The Rise Of Foreign Automotive Competition In The American Market

Peter Castoldi | FYS_1101

Introduction: A Brief Overview

This presentation is designed to display an overview of the entirety of the American automotive industry through the exploration of numerous topics:
A brief background of the Automotive Titans The men who started it all; The beginnings and evolutions of the troubles within the industry, including OPEC; Americas response to such a crisis in the periods of the 1970s-1980s, and in the 1990s-2000s, and; A look into a new threat: HEVs (Hybrid Electric Vehicles) , their impact on modern motoring, and their effect on American jobs

The Dawn Of The Automobile

While there were many prototypes constructed before with some being manufactured using steam engines and others with more advanced forms of the early example of the combustion engine only two men really jumpstarted the automotive industry
Henry Leland Henry Ford

Both played important roles in radically changing American society through the use of new engineering and manufacturing techniques

Henry Leland (1843-1932)

Dubbed a Forgotten Titan of the automotive industry for his achievements with, and involvement in, the Olds and Cadillac Motor Company He used his knowledge of interchangeable parts, and his skill of manufacturing, to the emerging motor industry in 1870
His improvement upon the Olds engine

Leland fully entered the automotive business in 1902 when he helped to form a luxury car maker, currently known as Cadillac

Henry Ford (1863-1947)

Fords automotive ventures stemmed from his construction of the first horseless carriage in 1896 (The Quadricycle)
He later sold this to finance work on an improved model

In 1903 he incorporated the Ford Motor Company where he vowed to create a car for the great multitude In 1908, he created the Model T: A car that everyone could afford, and one that nearly everyone owned

In 1914, with demand skyrocketing for his vehicle, he utilized a new production technique: The assembly line

The Quadricycle

The Evolution Of Competition

Skipping ahead to more modern days of motoring, American automotive manufacturers started to face some serious issues both from within our own nation and from across the globe During the October 1973 Arab-Israeli War, the Arab members of the Organization of Petroleum Exporting Countries (OPEC) announced an embargo against the United States in response to our nations decision to re-supply the Israeli military during the war This set off an upward spiral of oil prices: The price of oil per-barrel doubled, then quadrupled, leading to increased costs for consumers American automakers were significantly impacted

The Evolution Of Competition: Continued

During the time of the Crisis, the mainstream automobiles were long-wheelbase vehicles boasting large V-8 engines and multipletonnage curb weights
Fuel economy, on average, was no greater than a combined 15 MPG

This is where the Japanese imports played a role in switching up vehicle sales in the United States
They introduced smaller, high-mileage vehicles such as the Corolla, Civic, the Datsun B210 and 510, and the Subaru Leone. Hatchback and Coupe variants were also introduced

Before long, American manufacturers were quickly experiencing a drop in vehicle sales

Japanese Imports

1978 Toyota Corolla

1978 Honda Civic

1979 Datsun B210

1974 Datsun 510

1979 Subaru Leone

The American Response: 1970s-1980s

By 1969, imports had increased their share of the American automotive market Feeling the need to respond to the issue of declining sales, American automotive manufacturers started to introduce their variations of a small, economical car
Such examples included: The Ford Pinto and Maverick; Chevrolet Vega; AMC Gremlin, Hornet, and Pacer; and Chrysler began importing versions of their vehicles from Mitsubishi Motors

To cope with fuel economy problems, in 1975, under the Energy Policy and Conservation Act the federal government initiated new fuel efficiency standards
For passenger cars, the then-current standard was 18 MPG and the Act increased this to an average of 27.5 MPG by 1985

Unfortunately, while the new fuel economy standards were headed in the right directions, the new vehicles being produced/imported by The Big Three werent
Quality remained an issue for American cars The Pinto was a prime example

Snapshot: New Passenger Car Sales

In 5 Years: Domestic car sales were down by 66,000 Import car sales increased by 292,000

(Above): New passenger car sales, measures in thousands of units. Source: http://www.bts.gov/publications/national_transportation_statistics/html/table_01_16.html

American Production

1978 Ford Pinto

1977 Ford Maverick

1976 Chevrolet Vega

1972 AMC Gremlin

1976 AMC Hornet

1975 AMC Pacer

The American Response: 1990s-2000s

It was only until now that American automotive manufacturers were starting to recover their losses from the previous decades Due to the differentiating fuel economy standards between passenger cars and larger trucks/SUVs, both domestic and Japanese imports were selling thousands of pickup trucks and large body-on-frame SUVs

Though, a new threat would soon emerge: one that would forever change the goals of automakers across the globe .

Hybrid Electric Vehicles (HEVs)

This new threat? Vehicles powered by something other than gasoline. This is the birth of the hybrid

Hybrids, by definition, are vehicles that use two or more power sources to move the vehicle. One of the most common is a gaselectric hybrid
The most popular? The Toyota Prius

Once again, American automotive manufacturers faced a new form of competition one that is still very relevant in todays society
In essence, it changed the course of what companies and consumers have thought about the future of the automobile
Corporations developing new technologies require more employees, as well: further shaping the automotive job market

(Above): Cumulative HEV sales between 1999-2011 show the Prius family as a clear winner

Gasoline No More?
As previously mentioned, the launch of the Prius came with huge sales success and the upbringing of many new hybrid vehicles and technologies Many believe that the future of vehicles relies on little to no reliance on fuel, and more reliance on things like electricity or hydrogen This has mainly stemmed from recently-rising fuel prices and environmental concerns, like global warming

Companies like Toyota invest millions of dollars (Toyota does this on a daily basis) to improve upon their hybrid technologies
Domestics are also entering into the market with recently-added 2013 models of the Ford C-Max (a hybrid) and the Fusion ENERGI (a fullyelectric vehicle)
Fully-electric sports cars are also being released, such as the popular Tesla Model S Roadster (it is sold out in the United States)

What Does This Mean For Jobs?

Many believe that the shift in automotive technologies, and the rise of foreign competition, is killing American jobs

However, Wall Street Journal author Shirouzu Norihiko believes otherwise; her opinion is stated in the article titled Foreign Car Makers Grab U.S. Resources: Automotive Engineers
It states that a growing presence of foreign automakers and suppliers in the United States is a good thing from an individual engineers point of view because it offers more options for American engineers at a time when opportunities at The Big Three are lacking
This is true for jobs both inside and outside the United States

A prime example is Toyota: nearly 40% of Toyotas 20,000 engineers in Japan are contractors from agencies and guest engineers from suppliers