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An industry Primer
The automobile has become an integral part of everyday life for
millions of people. What was once looked upon with wonder and
awe has become commonplace, a durable consumption good taking
its place alongside countless other gadgets and machines that
inhabit modern garages and households. Thousands still flood to
auto shows to see new and exotic hardware, but the technology in
the basic run-of-the-mill automobile is taken for granted.
Yet the car is among the most sophisticated, complex
consumer products ever devised. Early gas-powered vehicles were
little more than a modified carriage with a crude (by modern
standards) engine and chain drive, "horseless carriage" was a quite
accurate description. Many years of refinement and development
have resulted in an engineering- and technology-intensive product.
Major technical systems include the engine with its advanced
m echanics and materials, fuel delivery with sophisticated car-
buretion or fuel injection, automatic transmission and drive train,
power-assisted steering and brakes, and complex electronic
controls.
The technical complexity of the car is masked by the sim-
plicity of its operation. From the standpoint of the driver, all that
is required is a turn of the key, selection of forward or reverse,
and pressure on the gas pedal. Beneath the sheet metal, behind the
gear selector, however, the technical systems must function at
high levels of performance, on demand, under extreme conditions,
over and over again.
From the beginning of the industry, reliability under pressure
and simplicity of operation were important parts of the motiva-
tion for increasing complexity and sophistication of the car's
technical systems. Reliability, simplicity, and low cost were
essential to the development of a true mass market oriented
toward basic transportation. In this sense, design changes in the
first 20 years of the industry were determined by market demands,
and competitive success depended on significant advance in
17
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18
f unction and performance. At this stage, much of the new-car
demand was "first time" purchase, with replacement demand
playing a relatively small role.
The rapid and widespread acceptance of the automobile is
evidence of the success of engineering and technical develop-
m ents. As the product matured and basic technologies were
refined, the design of basic systems and components was stab i-
lized. The previously dominant need for basic transportation gave
way to a more varied, more sophisticated set of demands and
consequent segmentation of the market. Vehicles were developed
to meet particular functions (e.g., station wagons, sports cars,
f amity sedans). Moreover, within a given f unction, the use of
optional equipment created wide divergence in the potential cost
and performance characteristics of similar models.
Table 2.1 presents a four-segment characterization of the
automobile market of the 1 970s. The segments range from
TABLE 2.1 Market Segments (by model) and Buyer Priorities
in the 1970s
Market Segments
Sporting/ Prestige/
Economy Cars Personal Cars Family Cars Luxury Cars
Chevette BMW 320i Fairmont Audi 5000
Civic Camaro Impala Jaguar
Corolla Celica LeBaron Lincoln
Omni Cutlass Coupe LTD Mercedes-Benz
Pinto Grand Prix Regal Seville
Rabbit Mustang
Thunderbird
Priorities
Price x x x
Fuel economy x
Interior room x
Comfort x x
Reliability x x x
Acceleration x
Handling x
Styling x x
Interior trim x x
Workmanship x
SOURCE: Adapted from Arthur D. Little, Inc., The Changing World Automotive Industry
Through 2000 (1980, pp. 24-25).
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19
TABLE 2.2 Structure of New Car Sues
Size Class
Year Subcompacta Compact Intermediate Standard Luxury
1967 9.3 15.7 23.6 47.9 3.1
1972 22.7 15.4 21.7 36.1 3.4
1973 24.9 17.7 23.0 30.0 3.6
1974 28.4 20.0 24.2 22.6 3.7
1975 32.4 20.3 24.1 17.9 4.0
1976 26.1 23.5 27.3 19.4 3.7
1977 27.1 21.2 26.9 19.4 4.6
1978 26.4 21.6 26.8 18.4 5.5
1979 34.0 20.0 24.2 15.3 5.5
1980b 42.0 20.2 20.6 12.5 4.7
a Includes imports.
b January and February.
