Essay/Term paper: U.s auto industry's market share and fluctuations

Essay, term paper, research paper:  Economics

U.S Auto Industry's Market Share and Fluctuations

The U. S. auto industry's share of the market has experienced fluctuations over
the past 50 years. These fluctuations have been caused by many reasons, but some
of the main reasons include quality, price, and foreign competition.

The Ford Motor Company, General Motors Company, and the Chrysler Corporation,
a.k.a. "The Big Three", are the three largest manufacturers of automobiles in
the world. " The Big Three" hold nearly 75% of the market and produce over 8
million automobiles per year. The largest competitors of " The Big Three" are
Japanese auto producers that include Toyota, Nissan, and Honda. These three
foreign manufacturers hold 20% of the market and produce about 2.7 million
automobiles per year.

General Motors Company, the world's largest automobile producer, originally was
composed of four major vehicle manufacturers- Buick, Cadillac, Oldsmobile, and
Oakland which became Pontiac. Presently, General Motors is made up of Buick,
Cadillac, Oldsmobile, Chevrolet, Pontiac, and Saturn. During the first thirty
years of operation GM's only major competition was from U. S. manufacturers.
However, since the first foreign truck was imported from Japan in 1956, GM's
share of the market began to decline. Foreign cars were smaller, more fuel
efficient, less expensive, and often more reliable than their American
counterparts. General Motor's market share dipped from nearly 44% in 1973 to
below 30% in 1985. In response to this sudden drop in its share of the market GM
founded the Saturn Company. Saturn produces compact cars very similar to
Japanese imports at competitive prices. This response halted GM's declining
share of the market. Today, General Motors maintains about 30% of the market.

General Motors was the first large auto company to begin research on alternative
fuel sources and continues to lead the way. Some developments of this research
include the first production natural gas engine, and the first car powered
completely by electricity. Many ideas are still in the process of being
developed, such as affordable solar powered vehicles and ultralight plastic body
parts.

The Ford Motor Company, founded in 1903 by Henry Ford, was the largest car
manufacturer in the world until 1929 when GM passed it. Ford is currently the
second largest producer of automobiles in the world producing over 5 million
cars per year and holding 25% of the market. In the late 1970s and early 80s
when its share of the market was being taken over by foreign auto companies,
Ford's response was different than that of GM's. Ford decided to buy small
foreign companies and convert them to Ford production facilities. This would
enable Ford to increase its share of the market in Europe and Asia. Also, this
would allow Ford to avoid high tariffs placed on foreign cars in China and Japan.


Ford motor company currently employs over 300,000 workers world-wide. In January
of 1996, Ford merged its North American, South American, Asia-Pacific, European,
and African Automotive Operations into a single organization, Ford Automotive
Operations. This merger cut back on costs of developing new cars because now
instead of five different organizations working on the same project only one
organization would work on it. This decreased the amount of time and labor
needed to improve or design new cars. In return the price of Ford products
declined, resulting in more sales.

Another approach of Ford was to enter joint-ventures with foreign companies.
Through these joint-ventures the foreign companies would produce and assemble
Ford automobiles for sale in that country.

Ford is trying to assure future sales by researching vehicles that contain
plastics that can be recycled into common materials. Also, Ford is currently
working with the U. S. Department of Energy to develop alternative fuels,
such as electricity, methanol/ethanol, natural gas and solar energy.

The third member of the " Big Three", the Chrysler Corporation, was founded in
1921 when the Maxwell Motor Company failed and Walter P. Chrysler reorganized it.
Chrysler was able to capture its share of the market when it acquired Dodge
Brothers, Inc. and when Ford stopped production in 1927 to switch from producing
the Model T to producing the Model A. During the 1950 and 60s Chrysler took over
the operations of several small companies in France, Spain, and Britain. This
enabled Chrysler to begin selling cars in Europe and compete with Ford and GM on
foreign markets. In 1970, Mitsubishi Motors of Japan began producing compact
cars under the Chrysler name to be sold in the United States. This led to a rise
in Chrysler's share of the market until the early 80s when Mitsubishi began
using its own name. To counter this move Chrysler formed a joint-venture with
Renault of France to produce compact cars. Then in 1987 Chrysler purchased the
Italian company, Nuova Automobili F. Lamborghini, maker of expensive sports cars.
Chrysler also purchased the American Motors Corporation, the maker of Jeep
products. These purchases increased Chrysler's share of the market from 11% to
16.3% and continuing to rise. Chrysler produces nearly 3 million automobiles a
year under the Chrysler, Dodge, Plymouth, Jeep, and Eagle names.

Chrysler is also in the process of producing alternative fuel cars. These
include vehicles powered by electricity, liquefied natural gas, and gasoline-
methanol mixture.

The future share of the market for the " Big Three" should remain steady or even
increase. Today, the " Big Three" is able to produce top-of-the-line, fuel
efficient, affordable cars to compete with imports. The " Big Three" also leads
the way in research on alternative fuels and designs that will make automobiles
more efficient and less polluting. In conclusion, the United States automobile
industry, which pioneered processes and technology in the early 1900s, has
returned as the leader and will lead the auto industry into the 21st century.