Challenges of the us Auto Industry
While many have hailed the recovery of the US auto industry from the brink of bankruptcy and rejoiced at resurging domestic auto sales (which are likely to be helped in the short term by Hurricane Sandy‘s recovery effort), the industry as a whole remains troubled. The good news lies with US consumers, who cannot imagine life without the personal mobility that owning a vehicle assures, and the some250 million vehicles on US roads in 2012.The bad news is that sales by Honda, Hyundai, and Toyota continue to challenge the US automakers. Then there is the more globalized marketplace, with most US automakers tied to sales in Europe, which has been experiencing its own severe economic crisis throughout the Eurozone. Finally, there has been a slowdown in exports to the Chinese market as that nation readjusts its economy.All of these factors leave the US auto industry in a precarious spot going forward. While Japanese automakers have spent the interim making valuable changes to their auto designs and fuel efficiency, the US industry continues to play catch-up with consumer preferences.Rise of the imports and decline of US automakersAlthough the auto crisis is frequently seen as a product of the country’s economic collapse in 2008,industry analystshave noted that this decline was not merely a phenomenon of the recent economic breakdown. Instead, the decline in the US auto industry can be traced as far back as the 1950s, when the “Big Three” (Chrysler, Ford, and General Motors) began to lose market share to foreign imports.Although the auto industry (and assembly line) were born in the US, the fact is foreign manufacturers have taken those lessons and excelled. No longer does the United States produce the most cars; thatrole has been taken over by Japan, which produces some 5 million more vehicles each year than the US. Even Germany produces more vehicles than this country. In 2010, for example, Germany made 5.5 million vehicles, while the US made only 2.7 million.Some might argue that other nations can make these vehicles more cheaply, but if one compares the USauto worker’s salary and benefits($33.77/hour) to Germany’s ($67.14/hour), it’s clear that other factors come into play.Production mistakes by US auto industryNot only did foreign automakers begin to challenge US dominance around the world, these foreign car producers began building autos on US soil in significant numbers in the late 1970s. Facing this challenge, the US auto industry focused instead on building light trucks (to the detriment of automobile development), where it was seeing a bigger profit margin from sales.As a result, in 1970, General Motors had a 60 percentmarket share of US sales; today that figure is closer to 20 percent. The “Big Three” went from more than 70 percent share to just over 50 percent in the same time frame.The real problem with foreign dominance emerged when economic times turned bad. Then, rising gas prices forced consumers to shed their US-created sport utility vehicles (SUVs), minivans, and trucks in favor of foreign-created vehicles that consumed less gasoline. Meanwhile, the US auto industry was already over-committed to the production of less desirable gas-guzzling vehicles.What does the future hold?The biggest question today seems to be “How to turn the ship around?” Or, is it even likely that the US auto industry can regain its world title? Examining general economic conditions, the United States as a global entity has some climbing to do. The once-unparalleled US infrastructure, for example, is now ranked 23rd globally. The average wealth per adult in the US has declined from number 1 to number 7. While there may be big problems in Europe and Asia, the United States (including its auto industry) needs to cast a hard eye on itself.
