Automobile Industry
There is no industry more present in the
world-wide community than the
automobile industry. The automobile has changed
the lives, culture, and economy
of the people and nations that manufacture
and demand them. Ever since the late
1800s when the first "modern" car
was invented by Benz and Daimler in
Germany, the industry has grown into
a billion dollar industry affecting so many
aspects of our lives. There are
more than 400 million passenger cars alone on
the roads today. During the
early part of the twentieth century, the United
States was home to more
than 90 percent of the world’s automotive industry,
but has shrunk to about
20 percent in today’s world. This drastic change has
occurred by the booming
economies in such nations as Japan, Germany, Canada,
France, Italy, and
other nations. The US auto industry "sales totaled $205
billion, or 3.3
percent of the total Gross Domestic Product." (Tardiff 394) By
the end of
19th century, there were about 500 auto manufacturers, but that
number
dropped sharply to 23 by 1917, and today the Big Three dominate the
market.
Ford, General Motors, and Chrysler make up the Big Three which account
for 23
percent of the world’s motor vehicle production in 1997, with
the
Japanese industries coming in second, producing 21 percent. Germany
produces 9
percent, Spain, France, South Korea, and Canada each produce 5
percent of the
international market in 1997. In the US alone, the auto
industry, which includes
it’s 500,000 car-related businesses, create 12
million jobs. The automobile is
clearly an oligopoly, but each company’s
control of the market has gradually
diminished because of rising foreign
competition. The US has three main auto
manufacturers, Japan has five major
producers as does Germany. Each of these
companies produce differentiated
versions of the same product, have control over
their products’ prices, and
rely heavily on non-price competition. Each
company produces a new line of
cars for each model annually. There are many
different types of cars, like
sedans, station wagons, Sport Utility Vehicles (SUV),
two-doors, and
four-doors, but by comparing models between two competing
companies, you can
see how great the similarities are. The auto industry can
still thrive even
though it’s products are so similar because the demand for
cars is immense
and continuous. People rely on cars for so many things that life
without one
seems impossible, especially in the US which registered 141 million
cars in
1988, whereas Japan, the second highest, only registered 30 million.
The
creation and production of a new car starts about three to four years
before it
is released to the public. The initial planning stage begins in the
company’s
corporate headquarters with ideas for the car from product planners
and company
officials. Automotive designers draw prospective sketches of the
new car, and
once approved, model makers create small scale models of the car
in fiberglass
or clay, then forge life size models also in clay or
fiberglass. Automotive
engineers then develop each part of the car, and
mock-up builders create those
indigenous parts of the new car. Test drivers
check over the entire system,
analyzing how it runs, and then gives
suggestions on improving the vehicle.
Automotive engineers test all the
new, specialized parts of the car, and after
all the parts are tested, plant
engineers plan how to best mass-produce the new
car. Of all the people
working in the automobile industry, most will be found in
this next industry
which is the assembly plant. In the United States, the
majority of these
assembly plants can be found in the Michigan, Great Lakes
area, and it, on
average, takes about ninety minutes on the assembly line for an
entire car to
be produced. When planning a new car model, the company tries to
create what
the consumer wants. This is very difficult because as stated earlier
it take
between three and four years to develop a car. When General Motors
begins
developing a new product, it starts by assembling a new team to
coordinate
the production. After this team is assembled, millions of dollars are
spent
on dispensing and analyzing public surveys, private firm’s own
research,
government research, and past car sales to determine what the
consumer wants.
These specifications include physical dimensions, cost,
fuel efficiency,
comfort, market price, appearance, and performance. GM then
would go on to begin
producing the car. The most time consuming step when
creating a new model is
supplying the specialized pieces of the new model.
