Changes in American Automotive Industry

By the 1973, Arab oil embargo, it was clear that the American automotive industry was in trouble (Sobel, 1990, p. 242). The Japanese, who had begun exporting automobiles around 1960, had refined their manufacturing techniques and labor relations to the point where, by 1970, they could produce a vehicle for about $1,300 less than their American competitors (Davidson, 1991, pp. 20-21). This, combined with low import tariffs, made penetration of the American market possible. Not surprisingly, the Japanese moved into that market aggressively, pursuing a strategy of entering the low-cost end of it first.

There is a very powerful rationale for Japanese entry in the low price segment. This segment exhibits the greatest potential for standardization, highest unit volume

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ations and different value systems pressing against these institutions" (Sobel, p. 258). By 1980, the flood of foreign automakers in the U.S. market had nearly doubled in just five years. In 1975, 1.3 million foreign cars were sold domestically, whereas, in 1980, the figure had climbed to 2.5 million. In 1950, imports accounted for one-third of one percent of domestic cars sales, while by 1980, it had risen to thirty percent (Sobel, p. 260). Meanwhile, American production was declining steadily dropping from 9.8 million in 1973 to 6.4 million in 1980. All of the Big Three were in financial trouble. Chrysler was nearly bankrupt, Ford was given two years to survive, and General Motors' profits had shrunk by ninety percent between 1978 and 1981 (Altshuler, 1991, pp. 154-155). In the early 1980s, of the top ten car manufacturers in the worked, only two were American; the rest were Japanese, German, Italian, and French. How had this situation come about? The conventional wisdom was that the Americans had committed managerial blunders, turned out inferior products, failed to respond to market forces, and suffered from worker dissatisfaction, low productivity, and high wages. Under this enormous pressure, the American industr
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Approximate Word count = 3142
Approximate Pages = 13 (250 words per page)