The recent problems faced by the car industries in the USA can be explained by simple method as sale of cars produced by major car manufacturers in USA (such as Chrysler, Ford and General Motors in the car manufacturing hub of USA i.e. Detroit) has substantially gone wrong. The sale of small cars for domestic use, trucks, buses, commercial vehicles are taken into consideration. The small car segment is mainly targeted towards the population buying small cars through bank loans. The banks doling out loans were substantially increased and collections of receivables became less, thus the collection replenishment of Bank incomes also becomes troublesome, and banks became insolvent. The buying power of public in USA subsequently went drastically down due to inflation and global meltdown. Thus, essential spending became more priority. There was a time when a small vehicle was necessary to all Americans. Now it was reversed due to heavy debts and inflation, jobs lost and allied problems related to spending power of the public.
Truck and bus industry have miserably failed in the recent past in the USA. In addition, it seems beyond repair that the capital operational costs of manufacturing related to such types of cars for commercial use vehicles have increased exorbitantly high, but the income level has not increased accordingly. (Heaton 2007)
The technical team on the shop floor of car, along with Quality control team and research and development team, is producing cars with added GPS, cruise control and sports exhaust. Cars made with so many fancy gizmos, also added to the cost manufacturing cars saleable in the market. Any small vehicle for transportation for the general mass should have been targeted with fuel efficiency, comfort of travel, stable performance engine with efficient brakes, safety of passengers, sufficient space to carry passengers and most of all it should be following a criteria to make a cost effective cars. Cars should be available at a reasonable cost; good mileage for a gallon of gasoline with less pollutant emissions is the real need. Whereas, adding fancy gizmos, which are not all essential requirements for the mass, was considered and implemented, thus making wrong decisions.
The workers who produced these cars are also a big hindrance to the manufacturing of cost effective cars, as they created more problem by demanding higher wages, union demands which added costs to the cars manufacturing. This is also being one of the essential components to be considered as a hindrance to the costing of the cars. If we have overhead expenses very high, it will add cost to the manufacturing process. On top of all these, the management attitude towards planning, design, action on Quality Assurance and research and development, raw materials costs are also to be blamed partly. The Sales pattern is also to be rectified, because the sales managers and executives, who are selling to the dealers, car show rooms owners, have less efficiency to complete the sales. Many a times, cocaine or marijuana was found in the possession of Sales Managers and executives of American car manufacturers. Thus, the very foundation of efficient sales person is weakened due to these bad habits. (Pierce 2009)
United States car manufacturers have made a mess out of themselves, which has become a concern to all of them. Say, for example, the strong union of automobile manufacturers in USA, United Autoworkers Union, may be the target of blame to be shouldered. The real problem lies with the management of these large companies that has consistently pursued the easy dollar instead of making hard and realistic options for selection. The automobile industry receives billions of dollars from the American government to support them and to continue their operations. American automobile depends on internal combustion engines fuelled by petroleum products, where problems were sky high on the horizon, during the seventies. The seventies saw steep increase of gasoline prices increase, but still today after thirty years, the American automobile industry did not learn a lesson out of this technical problem, to create fuel efficient cars.
It is not only the economic problems the car manufacturers are facing due to the manufacture of wrong types of cars, but also the economic recession, cash crunch, reduced buying powers of consumers. With bank loans doling out and collections of EMI at lower level, banks becoming insolvent are also the realistic reasons. The global meltdown and recession are also the greater problems, which is much larger concern for the American general population.
The eighties, nineties and the last decade, the automobile industries have contended themselves by throwing carrots to the public of America as solutions to the oil problem. The cars were built to run on unleaded gasoline to satisfy the ecologist to protect the environment. The gasoline mixtures of one hundred per cent to ninety percent change were not much of significant help. (Carr 2006)
It would be wrong to access, a vehicle designed to run on regular unleaded gasoline, is far too efficient than a vehicle designed to run on a mixture of fifteen percent gasoline and eighty-five percent alcohol. The availability or easy access to this mixture gasoline and alcohol is far less available in the US market. When the American government made a mandatory law that unleaded gasoline cars can be built, it was almost overnight transformation as big oil companies began their filling their storage tanks with unleaded fuel. The reason the mixture of gasoline and alcohol is not readily available and that the American car giant manufacturers’ capital city Detroit has elected to put forth their view, the course has affected their output. The only time the big three car giants made significant changes was when the Federal Law did not give them any alternative at all.