SOURCE: Ward's Automotive Year Book, Annual Reports, Detroit, Michigan.
economy car to luxury/prestige car and are defined primarily in
terms of consumer preferences and principal use. The table also
contains an assessment of the priorities governing purchase
decisions in each segment. Both the segments and the priorities
reflect conditions in the mid-1970s before the oil crisis of 1979.
Given changes in the relative price of fuel and in household types
over the next several years, buyer priorities and segmentation are
likely to change. Patterns of change expected for the future are
somewhat evident in the shifting pattern of demands by size class
over the last 10-12 years.
Although not a perfect measure of the diversity of demands in
the postwar era, vehicle size has been an important competitive
dimension. Larger cars have been associated with luxury,
elegance, and prestige, and many important product innovations
were first developed for larger cars and then diffused to the rest
of the product line. The dominance of the large car reached its
zenith in the late 1960s. With the onset of higher operating costs
the structure of demand in terms of vehicle size has shifted
dramatically.
Table 2.2 presents data on new car sales by size class for
selected years since 1967. The data document the sizeable shift in
the structure of demand that occurred in the 1970s. In 1967 over
70 percent of new car sales were in the intermediate and standard
categories, while the subcompact group, which includes imports,
accounted for 9.3 percent. By early 1980 the subcompact group
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dominated the market, while standard models held fast at 12.5
percent of the market.
The shift to smaller cars has been well publicized, but the
timing of the change and the patterns of adjustment within the
large-car ranks (intermediate, standard, luxury) deserve emphasis.
It is clear from Table 2.2 that the largest change in the share of
standard models occurred in 1974, but the downward trend was
evident long before OPEC quadrupled the price of crude oil. From
1967 to 1972, for example, the large-car share fell from 71.5 to
57.8 percent, with most of the decline coming from the standard
group. At the same time the share of subcompacts more than
doubled to reach 22 percent. The shifts evident in the pre-1973
data set the pattern for the rest of the decade: a dramatic decline
in the share of standard-size vehicles, a rise in subcompacts
(including imports), and only modest changes in the share of other
categories.
THE AlANUFACTURING PROCESS
Changes in the structure of demand in the 1 970s have had a
profound impact on manufacturing facilities and processes. Trans-
forming equipment, plants, and organization geared to the
production of large road cruisers into a system for the design of
much smaller and more efficient cars cannot be accomplished
overnight. The expense and difficulty reflects the complexity,
scale, and integration of the automobile production process.
Indeed, the complexity and sophistication of the car itself pale in
comparison to the organization and technology used to design,
produce, and deliver the finished product to the market. Manu-
facturing involves the production or purchase of over 10,000 parts,
combining parts into components and systems, and the
coordination of all this activity so that the right systems and
components can be assembled to produce an automobile. The
basic structure of production in the industry is shown in Figure
2.1. The figure includes activities in the chain of supply from raw
materials to final assembly.
Perhaps the dominant characteristic of the automobile pro-
duction process is the importance of economies of scale. Over the
last 70 years the production process has become increasingly
mechanized, automated, and capital intensive. Indeed, the classic
illustration of automation in U.S. industry is the modern auto-
mobile engine plant.
The modern engine plant can be seen as the outcome of an
evolutionary progression from the general-purpose job-shop
environment that characterized early engine manufacture. The
highly specialized, capital-intensive process in today's plants
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21
PROCESS SEGMENT
r t I
Process | Raw i_ i=
Flow I Materials I I Processingb I I m n n I l
Systems and
SubassemblyC | l
Final
Assem blyC
Basic Iron and Castings Bearings Engine Completed
Sectors steel Forging Batteries Transmission automobile
Aluminum Plastic Spark plugs Axles
Silicon forming Shocks Suspension
Plastics Glass Tires Steering
Fibers forming Exhaust Frame
Al I oys Stamp i ng Carbu retor Body
Tri m
Wheels
Brakes
FIGURE 2.1 The structure of production in the automobile
industry. (Adapted from Byron, 1980.)
