The Boomers Stop Buying

The greatest generation of consumers is sitting on its credit cards. That's bad news for the U.S. economy, even after it pulls out of the recession

By Ed Wallace

In September I got the first of many phone calls asking what automobile someone should purchase next—with a qualifier. These suddenly single-minded callers signaled the most shocking shift in the mindset of boomer consumers since the Second Energy Crisis and recession of 1979-83. Moreover, these discussions prove that, should the public react to bad economic news by clamping down on spending, we can take a nasty recession and turn it into something far worse.

Welcome to 2009.

Rusty Wood and wife Carol were the quintessential boomers living the good life. In 1987 they traded a two-week-old BMW in for a new Acura Legend, just because they disliked the Beemer's ride. Rusty would go on to start Bizmart, the forerunner of today's office supply supercenters, selling it within a few years. In an early semi-retirement he took flying lessons and enjoyed his leisure time. Carol moved into sport utilities in the 1990s, while Rusty leased from Lexus. Only now, Rusty was saying he thought he might choose something more downscale next. After all, he said simply, at his age he no longer needed to impress anyone. What he was really saying was that he is now willing to pay much less for his mobility.

That refrain continued in virtually every call I got. Either the potential new car buyers were going down-market or, fearing the economic unknown, were postponing any purchase…to some date far in the future.

From King to Court Jester

Much is made today of how Detroit's automakers managed to lose their customer base, but the seeds of their destruction were planted decades ago: Detroit's loss of market share is generational in character.

From 1946 to 1964, around 4 million new Americans were born every year. When they became adults from 1967 through 1985, the American automobile market would never be the same. In 1967 there were approximately 97 million vehicles on American highways; that number had jumped to 171.6 million as the last of the boomers turned 21. No previous generation of Americans had ever made or spent more money, and boomers enjoyed their consumer lifestyle even if it meant taking on serious debt. That truth, however, doesn't convey Detroit's loss of respect.

When the first two-thirds of the boomers came of age, Detroit was still king and gasoline was cheap; the last third entered adulthood after two major energy crises and the rise of Japanese automakers. In their youth the larger group of boomers had lusted after Camaros, Mustangs, Monte Carlos, and Cutlasses. Exciting cars didn't exist as the youngest boomers turned 21 in 1985; and though the following year set a record for car sales, it also marked the start of the decline of Oldsmobile.

In contrast, our grandparents simply wanted to be mobile, and Ford (F) made cars affordable for all. As the middle class grew, our parents knew General Motors (GM) offered a car for every purse and purpose. Important here is that both of those generations also knew Ford had pioneered the modern airline business, while GM once owned Eastern Airlines. To them Detroit was creating modern America.

They were aware that GM's engineers had perfected refrigerators and made them widely affordable, and that Detroit's Arsenal of Democracy helped win World War II. They knew Detroit had nourished a blue-collar middle class, beginning with Ford's watershed $5 workday. Only decades later, Detroit had accepted union contracts; and anyone who had lived through the Great Depression considered dependable, higher wages proof that America was on the right track.

For those two generations, Detroit was the symbol of everything that was right in America. For the early baby boomers, Detroit made the wheels they most wanted. It carried forward as the first boomers fed the minivan craze, following that with a mania for SUVs, and Detroit profited. But as our grandparents and then our parents retired and passed on, that unconditional love, or "Detroit or nothing" started crumbling.