U.S. Auto Industry the Motor

U.S. Auto Industry

The motor vehicle industry is of paramount importance to the U.S. economy. It has served as a model of adaptation, over the years taking many hits from import status and pricing to increased cost of doing business under the high cost of American labor industry (Macduffie 1995) and globalization (Lung 2000) and finally in its most recent remaking it has diversified and attempted to create and maintain headway in a market that demands innovation, especially with regard to energy utilization. (Studer-Noguez 2002)The industry has faced all these challenges with a valiant effort to remake itself under almost any circumstances, including but not limited to even restructuring the way it manufactures according to Japanese lean manufacturing tenets. (Klier 1995) (Rubenstein 1992)

The restructuring of the industry has not always been popular as buy out, outsourcing of American jobs and large cuts in American workforce and industry have hit the U.S. economy hard, even though this industry must serve as a core and responsible global partner for change. (Nattermann 2000)

…"lansiti and Clark (1994) found that building on past knowledge for current projects was related to successful product generations in the mainframe computer and auto industries. So perhaps building on the past is key to successful multiple-product innovation.Yet, while building on the past may be advisable, we found that looking to the future was critical. The managers with successful product portfolios (Cruising, Midas, Titan) seemed to have a good sense of the future and a vision for their organizations within that future." (Brown, and Eisenhardt 1997, 1)

The industry, already dealing with countless international and national pressures must now, again face serious reorganization in the face of the current economic situation, a situation which many see as an economic tsunami, where ground shaking events all over the world coupled with just a few wrong decisions can break centuries old progress to at the very least stay afloat in the global market. (Tyson 2005) "The U.S. auto industry is struggling with massive health care and pension liabilities and labor contracts which guarantee jobs to its workers." ("Chrysler Sale Could Herald" 2007)

There is at least some evidence that organizational strategy and change will not only challenge the industry but may actually help the industry to compete more equally with other nations' auto industries, at least in the long-term. ("Strategy Is the Best Practice" 2000) Though again many of these strategic changes, associated with global market decline will not be popular. If the industry is to survive the present economic downturn, they will be essential. Tyson suggests that the current global market, will not continue to serve the U.S. economy in the manner it has in the past as increased global workforce will lower wages, across the board and strategic changes in the manner any business does business will be essential. (Tyson 2005) In other words, once again the U.S. auto industry will be asked to make a superior product, for less manufacture cost, providing a lower cost option, with less wage dependence and within the confines of environmental trends. (Renner May 19, 2009) (Rauch 2008)

The companies may see a need to diversify national operations by limiting manufacture in the U.S. And supporting a smaller number of employees at different task levels. This will likely be exceedingly difficult but in an economic tsunami there will be no real choice, as waiting out industry failure which could in the long-term make U.S. auto giants far more competitive is clearly not a good strategy, no matter how much the U.S. would like to see highly paid skilled manufacture return to the U.S. Or even increase this is not a realistic global trend. (Pfeffer, and Sutton 2007)

The auto industry in the United States directly employs over 1 million workers, and is so large that gross motor vehicle output alone represents more than 3% of the U.S. economy. In discussing its fortunes, however, we often focus on the assembly segment of the industry. Assembly-related activities represent only the most visible part of this industry, the tip of the iceberg, if you will. Below the waterline lies the entire supply structure that ultimately feeds into the assembly line, at the end of which rolls off a car or light truck. That part of the industry, which encompasses everything from inputs such as steel coils to the subassembly of entire vehicle interiors, is larger, both by count of plants and employment, than the assembly part of the industry. (1) Yet our understanding of the auto supplier industry is quite limited… (Klier 2005, 2)

Supplier infrastructure must be considered as the industry is discussed, as such logistics, in additional to diversification of labor is much larger in scale that is assumed by the novice reviewer of information offered on the nightly news. The supply side it seems is also diversifying and globalizing and supplier and manufacturer/assembly must be within cooperative and logistic reality. In other words as suppliers globalize so must assembly and logistics and that does not necessarily translate into American jobs. "Between the first quarter of 2000 and the first quarter of 2005, the U.S. share of light-vehicle sales by Big Three nameplates has fallen from 67.9% to 57.8%. While some of that market share loss is attributable to a rise in imports, most of it is explained by increased U.S. production of foreign-headquartered assembly companies." (Klier 2005, 2) It has been four short years since this assessment and the trend is continuing, and adding to countless economic pressures evident in the broader economy. Many of these pressures are evident in sales statistics for the period between 1980 and 2008.

With sales data for 2008 available, we can see to some degree what the auto companies were talking about. Total light vehicle sales declined 18.0% in 2008, as sales for both cars and light trucks (which include SUVs) declined over the year. That now makes three consecutive years in which light vehicle sales have declined, after declines of roughly 2.5% in both 2006 and 2007. (Shenk February 23, 2009)

"Sales at Ford, GM, and Chrysler (the big three) have been declining steadily since 2000. These three automakers were especially hurt in 2008 when sales declined nearly 25%." (Shenk February 23, 2009) From nearly 2006 to current the broader lending issues in the economy, i.e. The reluctance of traditional and high risk (including many auto finance companies) have begun to reserve judgment on consumers and stopped lending to a great deal, in response to national lending trends that are under scrutiny for risk and responsibility issues. This is coupled with lending institutions diversifying in the market to such a degree that when the economy began to falter risk became loss rather than reward. ("A Nightmare on Wall" 2008, A01) The auto industry, as well as the housing industry, two of the most significant industries associated with economic growth and sadly economic decline became unwitting victims and are now being forced to curtail operations and fully restructure their companies. ("Chrysler Sale Could Herald" 2007)

(Shenk February 23, 2009) These faltering statistics are essentially compared to Japanese statistics which show the reverse trend, but are now faltering strategically under global economic strain but certainly not on the same scale as the American industry or even the European industry, who are now seeking serious reorganization in the form of strategic mergers and even asking for and largely receiving the now infamous federal bail-out moneys. (Ramsey and Shields November 10, 2008) It now remains to be seen what they will do with these funds, and if what they do will prolong a forgone conclusion of further decline or allow them adequate time to restructure and change their overall organizational structure. The form this takes still remains to be seen but it is clear that it is the only chance of the industry, and especially the big three, Ford Chrysler and GM making any real stride toward recovery. It is likely that traditional trends, such as continued outsourcing, redevelopment of logistics and supply side economics as well as many other changes will occur.