_Predominantly suppliers.
b Mixed OEM/suppliers.
-Predominantly OEM.
reflects a strategic orientation toward low-cost production of a
standardized product. Choices about equipment and process have
created a setup in which high volumes are essential to low cost.
Existing estimates of the minimum efficient scale in engine pro-
duction range from 350,000 to 500,000 units per year, depending
on the particular technology employed.
Engine plants are more automated than many of the processes
in automobile manufacture, but the dependence of low cost on high
volume is characteristic of all of them. In general, manufacturing
policy has been oriented toward increased standardization and
specialization in manufacturing operations and consequent reliance
on high volume. At the same time, employment in jobs not
directly related to production has increased substantially, possibly
reflecting the growing complexity of coordination problems and
changing regulatory requirements. In addition, the fixed com-
ponent of engineering and research and development costs has
grown under regulatory pressure and the need for new design
initiatives. The net effect of these developments has been to
enhance the importance of scale in the determination of
profitability and competitive advantage.
The Plant Network: An Illustration
The basic structure of the overall manufacturing process, and in
particular the plant network, can be illustrated by considering the
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22
impact of changes in the marketplace as demand has shifted to
smaller, more efficient cars.) The shift in demand has been met
by "downsizing," by changes in basic components (e.g., shift from
rear-wheel to front-wheel drive) and by material substitution.
Though each change may have a direct impact on only part of the
car, or a part of the manufacturing process, the various types of
facilities are so tightly linked that even a small chance ran have
major ramifications
O ~
_, _. . . _~ - ._. .~ .
The key facilities in the manufacturing process and their
linkages are illustrated in Figure 2.2. Though highly simplified,
the diagram captures the basic relationships among the manufac-
ture of materials (e.g., steel, aluminum, plastic), components (e.g.,
steering gears, brakes), systems (e.g., engines, transmission), and
final assembly. The automobile companies ~hereafter, OEMs
"original equipment manufacturers)] do final assembly in their own
facilities, and they generally produce major systems (engines,
transmission) in-house; most materials and many components (e.g.,
brakes, steering assemblies, valves) are purchased from suppliers.
The extent of integration varies significantly by company and even
by model. It is not uncommon for OEMs to produce part of their
need for a component in-house. while m~in1minina :~Hiti~r`~'
sources outside.
In Figure 2.2 the impact of "downsizing" is indicated by the
cross hatches on various facilities. "Downsizing" involves all new
body sheet metal (retool stamping plants), a shift to V-6 engines
(change engine lines), smaller and lighter components (retooling at
several plants--axles, suspension, brakes, and so forth), and new
frames. The changes culminate in the final assembly plant, which
requires some new fixtures and tooling. It is not hard to see why
such changes require several hundred million dollars and take a
few years to accomplish. Yet "downsizing" has a relatively modest
impact on the manufacturing process in comparison to the redesign
of basic components. The impact of moving from rear- to front-
wheel drive and the introduction of unit body construction are
illustrated in Figure 2.3. These changes in drive train and frame
are accompanied by changes in several major components, as
f allows:
— —~ ~ · ~~& ·~e ·O ~~A ~V! I~1
· Elimination of the rear axle and addition of a new rear
suspension.
· Replacement of the standard V-8 engine with V-6 and IL-4
engines.
- e~m~nat~on of the drive shaft and transmission and
replacement with trans-axle and twin front-wheel-drive shafts.
· Addition of new suspension (McPherson struts) and steering
(rack and pinion).
OCR for page 23
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The impact on facilities is widespread: engine, frame, and axle
plants are shut down, and major retooling occurs in the production
of transmission bodies and other components. The significant
capital adjustments, however, involve only modest use of new
materials and do not require major changes in manufacturing
processes. Future changes In Meson and in the use of new
_ O
materials could have even more far-reaching effects. We have
already seen the introduction of electronics, which adds another
type of process and facility to the overall system. Increased use
of plastics, composites, and lightweight metals could make older
facilities and processes obsolete and require new manufacturing
capabilities.
