The US Automotive Industry Lags Behind

The influence of the Big Three is not only shrinking in the domestic market, but also declining as a force in the global economic landscape. The decline in sales and productivity may seem like a result of the US automotive industry lagging behind as businesses, but the problem has many complex factors. The industry itself is of course partly to blame, but there are many influences that have led to the current status of American car companies in comparison with foreign car companies.

First, the difference in car designs demonstrates the intricacy of the problems facing American car companies. In years past when the economy was thriving, design matched the needs of the consumer in the present, and sometimes the past. National trends in preferences were equally near-sighted, and car companies had no need to promote any other kind of car besides one Americans would spend more to buy. Foreign markets, however, created a more progressive demand, and the most noticeable force was, and still is, the consumption of gasoline. In European and Asian markets where gas is more expensive due to higher taxes, saving money began not at the car dealership but at the gas station. So, when deconstructed, the simple problem of design differences becomes a multi-faceted issue where car companies, consumers, and government are all responsible. The balance and influence of all three on one another in this country is especially important when the car companies were once large, dominant players in the domestic and global economies. So, the other factors that have led to the collapse of the Big Three are actually all part of the same problem. But, the progress of the Asian auto industry highlight the major problems slowing the progress of the American auto industry.

From a business standpoint, the difference in production between Asian and American companies demonstrates one area where the US industry lags behind. First, labor costs are one major issue that Japanese car companies have been able to control through union relations. American auto workers' unions have held influence over company executives, and as a result, union demands reduce profit margins starting right on the factory floor.

Car companies are also plagued by their corporate structure. Ford initially solved a problem of miscommunication and uncoordinated suppliers, but they created more problems down the road. Toyota avoided problems of inefficiency and bureaucracy by creating small, efficient entities for supply and manufacturing. The inflexibility of American car companies started from the suppliers upward, and higher costs were felt at every step in the manufacturing process. The philosophy of centralized control not only drove up costs but drove down innovation, leading to designs and ideas that were too slow to react to market changes.

Finally, government policies have slowed American innovation. Asian governments have used taxes and incentives to encourage their citizens, and the lack of these kinds of programs has led to a stagnant auto industry. In China, taxes on small, fuel-efficient cars have been cut in half, creating increased demand for small cars. As a result, manufacturers have been able to charge more for their product at a time when American car companies are slashing prices to encourage sales.

The American auto industry is lagging in the world market, and it is a product of its complicated past. However, since the blame is not only with the companies themselves, returning the US automotive industry to its global prominence will require an understanding of all of its influences, and a concerted effort by the industry, consumers, and the government alike.