Some of the parts can be
carried over from previous models or other cars, but
many times the company has
to either create the new pieces themselves or buy
them from a large scale
supplier, like ITT Automotive. The company then looks
for the supplier that will
supply the parts the cheapest. After the model car
has been created and
approved, the plans are made for it to be made on the
assembly line. The car is
then ready to be sold to the public through private
dealerships which, in the
US, are not linked with any major automobile
manufacturer. GM would then sell
its cars to whichever dealership is willing
to buy from them. In many Japanese
firms, like Toyota, a new system has been
created and has been coined ‘lean
production’. The basic manufacturing ideas
are the same, but it emphasizes
developing relationships between the company
and those it deals with. When
Toyota begins developing a new car model,
it already has a team assembled which
has worked on previous models. The
Toyota team then collects the same
information about what the public wants
just like the GM team but has a much
cheaper way of going about it. Unlike
the GM firm, Toyota has formed business
ties with car dealerships, and in
some cases even owns them. These dealerships
use a new set of techniques to
sell their cars, called "aggressive selling,"
in which a very permanent,
personal, and hopefully life-long relationship is
created between the
company, the dealer, and the buyer. Since the company keeps
ties to its
consumers, it already knows what the consumer wants, and the
consumer is more
willing to buy from the company. Toyota continues developing
and producing
its car, and it comes across the same problem as the GM team of
not having
all the specialized parts it needs. Like with the dealerships, Toyota
has
formed many symbiotic relationships with car part suppliers. These
suppliers
work hand in hand, with the Toyota team and develop any products
that Toyota
needs for its new model. The past decade has seen many
interesting fluctuations
within the automobile industry. Overall the auto
industry fluctuates with the
normal business cycle, for motor vehicles are an
elastic demand to consumers.
The more the price for cars goes up, the
less people buy cars. For many years,
the automobile industry has seen very
large profits because the demand and
necessity for cars has increased
significantly. Recently, large foreign
competitors and steadily increasing
prices in motor vehicles have reduced these
surplus profits within the
industry. Consumers are now demanding lower prices
and more luxuries in their
cars. To deal with this consumer demand, auto
manufacturers have begun by
lowering employee pay rolls, replacing employees
with machines and more
capable workers to improve productivity, and many times
merge with other
companies to better compete in the market. Production growth
has been about
2-3 percent for the past few years in the auto industry, and
hopefully will
continue by implementing new cost efficient procedures. American
industries,
competing in the international markets, face the problem of a strong
dollar
compared to the weaker currencies of foreign nations. This means
that
American cars to foreign nations are more expensive, and foreign
cars to
Americans are cheaper. This supply and demand problem was solved
by the Clinton
administration which opened up many foreign markets previously
closed to the US
auto makers. One of the main markets that the Clinton
administration opened up
was the Japanese market. This was such a positive
victory for the US industries
because the Japanese were notorious for
charging very little for the cars they
sold in foreign countries, making up
the difference with extremely high prices
for the cars they sold in the
closed markets of Japan. The North Atlantic Trade
Agreement also opened
up trade to many nations in Latin America, especially
Mexico. Overall,
between 1992 and 1995 export sales rose 22 percent and the
sales to Mexico
and Japan each rose 250 percent. The auto industry is also a
major source of
jobs in the world. "During the early 1990s, approximately one
of every seven
jobs in the US domestic economy is related to the production,
sale,
operation, or maintenance of motor vehicles" (Tardiff 396) which
makes
abundantly clear the impact the car industry has on society, with GM,
Chrysler,
and Ford Companies making up three fourths of those jobs. Auto
workers are also
among the most highest paid workers in any industry and also
the most
productive. This great increase in worker productivity, due to
advancing
technology, also accounts for the huge profit gains the Big Three
have received
in the past few years. Until the late 1960s, the government did
not get involved
in implementing regulations on the automobile industry. Most
of the regulations
now placed on car manufacturers have to do with making the
car drive safer and
be more environmentally sound. Seat belts, reflectors,
bumpers, windshield
wipers, defrosters, dashboard controls and specialized
lights, brakes, tires,
and windows were all the result of government action.
