GENERAL MOTORS AND THE DOLLAR

Since 1973, the time of the first Arab Crude Oil Embargo against western countries, the automobile manufacturing industry in the United States had been on the defensive against foreign competition. The American industry suffered additional setbacks in the economic recession of the early1980s, and, although the American Big3 automobile manufacturers made some progress following the end of the recession, they continued to see their market share erode.

In the mid1960s, the foreign share of the American new car market was low, and the share of the Japanese manufacturers was minuscule. Japanese products of all kinds, not just automobiles, did not enjoy a high level of confidence among American consumers with respect to either product quality or design innovation. The Japanese, in all industries, set out to change their images among American consumers. Strict attention to quality control, high quality/price ratios, and a cando philosophy brought

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on and inaction. There were many worrying factors in the economy, such as the farm crisis, high personal and corporate debt levels, and sluggish growth. Automobile sales (new) in the United States maintained sales at trend line levels in 1984 and 1985, after being well below the trend line in the 19801983 period. An uncertain economy, an absence of real wage gains in the United States economy, and high levels of consumer installment debt (as a proportion of disposable income) were the principal reasons for the low sales. In the early1980s, the federal government negotiated socalled voluntary import quotas for Japanese automobiles. These quotas were removed in 1985, however, late in that same year, the federal government implemented a program designed to reduce the value of the dollar in international currency exchange markets. The value of the United States dollar in international currency exchange markets increased each year, beginning in 1980, and extending through the summer of 1985. This movement of the dollar was in concert with a conscious policy pursued by the Reagan Administration. The Administration, and particularly the president, pointed with pride to
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Approximate Word count = 2408
Approximate Pages = 10 (250 words per page)

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