COMPANIES AND STRATEGIES, 1908-1973
The scale and complexity of the auto production process and the
emphasis on high volumes is not a recent event. Although the very
early days of the industry were characterized by competition
among small technological entrepreneurs, the emergence of the
Model T in 1908 and the subsequent development of a mass market
for automobiles gave strong impetus to the emergence of large-
scale enterprise as the dominant form of organization.2 By 1923
Ford and General Motors (GM) held 7 1 percent of the market, with
Ford's share amounting to 50.4 percent. Ford lost the leadership
position to GM in the late 1920s, and GM has retained a dominant
market share to the present time.
From 1925 to 1970, competition in the auto industry was
essentially competition among a few giant domestic firms. While
several so-called independents operated at the margin of the
industry until the early 1950s, the bulk of sales was satisfied by
the Big 3: GM, Ford, and Chrysler. The nature of competition in
this period was strongly influenced by the strategy developed by
G M in the 1920s and 1930s. In terms of pricing, product and
process technology, and distribution, the Big 3 developed broadly
s imilar approaches, although both Ford and Chrysler fashioned
distinctive features.
Stated quite broadly, the history of competition in the auto
industry up to the oil embargo of the 1970s was marked by two
d istinctive periods. Table 2.3 presents a brief characterization.
In the first period, from 1908 to 1948, major innovative changes in
the product played a significant role in the jockeying for profits
and share. The second period was marked by relative stability in
product technology and increased emphasis on competitive pricing
and styling. In the postwar era, competition occurred primarily on
the basis of economies of scale, styling, and the dealer network.
These broad evolutionary changes are reflected in the changing
strategic orientation of the major firms.
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26
TABLE 2.3 Changing Mix of Competitive Factors
Competitive Factor
Competitive pricing
Stage of Development
Early (1905-1948)
Secondary Factor
Product performance domi-
nates price comparisons;
initial buyers value per-
formance over price.
Model change (in- Primary Factor
novation in tech- Signuficant improvement in
nology) product occurs rapidly; new
models have major impact
on market share.
Channels of distribu-
tion (dealerships)
Primary Factor
Personal contact and dealer
reputation are key to ac-
ceptance of new product.
SOURCE: Adapted from Abernathy (1978, Table 2.5, p. 41).
Strategy at Ford
Late (1949-1973)
Primary Factor
Standardization leads to
acceptable levels of per-
formance; price be-
comes significant factor
in purchase decision.
Secondary Factor
Technology is refined and
standardized; new
models offer styling
changes.
Primary Factor
Availability, cost, and
quality of service are im-
portant to mature prod-
uct.
The innovations in product and process that carried the Ford Motor
Company to a dominant market position between 1908 and 1927
were motivated by a broad strategic plan. The essential outline of
Henry Ford's strategy is suggested by an advertisement he placed
more than two years before the Model T was introduced:
tThe] idea is to build a high grade, practical auto-
mobile that can be maintained as near $450 as it is possible
to make it, thus raising the automobile out of the list of
luxuries and bringing it to the point where the average
American citizen may own and enjoy his own automobile--
the question is not "how much can we get for the car?" but
"how low can we sell it and make a small margin on each
one?" 3
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27
The design of the Model T was followed by Ford's innovations in
process methods and decentralized assembly plants, with mass
production and distribution to provide control of the markets in an
era of slow communications. The success of the strategy was
evident in dramatic price reductions and in expansion of the
market from 1908 to 1926; by 1923 Ford had 50.4 percent of a
market that had grown to 3.6 million units.
By the early 1920 s the Model T competed in a market far
different from that of 1908. Its design had been improved upon,
and the lack of variety had given GM an opportunity to differ-
entiate and segment the market. Even though Ford added a
starter and a closed steel body in the mid-1920s, there was no
change in basic design. To retain market share, Ford dropped the
price to $290, but GM still gained market share rapidly. Ford
closed down completely in 1926 for nine months to design and
change over to a new model.