The trend to make hybrid cars was a common practice for all car manufacturers in the USA for a long time. Until date, they have made small ugly cars and it is available in limited numbers with special prices fixed. This area is improving, but these cars are driven by selected few environment conscious die-hard people only. Automakers around the globe have till date failed to produce a car, that makes a genuine effort to be powered by any revolutionary type of engine. The change is essential, if the automobile manufacturers around the world, including Detroit, are to survive deep into this future. We all must remember, “Necessity is the Mother of Invention“, and today the real necessity has come. A genius brain from any part of the globe can take this challenge and make it happen in reality. The nanotechnology may or may not be useful in this invention and is to be explored by a genius brain on earth. (Dobrev 2008)
Furthermore, tire manufacturing has causes problems too. Although the tires of the Tire Company are low-cost, it is concerned about quality since automobile manufacturers do not want to spend much on tires for new cars but are concerned that the tires last a while. Thus, it is obvious that as Tire Company is not willing to make further invest in the segment of tire it is necessary to put a greater emphasis on the quality management techniques for the company. This is essential because this way the company would be able to maintain sustainability in the tire market. Otherwise, with tires not developing in the context of research and development scheduling and facing fierce competition in terms of quality and pricing the Tire Company is sure to be eradicated from the market.
For example, a Tire Company produces 10000 tires a week it would be relevant to implement quality control management techniques on a weekly basis. It could be ascertained that the Tire Company should move towards a sampling measure that would include at least 10% of the total products weekly. This appears to be quite high as a number to be sampled but keeping in mind that the only aspect of development for the Tire Company to sustain effectively in the tire market is to improve on quality control. As a result at least 1000 tires should be tested for sampling purpose weekly. On the other hand, for better quality control measures the Tire Company needs to set up a specified wing of specialized personnel who are highly instrumental in the management procedure of quality management techniques. With their intervention, the Tire Company would find them in a place where the quality of its products would always be maintain and thus would be able to sustain their market segment amidst fierce competitions.
Once upon a time the American automobile industry, produced the finest cars in the world, Duisenberg, Auburn, Cord, Pierce Arrow, Packard all were great names in Automobile industry. They were one of the most advanced and luxurious cars ever built in America, and they still fetch a lucrative price tag in the present market. Are we going to see same type of splendid automobiles with same prices for the modern cars, some rare iconic models will achieve legendary status such as Mustang and Cobra? We need to analyze, what has happened to this industry, and what are the causes for its failure, if we look it from an outside America as a foreigner.
This vision goes as two folds
A car is made to sell. Every three years, a new model of car needs to be rolled out from the manufacturer. Some additions and modifications were added or deleted to give it a new model. This new model of car is the state of the art. The asp rational part is eliminated. Any one who pays the price can own one, with power everything, GPS, cruise control and sports exhaust. Cars made with so many gadgets or gizmos the driver could drive the car hands free; we can engage our hands in other activities, while you drove around in special comfort. (Mudambi 2008) The cars also became cheaper, so many people can afford, and the manufacturing and the quality of the car is improved. The cars do not offer the best in the world; they just offer what some other countries offer and make it cheap and dirt-cheap.
The second reason the industry failed is it stopped making cars, and started making trucks (SUVs). These are not cars; they are massive great land yachts. These great yachts come with televisions, stereo systems that would be out of place in discotheques, luxurious chairs and huge couches, etc. These no longer have the right to be called a true car, or SUVs. We should call them for lack of a better efficient work Wank Fodder. (Rubenstein 2006) These Wank Fodders were aimed at the lowest common denominator population who cannot drive a car properly. We shall be practical, these two tons whales do not handle, they require a huge amounts of steering lock to return to turn, have no way of feeling the road. They are Yachts with wheels. You need five minutes warning before you turn a corner. The car industry lost its focus from the real target, when it started concentrating on people movers heavy Wank Fodders, mini vans and SUVs. These are not cars; these are tanks, with all the Freudian symbolism.
