition of Lamborghini in 1998 was a much more straightforward affair; the Malaysian and Indonesian investors who purchased the storied Italian supercar maker from Chrysler in 1994 were only too glad to get rid of it. So, too, was Piëch’s resurrection of Bugatti, purchased from Italian businessman Romano Artioli. Artioli obtained the rights to the marque in 1987, and between 1991 and 1995 he produced a handful of EB110 supercars powered by a remarkable quad-turbo, five-valves-per-cylinder 3.5-liter V-12. But turning Piëch’s vision of a modern Bugatti—a car with at least 1,000 hp and capable of 250 mph yet refined enough to drive to the opera—into a reality was difficult. The Veyron would not appear on the road until 2005.

Clockwise, from top: Jaguar XJ220, Bugatti EB110, and McLaren F1.

The Bugatti EB110, along with the Jaguar XJ220, was among the first of the hypercars, or super sports cars that could top 200 mph. King of them all, though, was Gordon Murray’s McLaren F1, a version of which, with a revised rev limit of 8,500 rpm, hit 240 mph on Volkswagen’s giant Ehra-Lessien test track in 1998. It’s a record for a naturally aspirated road car that still stands. In terms of its engineering, performance, and all-around drivability, the F1 remains a benchmark.

However, the two most significant cars of the ’90s, cars that were among the most technically complex production vehicles ever created and whose influence on mainstream cars in the 21st century would prove profound, were neither hypercars nor made by Germans.

The first-gen Prius unveiled a dazzling hybrid powertrain.

Toyota’s first-gen Prius, launched in Japan in 1997, unveiled a dazzlingly complex hybrid powertrain that delivered remarkable fuel economy. Prius production began small, at 1,000 units per month, even though the financial break-even volume was reportedly five times that number. “We can afford to fail,” Toyota boss Hiroshi Okuda told a Tokyo business reporter. But the Prius didn’t fail, and a version of its powertrain concept is now available on almost every Toyota and Lexus made today, and virtually every automaker now sells vehicles with hybrid powertrains of some type.

On the flip side, GM’s EV1 was a commercial failure, but it marked the modern reinvention of the electric car. EV technology had been around since the dawn of the automotive age—Henry Ford’s wife, Clara, famously preferred her clean, smooth, and quiet Baker Electric to her husband’s cantankerous Model T. The EV1 was an electric car that touched the 21st century.

In the ’90s, GM’s EV1 previewed the modern electric vehicle.

The car was designed and engineered in response to the California Air Resources Board’s (CARB) Low Emission Vehicle 1990 regulation that required 2 percent of vehicles produced for sale in the state in 1998 to produce zero tailpipe emissions, rising to 5 percent in 2001 and 10 percent in 2003. The EV1 boasted not only a highly efficient electric powertrain but also technologies such as by-wire acceleration and regenerative braking, electrohydraulic power steering, tire pressure sensing, a heat pump HVAC system, inductive charging, and other advanced technologies now widely deployed by automakers around the world.

California’s electric vehicle mandates of the time never happened, though, and the EV1’s market appeal was hampered by lead-acid batteries that were poor in terms of energy density and thus severely limited the car’s driving range. More critically, CARB, whose other policies unquestionably reduced choking smog and automotive greenhouse gas emissions, never made the imaginative leap Elon Musk would manage 15 years later and mandate a charging infrastructure to truly kickstart the electric car revolution.

Today, electric vehicles are pushing an even more profound change upon the automotive industry’s established order—and upon the cars and trucks and SUVs we all drive—than we saw in the 1990s. Already there are American and Chinese automakers that didn’t exist 10 years ago building EVs, and established OEMs from Ford to Ferrari are racing to make sure they’re not left behind. The lesson of the ’90s taught us once again that the past cannot be taken for granted and the future is hard to predict. We don’t know for sure what we’ll be driving in 2030, much less 2050. We’ll expect the worst. And we’ll probably be wrong.

Additional photo design by vcruz.

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