Share this story
Close X
Switch to Desktop Site

US automobile industry -- time for a U-turn?

The US auto industry's future transcends the question of whether your next set of wheels will be domestic or imported. In fact, it transcends any single question - labor costs, plant retooling, or foreign comepetition.

This is the firm conclusion of a penetrating report entitled ''The Competitive Status of the US Auto Industry: A Study of the Influences of Technology in Determining International Industrial Competitive Advantage,'' prepared by the National Academy of Engineering (NAE) and the National Research Council (NRC).

About these ads

''The (automobile) firms, the (United Auto Workers union), and the government have all been the subject of criticism in the public debate over the industry's condition. . . . Whatever the mix of truth and error in all this finger pointing , one thing is reasonably clear: Detroit's troubles are not just the result of an single, discrete, isolated cause . . . ,'' the report states.

Rather, the industry is the victim of a complex interplay of forces which can only be properly grasped if one first understands something of the history of the industry.

Since 1948, basic automobile technology in the United States had become standardized and American industry organized to compete on the basis of price and styling, rather than performance. But in the last 10 years, the market for automobiles has been internationalized. Because automobiles until recently were a luxury overseas, foreign automobilemakers have remained performance-oriented and technologically competitive. As a result, they act quite differently from US companies.

Since the Model T, American auto companies had ignored small, economy cars because they could realize considerably more profit on large, luxury models. Targeting this as the Big Three's Achilles' heel, foreign manufacturers, led by Volkswagen, developed cars like the ''Beetle.''

American carmakers successfully staved off the ''first wave'' of imports by introducing compacts. But they failed to address the problem of reorganizing to profitably manufacture smaller, higher-performance cars. As a result, they were caught short by the abrupt shift in buyer preference to small cars following the 1973 Arab oil embargo.

According to the report, there are three different interpretations of the current American auto industry crisis. Some view it as a passing misfortune brought about by the companies' lack of small-car capacity. A second position is that it is a natural consequence of the maturity of the auto industry: production is shifting to those countries where material and labor costs are lowest. Finally, a number of experts say they believe it is the result of a structural change: The industry is in for a period of rapid innovation in products and processes where competitive advantage will go to those with the greatest ability to innovate.

While not choosing definitively between these interpretations, the NAE/NRC analysis leans toward that of structural change. This is not as optimistic as the first nor as pessimistic as the second explanation. While it extends to the American auto manufacturers the hope of survival, it implies that this will only be bought by far-reaching changes in the attitudes, organization, and management practices of the industry, and does not foresee domestic auto production regaining its past dominance.

About these ads

''Much has been made of the lack of US capacity for producing the types of products in demand in 1980 and the large investments required to obtain it. Yet it is also useful to recognize that competitiveness in the future is likely to require changes in orientation and organization that may rival the billions in capital investments in importance,'' the report points out.

Japanese manufacturers can now produce and ship a car to the US for $700-to-$ 1,500 less than a comparable car can be produced here, the report estimates. In addition, Japanese automobiles today set standards for quality which American manufacturers have not been able to equal.

The experts agree the primary factor in this advantage is the Japanese commitment to manufacturing excellence and their form of management rather than their degree of automation or their culture. There are promising signs that industry and union management in the US realize the need to redefine their relationship, the report says, but the changes required are equivalent to a ''cultural revolution.''

Generally, the NAE/NRC analysis concludes that temporary import quotas on foreign automobiles are dangerous because they would tend to encourage production inefficiencies.