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11/17/2000

Ralph Nader

In light of the flack that Ralph Nader is taking from the Gore
camp over his "spoiler" role in the 2000 presidential election, I
thought it was a good time to briefly review Nader''s life,
particularly as it pertains to his efforts in fighting the U.S. auto
industry.

Born in 1934 in Winsted, CT., Nader was one of four children of
parents who immigrated from Lebanon. The Naders were civic-
minded individuals and the family restaurant was a source of lots
of talk about the authoritarian "they."

At an early age, Ralph Nader was drawn to the writings of the
classic muckrakers, folks like Lincoln Steffens, Ida Tarbell,
Upton Sinclair, and George Seldes. He read them all before he
was 14. [During this time in my own life, I was playing Strat-O-
Matic Baseball.] What Nader picked up from these readings
was that they all stopped with exposure. None of the muckrakers
turned their feelings into political movements.

And so Ralph eventually found his way to Harvard Law School
where upon completion he hitchhiked down to Washington to
commence his career of public service. And his first target was
the U.S. auto industry.

Going back to the 1920s, the U.S. auto makers began to break
away from Henry Ford''s philosophy of sticking with the same
model, in the same color, at the same price. Instead,
manufacturers like General Motors changed models every year,
to give the impression that there was something unique that the
American consumer needed to buy. With each year, the cars
were made out to be better than the older ones. This principle
would come to be known as "planned obsolescence," somewhat
akin to today''s popular philosophy of "creative destruction,"
though the latter is more a result of technological change while
the former is a result of marketing.

But changing models constantly required large investments of
capital for design and retooling. Detroit was planting the seeds
of its own destruction if it didn''t keep up with trends amongst the
buying public. And it was increasingly clear that the traditional
models were not built up to the standards that the public
demanded

Populist Tennessee Senator Estes Kefauver said, "The dictates of
styling engineers take precedence over everything else. Even
safety of operation - not to speak of fuel economies and
problems involved in parking - are subordinated to the whims of
fashion experts."

By the late 1950s, the Big Three auto makers were losing out to a
public that was demanding smaller, less expensive cars, and was
also increasingly attracted to imports, especially the Volkswagen
Beetle. Imports, in fact, accounted for 10 percent of all sales in
the U.S., exceeding 600,000 a year in 1958.

Plus, it was in the fall of 1958 that a wire story crossed reporting
that two heretofore unknown manufacturers, Toyota and Nissan,
were for the first time shipping cars to this country.

In the fall of 1959, the New York Times'' Richard Rutter wrote:

"If one single factor had to be cited for the public acceptance of
foreign models it would undoubtedly be price. Gasoline
economy, ease of handling, style and just plain novelty also have
been attractions. But a lower-than-expected American price has
furnished the major impetus to the expansion of the imported-car
market."

[To give you an idea of how much the AMC Rambler, a compact
alternative to the staid Big Three models, meant to the
bottom line, consider this. The company was deep in the red in
the mid-50s and facing bankruptcy. Then it introduced the car
and by 1958 it was earning $26 million. Studebaker-Packard lost
$13 million in the first half of ''58, then earned $12 million for
the comparable period in 1959 with the success of its own
compacts.]

So in 1959 it came as no surprise when the Big Three introduced
3 smaller models to compete against the Rambler, Studebaker,
and the imports; the Ford Falcon, Chevrolet Corvair, and the
Plymouth Valiant. The European makers began to see their sales
drop for a spell. But the new cars were still more expensive than
the imports and the quality was equally suspect.

Enter Ralph Nader. In 1965 he published "Unsafe at Any Speed:
The Designed-In Dangers of the American Automobile," which
called for automobile redesign, specifically singling out General
Motors'' Corvair which he labeled a death trap due to its poorly
designed suspension system that could cause the driver to lose
control during turns. And Nader wrote of the auto manufacturers
in general, "Probably no other industry in this country devotes
so few of its resources to innovation of its basic product."

[Foreign cars didn''t escape Nader''s microscope either as he later
published a separate report detailing VW''s safety problems.]

For its part, General Motors was shocked that this young,
unknown attorney would attack one of the pillars of American
business. They decided to launch a secret investigation, delving
into Nader''s past, as well as to determine whether he would
receive any financial benefit from all of the lawsuits that would
be filed against GM by angry consumers.

And GM looked into whether or not this was some kind of a plot.
Nader couldn''t possibly be acting alone. Maybe he was a
Communist! They even tried to compromise him with
attractive women, but GM found nothing.