Ford introduced a new product in 1927 (the Model A), but the
strategy was unchanged. Although Ford briefly regained its prior
m arket share, the old competitive approach of low price, stan-
dardized design, and mass production did not work for long. After
three years, Ford's market share dropped below 25 percent.
Product standardization was abandoned in 1932 with the intro-
duction of the V-8 engine.
Alfred Sloan of GM criticized Ford's strategy as follows:
Mr. Ford had unusual vision, imagination and foresight--
~his] basic conception of one car in one utility model at an
even lower price was what the market' especially the farm
~ ~ 1 ~ i_ ~ ~ ~ A ~ ~ ~ ~ ~ ~ ~ ~
, , _
se't_~, Jl`~- C`~ ~11` ~111~- · e · [His] concept of the
American market did not adequately fit the realities after
1923. Mr. Ford failed to realize that it was not necessary
for new cars to meet the need for basic
transportation.... Used cars at much lower prices
dropped down to fill the demand.... The old master has
failed to master change.4
Ford's strategy was brilliant but rigid. A market need was
identified; the product and the manufacturing, marketing, and
d istribution facilities to meet the need were developed and
implemented. But Ford's strategy recognized neither the
dynamics of market development nor the counteractions of
competitors.
Under new management after World War II, Ford rapidly
adopted a new strategy.5 Independent divisions, each having its
own product lines and production facilities, were envisioned.
Separate engine and assembly plants for Lincoln-Mercury and Ford
divisions were introduced, but the market failure of the
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E dsel thwarted the planned development of three separate car
divisions. After 1960 all North American production facilities
were consolidated under a centralized functional organization;
that is, many of the same Drc)dil~tinn Al Fir; ˘..--~:---
served all product lines.
In describing competitive policies, Lawrence J. White con-
cludes that Ford has been a follower in styling but a leader in
seeking out market niches.6 New models like the Mustang,
Maverick, Pinto, and a combination car and truck called the
Ranchero seem to confirm this characterization. Despite these
successes, Ford has not been able to excel in head-on competition
with GM across the full product line.
r ~ ~. · ~& &~ ~~ ·~~ ~~i 11 IE; lUI 1~ [lQllti
Alfred Sloan and GM's Strategy
G M's competitive policies evolved out of experience with both
success and failure in the contest with Ford. The habit ~nnr^:~-h
has been summarized by Alfred Sloan:
~ ~ ,~ ~ & IF ~ ~! ~
In 1921 . . . no conceivable amount of money, short of
the United States Treasury could have sustained the losses
required to take volume away from [Ford] at their own
game. The strategy we devised was to take a bite from
the top of his position--and in this way build up Chevrolet
volume on a profitable base.
Nevertheless--the K Model Chevrolet--was still far
from the Ford Model T in price for the gravitational pull
we hoped to exert in Mr. Ford's area of the market. It was
our intention to continue adding improvements and over a
period of time to move down in price on the Model K as
our position justified it.
We first said that the corporation should produce a
line of cars in each price area, from the lowest to one for
the strictly high grade quality-production car.... We
proposed in general that General Motors should place its
cars at the top of each price range and make them of such
quality that they would attract sales from below that
price.... This amounted to quality competition against
cars above a given price tag and price competition against
cars about that price tag.... The policy we said was valid
if our cars were at least equal in design to the best of our
competitor's grade, so that it was not necessary to lead in
design or run the risk of untried experiment.
The same idea held for production--it was not
essential that for any particular car production be more
efficient than that of its best competitor--coordinated
.
OCR for page 29
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operation of our plants would result in great efficiency--
the same could be said for engineering and other
functions.7
Thus, there were three essential elements in GM's strategy: (1)
Product design was conceived as a dynamic process that would
lead to an ultimate target through incremental change. Design
was not a once-and-for-all optimization as it had been with Ford.
