The problem with American auto makers roots back to the 70s and 80s. In those days, the US auto makers were quite arrogant and thought they knew all about manufacturing automobiles. They didn't think they could learn anything from the Japanese. They also refused to believe that Japanese built quality cars. Lee Iacocca went as far as to lobby the US Gov't to restrict importing cars from Japan and pressuring them to impose an expensive tarrif on those cars. He said that the Japanese companies were taking over the US industry and forcing US citizens out of jobs. He even went on to say that the Japanese companies should start building cars in the US and see how it works out. He didn't believe that Japanese auto companies could successfully run factories in the US. How wrong he was.
The point is, that instead of creating political drama, the companies should have focused on creating QUALITY CARS!! You know, this is how J.D. Powers auto surveys started! The American car companies thought they knew their customers and what they wanted. However, lots of people were complaining about problems they faced with Domestic car dealers and the cars themselves. One stats man named J. D. Powers (forgot his first name) started out a small company dealing with marketing and surveying. Toyota was one of his first clients, they wanted him to survey the owners of Toyota vehicles to see how they found it. After a while the surveying become popular, especially when Subaru advertised it on their TV commercials. Then the US auto makers took notice. They started employing Powers to do surveys. Another researching team from MIT conducted a survey to see how Japanese, German, and Americans made cars. They found that the Japanese were the most efficient while still creating cars.
At the same time, Chrysler bought Mitsubishi, and created a joint company called Diamond Star Motors. A few management people from Chyrsler observed the DSM factories (which was operated by Mitsubishi) to see how they worked. However, the majority of the upper management at Chrysler was opposed to implementing those methods in their own factories (although it occured soon enough in small amounts).
Another thing was that American companies were notorious for taking one car, changing a few minor things such as trim, and selling it as another model. This is in part how Chyrsler made money and also how it lost money after the K-car got long in the tooth. The L/H platform (Intrepid, Cirrus, etc..) brought them back due to Lutz and Sperlich.
In short, the Domestic car companies did not care about the actual product quality, which led to their downfall. Also a lot of the managements did not have a handle on buidling cars, rather they only focused on profit with out thinking about long-term growth. Fortunately they are try to get out of that hole now, however it will take them a long time before they get rid of the stigma of cheap cars.
A lot of this info came from a book called "Behind the Wheel of Chrylser: The Iacocca Legacy" by Doron P. Levin, which is a great book. I recommend it to anyone whos interesting to learn about the inner workings of the auto-industry.
I hope this post was somewhat interesting and informative to some of you.