Yet the story of the investigation didn''t break until one of the
private eyes mixed Nader up with a Washington Post reporter.
An embarrassed General Motors president James Roche was
forced to apologize before the Senate Subcommittee on Traffic
Safety for spying into Nader''s private life. Nader ended up
winning $425,000 for invasion of privacy, which he plowed right
back into his many public interest groups. GM helped turn
Ralph Nader into a star.

Federal auto safety legislation was introduced in 1966 and by
1969, sales of the Corvair had slumped some 95% and GM was
forced to take it off the market.

Nader went on to tackle insurance companies, the Federal Trade
Commission, AT&T, cereal companies, meat processing, nuclear
power, you name it.Ralph Nader went after it. He has been
called America''s Don Quixote, tilting at windmills, yes, but
sometimes knocking them down.

Nader is behind the Consumer Product Safety Act and the
Freedom of Information Act. Such now taken for granted safety
items such as seat belts, airbags, and No-smoking sections are a
result of his action or the work of his disciples.

Author Harold Evans perhaps summed up Ralph Nader''s impact
on this nation best.

"America owes more than it may ever realize to Nader and his
Johnny Appleseed research and advocacy groups: Safer cars.
Airbags. Medicines that are safe, effective and cheaper.
Tractors that don''t roll over. Scam-free hearing aids. Decent
nursing homes. Fairer credit and insurance. Cleaner water.
Safer factories.Nader and his groups have played a critical role
in all these changes and thousands more. Nader is not
invulnerable to criticism; he might perhaps too readily assume all
producers are wrong, all consumers right. He has had his failures
and setbacks, and he certainly has critics, irritated by his piety,
and enemies, frightened by his effectiveness. Yet few have
achieved more for the American citizen than Ralph Nader and
his selfless crusade over the past 35 years."

And as I''ve written in some recent "Week in Reviews," while I
can''t envision a day when I would vote for Mr. Nader nor his
Green Party, I respect him. And to my Democrat friends who are
complaining about his impact on Election 2000, chill out.
Nader''s campaign platform this year was virtually identical to
what he has been championing for years.

Sources: "The New York Times Century of Business,"
Floyd Norris and Christine Bockelmann
"Monopolies in America," Charles Geisst
"The American Century," Harold Evans
"1,000 Years / 1,000 People," Gottlieb and Bowers

Brian Trumbore

*The next Wall Street History piece will be Friday, December 1st.




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-11/17/2000-      
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Wall Street History

11/17/2000

Ralph Nader

In light of the flack that Ralph Nader is taking from the Gore
camp over his "spoiler" role in the 2000 presidential election, I
thought it was a good time to briefly review Nader''s life,
particularly as it pertains to his efforts in fighting the U.S. auto
industry.

Born in 1934 in Winsted, CT., Nader was one of four children of
parents who immigrated from Lebanon. The Naders were civic-
minded individuals and the family restaurant was a source of lots
of talk about the authoritarian "they."

At an early age, Ralph Nader was drawn to the writings of the
classic muckrakers, folks like Lincoln Steffens, Ida Tarbell,
Upton Sinclair, and George Seldes. He read them all before he
was 14. [During this time in my own life, I was playing Strat-O-
Matic Baseball.] What Nader picked up from these readings
was that they all stopped with exposure. None of the muckrakers
turned their feelings into political movements.

And so Ralph eventually found his way to Harvard Law School
where upon completion he hitchhiked down to Washington to
commence his career of public service. And his first target was
the U.S. auto industry.

Going back to the 1920s, the U.S. auto makers began to break
away from Henry Ford''s philosophy of sticking with the same
model, in the same color, at the same price. Instead,
manufacturers like General Motors changed models every year,
to give the impression that there was something unique that the
American consumer needed to buy. With each year, the cars
were made out to be better than the older ones. This principle
would come to be known as "planned obsolescence," somewhat
akin to today''s popular philosophy of "creative destruction,"
though the latter is more a result of technological change while
the former is a result of marketing.

But changing models constantly required large investments of
capital for design and retooling. Detroit was planting the seeds
of its own destruction if it didn''t keep up with trends amongst the
buying public. And it was increasingly clear that the traditional
models were not built up to the standards that the public
demanded

Populist Tennessee Senator Estes Kefauver said, "The dictates of
styling engineers take precedence over everything else. Even
safety of operation - not to speak of fuel economies and
problems involved in parking - are subordinated to the whims of
fashion experts."

By the late 1950s, the Big Three auto makers were losing out to a
public that was demanding smaller, less expensive cars, and was
also increasingly attracted to imports, especially the Volkswagen
Beetle. Imports, in fact, accounted for 10 percent of all sales in
the U.S., exceeding 600,000 a year in 1958.