Today safety has become
extremely important to car makers because of the high
deaths that result from
automobile accidents, the government, and most
influentially, people’s growing
concern for their well-being. The
Environmental Protection Agency (EPA) has
created standards for new cars
called emission standards, which prevent excess
carbon monoxide from being
released into the atmosphere. There has been much
talk of creating
international standards to regulate the automobile and recently
some progress
has been made. Many nations including the US and Japan has become"active
participants in the Group of Experts on the Construction of Vehicles,
of the
United Nations Economic Commission for Europe (ECE/WP29), the
principal
international forum for harmonization issues." (Hoover’s Online)
The future
of the automobile industry looks rather stable. More than ever,
international
competition will keep individual company’s sales from soaring.
Cost efficiency
is a major issue with today’s car manufacturing, as is
expanding into
developing countries. The Far East and Latin America are
expected to be the
source of most new profits and demand in the years ahead.
"The current global
car market is expected to grow from about 44 million
vehicles sold per year to
64 million by 2002." (Hoover’s Online) The
automobile industry is also
spending great amounts of time and money in
developing new cars and luxuries to
offer their customers. Like in airplanes,
car makers are looking into placing a"black box" in each car to record valuable
information in case of a car
accident. Intelligent Vehicle Highway Systems
was a government sponsored study
analyzing traffic patterns and ways to
improve motor transportation. Creating
environmentally safe vehicles is also
a major concern. Companies are looking
into solar powered, battery-operated,
and electric cars, plus a new technology
that converts liquid hydrogen into
electricity. All these new low emission
automobiles are still under
development, but many prototypes are expected to
reach the market by
2003-2004. The rise of computer technology in today’s
society has greatly
affected the automobile industry. Global Positioning System
is an up and
coming navigational system becoming more and more common in cars
today,
especially SUVs, which are predicted to be in heavy demand in the next
few
years. Thermal detectors in the windshield used to display hard to
see
objects at night are in development and researchers are looking into
the
possibility of placing computers in brakes to automatically slow the
vehicle
when rounding a curve or when encountering another hazardous
situation. The
automobile has become a necessity in the lives of millions of
people living in
developed countries and it’s influence is spreading around
the world quickly.
As cars become more and more advanced, suited with
better handling capabilities,
safer features, and more computerized systems,
it’s no wonder that so many
people invest so much time, energy and money into
this industry. The automobile
has come along way since the days of Henry
Ford, and you can rest assured that
it will continue to evolve. Even though
the car itself will continue to change
as will the industry that creates
these incredible machines, there is no doubt
that people’s demand and love
for cars will go on for a long time to come.
Works Cited McBride, Gordon.
"Automobile Manufacturing." Career Information
Center. 2 vols. New York:
MacMillan Library Reference USA, 1996 p. 98-100
Tardiff, Joseph, ed."
Motor Vehicles and Motor Vehicle Equipment." US
Industry Profiles. New
York: Gale Research, 1998 p. 394-401 Broughty, James.
Careers in
Transport. Chicago: The Institute for Research, 1999 Womack, James
P.,
Jones, Daniel T., and Roos, Daniel. The Machine that Changed the World.
New
York: MacMillan Publishing Company, 1990 Farr, Max. "Automobile
Industry."
Hoover’s Online. Online. Internet. February
2000
Bibliography
McBride, Gordon. "Automobile Manufacturing."
Career Information Center. 2
vols. New York: MacMillan Library Reference USA,
1996 p. 98-100 Tardiff, Joseph,
ed." Motor Vehicles and Motor Vehicle
Equipment." US Industry Profiles. New
York: Gale Research, 1998 p.
394-401 Broughty, James. Careers in Transport.
Chicago: The Institute for
Research, 1999 Womack, James P., Jones, Daniel T.,
and Roos, Daniel. The
Machine that Changed the World. New York: MacMillan
Publishing Company,
1990 Farr, Max. "Automobile Industry." Hoover’s
Online. Online. Internet.
February 2000