This process later became the annual model-change policy of GM.
(2 ~ Market needs would be met through the product-line policy
rather than independent designs. (3) Radical product innovations
were to be avoided. As Sloan said, it was "not necessary to...
run the risk of untried experiment."
The broad competitive strategy that GM hammered out in
specific decisions was to prove unbeatable. The company gained a
dominant position in the U.S. market in the 1920s and has held it
to the present. Little change in the essentials of GM's strategy
was apparent during the period 1923-1973. Increased centraliza-
tion among operating divisions, less difference in technological
characteristics of various cars in the product line, and greater
sharing of common components tended to make the different car
lines more like a single product. In general terms, however, the
strategy seems to have remained intact.
Chrysler and Product Engineering
The Chrysler Corporation seized a foothold in the market when
Ford faltered in the Model T program and shut down for nine
months.8 By 1929 Chrysler offered four basic car lines: Chrysler,
DeSoto, Dodge, and Plymouth. Unlike G M, production for all
product lines was centralized, and Chrysler apparently did not
integrate vertically backward as extensively as either G M or
Ford. Because Chrysler produced fewer of its own components, it
was less constrained in adopting advanced innovative components.
Thus, Chrysler could seek competitive advantages through flexi-
bility in product engineering and in styling. Chrysler pioneered in
high-compression engines in 1925; in frame designs permitting a
low center of gravity in the 1930s; and in the experimental intro-
duction of disc brakes in 1949, power steering in 1951, and the
alternator in 1960.
This strategy of design flexibility and shallow vertical integra-
tion proved very successful in the prewar period, when the rate of
technological change ir, the product was rapid. As product designs
stablized after the war, however, other factors like the strength
of dealerships and economies of scale became more important.
Chrysler's market share followed a downward trend after World
OCR for page 30
30
W ar II. Chrysler did develop strength in some segments of the
market (vans, compacts) but was generally a follower in product
development after the war. Cost control was difficult during
times of inflation, when cost increases could not be passed on to
the consumer.
This aspect was particularly troublesome after 1970. Infla-
tion, government price controls, and the consumer's loss of real
purchasing power have squeezed margins and capital at the very
time when resources have been needed to develop and introduce
smaller, more efficient cars. Chrysler's product image has not
been well defined, and it has suffered a loss of customer loyalty
and sales potential. Its current financial difficulties raise serious
questions about long-term viability as a full-line producer. A
competitive strategy emphasizing flexibility in product design was
well suited to prewar conditions. As with Ford's early policies,
however, it would seem that the development of the industry
changed the necessary conditions for success.
The Imports
Imports have played a major role in the compact and subcompact
segments of the U.S. market since the late 1 950s. Foreign
producers, notably Mercedes, BMW, and Triumph, have been
important in specialty and luxury cars. The distinguishing feature
of import strategies has been their emphasis on Nine in
selected market niches. Whether in terms of size, performance,
or quality, foreign firms have sought an advantage by creating
products that were different from the standard or traditional
domestic products. Furthermore, the more successful firms have
built strong sales and service networks.
The clearest example of the importance of the dealer network
in entering the U.S. market is the case of Volkswagen (˘W).
Firmly established before sales were made, the V W system of
dealers became a distinctive competitive factor, particularly in
comparison with other European manufacturers. VW's strategy of
"service first" allowed the company to maintain a strong market
presence through the 1 960s. When relative costs of production
shifted in the late 1960s and early 1970s, VW established a pro-
duction facility in Pennsylvania.
The lessons of the VW experience have not been lost on the
Japanese or other Europeans. The major Japanese firms have
payed close attention to the development of a dealer network.
The Renault-American Motors Corporation (AMC) relationship is
motivated in part by Renault's desire for an established dealer
system. Furthermore, production of Renault designs in AMC
OCR for page 31
31
f acilities is likely within the next few years. Other foreign
manufacturers, notably Honda and Nissan, plan to open car and
light-truck production facilities in the United States.
