U.S. Auto Industry
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The automobile industry in the U.S. consists primarily of the “Big Three” automobile manufacturers, General Motors (GM), Ford and Chrysler. While profits have been stalled and earnings lower in the past two years, mainly due to global competition, labor issues, and new technology, the Big Three are far from cash-poor corporations. According to Fortune magazine’s list of the Top 500 Global Companies, GM is ranked number one with revenues of $178,174 million in revenues, Ford ranks second on the list with $153,627 million in revenues and Chrysler brings up the rear at number twenty-five with $61,147 million in revenues (500 List 1-2). Ford listed a spectacular 55.6% increase in profits in 1997 over 1996 with $6,920.0 million (Top Performers 1). In addition to these numbers, GM boasted a 35% increase in profits for 1997 compared to 1996 with $6,920.0 million (Top Performers 1). However, Chrysler saw its profits drop 20.5% in 1997 compared to 1996 with $2,805.0 million (Top Performers 1). Even though all three companies are highly profitable at present, they face increasing pressure from labor issues, consumer demands for price, safety and amenities, government regulation and foreign competition. These trends, along with new technologies that come at a considerable cost but are necessary to remain competitive, have made the “Big Three” develop new strategies for remaining competitive and successful in the automobile industry
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Weingarten et al. 2). Added to this obstacle is the fact that few autobody repair shops exist that specialize in aluminum. However, as technologies become improved and cost lower this new use of aluminum may be a key factor in reducing costs and increasing fuel efficiency in the long run.
Another strategy that the Big Three U.S. automakers have been developing is the formation of international alliances which allow them to infiltrate new markets and combine forces with companies previously considered competition. Chrysler and Daimler-Benz have recently formed a merger that is designed to increase sales and market share as well as avoid plant closings and layoffs. U.S. automakers have been struggling with downsizing and plant closures for the past two decades and the trend among all automakers now and for future seems to be forming alliances in order to consolidate strengths and bolster weaknesses. Consolidation allows not only for greater economies of scale but it also provides a way of cutting costs while enabling companies to move past stalled areas. For example, the merger will allow Chrysler to expand beyond its traditional stronghold of SUVs, pickups and minivans, while allowing Daimler-Benz an opportunity to not rel
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Approximate Word count = 2429
Approximate Pages = 10 (250 words per page)
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