Plus, it was in the fall of 1958 that a wire story crossed reporting
that two heretofore unknown manufacturers, Toyota and Nissan,
were for the first time shipping cars to this country.

In the fall of 1959, the New York Times'' Richard Rutter wrote:

"If one single factor had to be cited for the public acceptance of
foreign models it would undoubtedly be price. Gasoline
economy, ease of handling, style and just plain novelty also have
been attractions. But a lower-than-expected American price has
furnished the major impetus to the expansion of the imported-car
market."

[To give you an idea of how much the AMC Rambler, a compact
alternative to the staid Big Three models, meant to the
bottom line, consider this. The company was deep in the red in
the mid-50s and facing bankruptcy. Then it introduced the car
and by 1958 it was earning $26 million. Studebaker-Packard lost
$13 million in the first half of ''58, then earned $12 million for
the comparable period in 1959 with the success of its own
compacts.]

So in 1959 it came as no surprise when the Big Three introduced
3 smaller models to compete against the Rambler, Studebaker,
and the imports; the Ford Falcon, Chevrolet Corvair, and the
Plymouth Valiant. The European makers began to see their sales
drop for a spell. But the new cars were still more expensive than
the imports and the quality was equally suspect.

Enter Ralph Nader. In 1965 he published "Unsafe at Any Speed:
The Designed-In Dangers of the American Automobile," which
called for automobile redesign, specifically singling out General
Motors'' Corvair which he labeled a death trap due to its poorly
designed suspension system that could cause the driver to lose
control during turns. And Nader wrote of the auto manufacturers
in general, "Probably no other industry in this country devotes
so few of its resources to innovation of its basic product."

[Foreign cars didn''t escape Nader''s microscope either as he later
published a separate report detailing VW''s safety problems.]

For its part, General Motors was shocked that this young,
unknown attorney would attack one of the pillars of American
business. They decided to launch a secret investigation, delving
into Nader''s past, as well as to determine whether he would
receive any financial benefit from all of the lawsuits that would
be filed against GM by angry consumers.

And GM looked into whether or not this was some kind of a plot.
Nader couldn''t possibly be acting alone. Maybe he was a
Communist! They even tried to compromise him with
attractive women, but GM found nothing.

Yet the story of the investigation didn''t break until one of the
private eyes mixed Nader up with a Washington Post reporter.
An embarrassed General Motors president James Roche was
forced to apologize before the Senate Subcommittee on Traffic
Safety for spying into Nader''s private life. Nader ended up
winning $425,000 for invasion of privacy, which he plowed right
back into his many public interest groups. GM helped turn
Ralph Nader into a star.

Federal auto safety legislation was introduced in 1966 and by
1969, sales of the Corvair had slumped some 95% and GM was
forced to take it off the market.

Nader went on to tackle insurance companies, the Federal Trade
Commission, AT&T, cereal companies, meat processing, nuclear
power, you name it.Ralph Nader went after it. He has been
called America''s Don Quixote, tilting at windmills, yes, but
sometimes knocking them down.

Nader is behind the Consumer Product Safety Act and the
Freedom of Information Act. Such now taken for granted safety
items such as seat belts, airbags, and No-smoking sections are a
result of his action or the work of his disciples.

Author Harold Evans perhaps summed up Ralph Nader''s impact
on this nation best.

"America owes more than it may ever realize to Nader and his
Johnny Appleseed research and advocacy groups: Safer cars.
Airbags. Medicines that are safe, effective and cheaper.
Tractors that don''t roll over. Scam-free hearing aids. Decent
nursing homes. Fairer credit and insurance. Cleaner water.
Safer factories.Nader and his groups have played a critical role
in all these changes and thousands more. Nader is not
invulnerable to criticism; he might perhaps too readily assume all
producers are wrong, all consumers right. He has had his failures
and setbacks, and he certainly has critics, irritated by his piety,
and enemies, frightened by his effectiveness. Yet few have
achieved more for the American citizen than Ralph Nader and
his selfless crusade over the past 35 years."

And as I''ve written in some recent "Week in Reviews," while I
can''t envision a day when I would vote for Mr. Nader nor his
Green Party, I respect him. And to my Democrat friends who are
complaining about his impact on Election 2000, chill out.
Nader''s campaign platform this year was virtually identical to
what he has been championing for years.

Sources: "The New York Times Century of Business,"
Floyd Norris and Christine Bockelmann
"Monopolies in America," Charles Geisst
"The American Century," Harold Evans
"1,000 Years / 1,000 People," Gottlieb and Bowers

Brian Trumbore

*The next Wall Street History piece will be Friday, December 1st.