Firm Performance in the 1970s: Response to Crisis
Historically, the auto industry as a whole has earned returns above
the average for manufacturing, both in terms of returns on sales
and stockholders' equity. At the same time, however, those
returns have shown much greater than average cyclical variability.
The decade of the 1970s witnessed a trend toward erosion of the
profitability of the domestic producers and marked cyclical swings
in the recessions of 1970, 1974-1975, and most recently in the
1979-1980 period. The downward trend in profitability may reflect
declines in real income, rapid shifts in relative prices, an inappro-
priate product mix, and effects of increased price competition
from imported products. The importance of price competition is
evident in Table 2.4, which presents data on Ford's list prices
expressed in constant 1958 dollars and cumulative units of
production. The long decline in the real price of the Model T.
f rom 1908 to 1926, is indicative of Ford's "experience curve"
strategy.9 With the transformation of the market in the late
1920s and GM's leadership in building larger and more luxurious
cars, the real price rose for over 30 years. Since 1960 two dips
have occurred, both associated with import competition. It seems
clear from these data that part of the weakening financial per-
f ormance of the domestic producers can be traced to declining
real prices, caused in part by intensive competition.
The oil DriCe exDlosIons in 1973 and again in 1979 olaYed a key
^ rib rib —off r-—a ~ ~
role in setting the economic context of industry performance. The
oil crises affected the major firms very differently. Table 2.5
summarizes the basic competitive
positions and market
performance ot the major domestic firms and indicates some of
the actions taken in the aftermath of the twin oil shocks. Except
for GM, which has gradually increased its share in the last few
years, the domestic producers have lost significant market shares.
The loss of markets is a reflection of rapid market shifts and lags
in response. Ford, Chrysler, and AMC have lagged behind GM in
introducing strategic changes in vehicle size or new products. In
general, GM has adopted a more aggressive posture, an approach
consistent with traditional market leadership and greater financial
resources.
Financial performance has deteriorated for all firms except
AMC, for which 1979 was an exceptionally good year. All of the
Big 3 have experienced declining margins, with Chrysler suffering
OCR for page 32
32
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OCR for page 34
34
s izeable losses at the end of the decade. The addition of 1980
data would show negative returns for all producers, a situation
that became evident in late 1979.
In retrospect, most of the 1970s was a time of transition for
the U.S. auto industry. The once profitable, vigorous auto firms
have experienced major financial and economic jolts; adjustments
to the energy shocks and shifts in consumer tastes have not been
smooth or easy. As we have intimated in this chapter, the nature
of the U.S. firms' response to the crisis and the likely character of
the industry's evolution in the next decade have been and will be
strongly influenced by the specific pattern of industry develop-
ment up to 1973. Several facets of that development might be
examined fruitfully; we have chosen to emphasize three: the
~v~=l';~C u1 'produce ana process technology, the international-
ization of markets, and the growth of government regulation.
Each is examined in subsequent chapters.
- Or_ ~ ~ _ i_ ~ _ ~ I
NOTES
1. The figures underlying this discussion are taken from Byron
(1980).
2. This has been well documented; see, for example, Chandler
(1964) and Abernathy (1978).
3. The original source is Nevins and Hill (1954), p. 282; also
cited in Abernathy (1978), p. 33.
4. Sloan (1972), pp. 4, 186, 187.
5. For a more extended review of Ford's strategy, see
Abernathy (1978), pp. 30-33, and Leone et al. (198 I )
6. White, L. (1971), p. 207.
7. Sloan (1972), pp. 71-73.
8. For a discussion of Chrysler's strategy, see Abernathy
(1978), pp. 36-38, and Leone et al. (1980).
9. See Abernathy and Wayne (1974)
of Ford's "experience curve" strategy.
for an extensive analysis
Representative terms from entire chapter:
production process
