Discusses the post–World War II history of the American automobile industry, specifically how this once globally dominant industry declined due to poor management and bad government policies.

The Axis defeat in 1945 ushered in a lengthy American-dominated Allied military occupation in Germany and Japan, which started in a highly punitive mode. The occupation authorities focused on rooting out the purveyors of Nazism and ultranationalist Japanese ideology. The occupiers also sought to eliminate the military and to dismantle or severely restrict industrial capacity. The unintended consequences of these punitive measures were, however, momentous in the medium and long term. In their quest to eliminate the massive concentrations of economic power of monopolistic corporations, American trustbusters redefined the competitive landscape, mostly for the better. And the Allied ban on the aviation industry in both countries caused aeronautical engineers and managers to seek employment in other quarters, above all in the automobile industry. They and the companies they worked for swiftly applied to car manufacturing what they had learned about quality control and efficiency from supplying airplanes to the Luftwaffe and the Japanese military. The result was high-quality mass production, which soon extended to other industries. In Japan, moreover, teams of former aviation engineers and managers were hired by the Railway Ministry, where they applied their stubbornness and can-do attitude in developing the bullet train.

Making the transition after 1945 from heavily military to predominantly civilian production proved less of a stretch for large firms in Germany and Japan than might have been expected: by the middle of the twentieth century, it had become almost impossible to distinguish clearly between arms-related and civilian-oriented industry. In other words, opportunities for recovery and growth abounded for manufacturing industry in both countries as the 1950s loomed. At the same time, however, wartime production had also served as a stress test for large-scale, high-tech industry, with the experience highlighting one overriding issue in each case. In Germany, large-scale firms built on long traditions and experience to produce high-quality goods for the war effort. But they had considerable difficulty manufacturing in quantity, and even more so in maintaining adequate levels of quality in the process. Most Japanese companies, on the other hand, found quality production challenging during the war regardless of quantity. Both countries developed the capabilities they lacked, developments epitomised at Volkswagen, founded in the Nazi period, but which became the first German-owned auto firm to engage in mass production of the iconic Beetle only after the war; and at Toyota, which eventually achieved high-quality flexible mass production.