Automobile Industry Term Paper

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Automobile Industry

"the foreign market has surpassed quality over the U.S. Automobile Industry"

The automobile industry is one of the biggest manufacturing industries of the 20th century and puts a severe impact on the economy of the nation. In Japan, a largest auto manufacturer of the world, the expression 10% industry is frequently used which indicates that the auto industry is involved in 10% of the total employment. As automobiles comprises of a broad range of materials and components, the automobile manufacturer is not capable of managing every manufacturing processes on its own. As it is seen that the impact of this industry is far reaching, and due to its extensive effect, the industry has been positioned as a strategic industry in a lot of nations. (Characteristics of the Auto Industry at the end of 21st century)

The scope of the motor industry is global which saw the dominance of America lasting from the year 1910 till 1965. During this period U.S. continued to manufacture 50% of the world's vehicles. Even though this dominance of the United States is absent now, it leads the world production. In the automobile arena, the dominant companies are Ford and General Motors, and next in line come the two Japanese companies Toyota and Nissan. The manufacturers operating in Europe have been concentrating within their area, even though Volkswagen of Germany and Fiat of Italy continue to have facilities in South America. The bulk of the multinational European companies are manufactures of component and trucks like Volvo of Sweden. During the later part of 1990s, the companies endeavored to become a global structure combining the global functioning so as to create a more integrated entity compared to earlier period. The majority of the companies who are carrying out their operations outside America are subsidiaries of the major American, Japanese and European manufacturers. During the middle of 1990s, the Korean companies like Hundai, Daewoo appeared as though they have the capability of financing, designing, manufacturing and then marketing their own cars. (Motor Industry: Encyclopedia article from Encarta)

Apart from the external factors, internal developments in the automobile industry have heightened the pressure on individual companies. During the 1980s, the foreign market especially by the Japanese car manufacturers attained unprecedented levels of excellence of product quality and competence in manufacturing and has surpassed quality over the U.S. industry. While the U.S. companies produced a car in 35-worker hours, the Japanese were able to do it in 15 hours. A judicious blend of major capital investment in excellent machinery, adequate control and production systems and design of vehicles for ease of manufacture helped the Japanese a substantial cost and quality edge compared to their rivals. This marked in the massive and speedier growth in Japanese production and exports. The cost advantage amounting to U.S.$3,000 that the Japanese enjoyed over the U.S. In the year 1990 was because of the basic design and manufacturing advantages. Besides, computer aided design and manufacturing - CAD/CAM methods like simultaneous engineering, detailed improvement, and Just-in-Time delivery aided in reducing costs, improve quality and lessen product gestation periods from five to below three years. (Motor Industry: Product Quality)

The twin oil crises of 1973 and 1978 and the consequent hike in the price of oil, gave a major spur to develop energy-efficient vehicles and techniques of production. The successive development of more efficient engines, lighter vehicles, and more aerodynamic cars had the objective of lowering consumption of fuel. In majority of nations, the ruling governments enhanced the taxes on petrol and diesel, thus changing the consumer preference in favor of fuel efficiency and extending a secure background of vehicle firms who have been spending resources on achieving this. Subsequent to the oil crisis, encumbered with large and poorly manufactured cars witnessed U.S. customers turning their attention to Japanese cars in hordes due to which the Japanese companies cornered 30% of the car market. During the 1980s, in order to permit the U.S. industry a respite to improve itself, the U.S. Government persuaded the Japanese car companies to enforce voluntary restraints on their selling endeavors and even to substitute imports by manufacturing cars in America. (Motor Industry: Operating Environment) The number of automobiles manufactured in Japan is nearly 20% which is roughly 10 million cars. From the year 1981, Japan surpassed the United States and came to be acknowledged as the world number one auto producer. 20% of the total number of automobiles manufactured in the U.S. is by manufacturers of Japan.

The Japanese Production Development and Supplier System: The Lean Production System: - The production, development and supplier system which is known by the name as the Toyota System or "the lean production system" was an ideal type based upon the "Toyota style production system" although simplified to a great extent was a major factor for Japan to launch its position as a font ranking auto industry in the world. The product development is typified by the features like: (i) strong project leaders with the potential to make and also actualize concepts, concurrent engineering at the time of development, a small group of high ranking multi-skilled engineers, speedier production and seeing to it that quality of prototyping is maintained, dies and tools making, participation of parts and manufactures in the process of development.

Supplier system is marked by the characteristics (i) increased level of outsourcing, (ii) multilevel suppliers (iii) long-term process (iv) stable levels of transactions (iii) relatively smaller number of large first tier suppliers, sub-assembly delivery by first tiers, design in, competition through way of design and ability of improvement, incessant reduction of prices of parts, removal of receiving inspection, technological instruction and visits to the factory by producers of assembly. The Toyota system possessing the above features has the following competitive abilities: (i) prevailing over trade-offs. In manufacturing it has attained competitive edge concurrently in production process productivity, quality in manufacturing, production lead time; under product development it has achieved competitive edge simultaneously in development efficiency, design quality and development lead time. (ii) Flexibility: It has attained a flexibility to tackle with modifications in products and the diversity of products -diversity in product mix, certain variation in total production volume, and model change with least hike in costs. (iii) Organizational learning and improvement: It has an inherent organizational learning mechanism which enhances productivity, enhance quality as also resolve other difficulties in manufacturing, continuously and on a company-wide scale.

The capabilities in production, development and purchasing systems played a part in the better competitiveness of Japan as regards efficiency, quality of manufacturing, productivity and rapidity of development of products, quality of products and quality of parts. For example, the International Motor Vehicle Program said that companies who introduced the "lean production system" in certain form or another characterized a major superiority in international competitiveness in the auto market of the 1980's. The important techniques and success of this system were well appreciated European and U.S. auto and parts manufacturers, and they made attempts to learn from it and to cope up with it since the late 1980's. A lot has to be understood regarding the mechanism behind the Toyota style. If it is viewed as an information creation-transmission method, in which the product design information which carries value to the customers through the company's productive resources, we might give an explanation regarding its competitive functions and structures in a rational way. To stat with, it is a system that is built in with a speedy problem solving cycle to go on enhancing competitiveness. Besides, the entire system permits value carrying information to flow effortlessly and continually in vertical as well as horizontal directions, rendering the amount of value carrying information carried to the market more dense. Apart from that, due to tightly interweaved flow of information, the requirement of the markets are converted into a concept, which is expressed as the blueprint of the design, building a development system which can make a realistic translation of the market demands of the product. (Auto Strategy Based on Lean production System)

Specific American company within the Automobile Industry: GENERAL MOTORS (GM):

General Motors headquartered at GM Renaissance Centre, Detroit is the largest automaker of the world and has been the frontrunner in sales since the year 1931. The company was founded in 1908 boasts of a 3,24,000 strong workforce worldwide. The company has manufacturing facilities in as many as 32 nations with vehicle sales spanning 200 countries. The year 2004 saw the sales figure of GM touching 9 million cars and trucks with a growth rate of 4% which is the second highest total in the history of the corporation. The most adored brand from the GM stable is the famous Chevrolet lovingly called Chevy which car buyers love to posses and flaunt. GM's other brands include Cadilllac, Pontiac, Opel, GMC and Saturn. (GM: Company profile) GM is committed to offer customers with products having superior quality and excellent visual appeal apart from being leaders in fuel economy and safety. GM uses technology for a…

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