We just have to admit we cannot drive, or one is lacking in the manhood department and then buy a decent car. Although one must admit, there are not much cars these days that do not fall into the formula of build for a normal price tag. There are sufficient reasons to believe, why Beatty, Lamborghini, Ferrari, Bentley and Aston Martin group of splendid cars exists, to remind of how cars should be, to a standard of no compromise. Although it is not sure, how a family will fit in a Bugatti.
However, we still imagine a car that could fit the family, drop the kids off at school, the dog at the Vet, get the groceries from the market, to the horse float and still drive and handle like a sports car to give the inner feelings, that you are controlling a real car on the road. A feeling of a real car drive on long distance drive with your girl friend, or your wife, or with your family, or with your friends, with full control on the steering give you a splendid feeling, about a good car with speed, excellent engine, fuel-efficient long drive car, becomes a satisfaction to an individual. (Cooney 2007) No, the American Auto Industry (and the world’s auto industry for that matter), lost it when each and every company churned out cars at a price and a formula rather than making cars for individual needs.
The automobile capital of America, the great city of Detroit, has become an urban wilderness. Once upon a time, not so long ago, a few kilometres from the downtown city of the Motor city, vibrant neighbourhoods could be found that are now empty of human life. One can find houses abandoned, empty of their occupants by a tornado named economic crisis, inflation, and global meltdown. They are not the only one; the financial and banking sector are first in the line. The recent decision from the White House for General Motors and Chrysler is that they have not formulated a business plan that is viable in the current scenario, and the market conditions, they have therefore been sent an ultimatum. Chrysler is being told to merge with Italian automaker FIAT, while GM was compelled to sack its CEO, and must re-structure radically within two months or face bankruptcy.
The White House will only provide funds for two months during the duration of ultimatum, with further support only available if the expectations of the President administration are met in full. (Stewart 2008) World output and international trade are closely related and since, we have a global market we feel both their positive and negative effect in tandem. Considering a particular year, the total sum of international trade that takes place directly affects the quantity of world output. The overall capacity of international trade will be slowed down if there is a decrease in world output and inversely, high output rates acts as a boost increasing trading volumes worldwide. Thus, if our global market is resourceful there will be an increase in world output too. As a result, during economic recessions a negative atmosphere is created since, people spend and purchase less imported and domestic products as they would have normally.
Just like an economic boom increases world output, increasing international trade, during recession, consumers become unsure about their individual and financial future and spend less. In addition, with increase in trade the efficiency of the sellers also increases as they become more capable and get more money and resources for investment, which further increases the overall world output. If one country trades with another obtaining services and products at a much cheaper rate than producing it themselves and trade them with a service or product of their own, they not only profit but also increase the output, as they are more efficient. Moreover, fluctuations in currency of a country during recession affects trade and import since the value of the currency are diminished leaving them unable to get imports, which becomes more costly than domestic items. The recent recession has proved to be number one enemy of the automobile industry in the US.
The merging attempt to Chrysler with Fiat is a viable proposition or not is a big question mark as the past mergers of Chrysler with Mercedes Benz did not work out in right spirit and the commercial viability was not successful. The act of foreign carmakers buying out sick American car manufacturing companies was disastrous, principally due to strong Auto Workers Union of America, which might be tough to handle by foreigners. Another significant point to be seriously looked into is the Italian Auto giant Fiat had left American auto market long back, finding it tough or complicated to handle. How they will look at the merger with Chrysler is also a big question mark.
The massive size of the company General Motors defines the essence of the problem faced not only by General Motors, but also by other global carmakers including Toyota, Honda, Nissan and Ford. As per present standards, the world has the manufacturing capacity to assemble more than ninety million cars a year. With worldwide sales reduced to fifty million cars, no major car company can afford to make profitable returns. (Weaver 2007) The only solution according to me is to preserve the sufficient demand for its manufacturing capacity. This demand need not be restricted to manufacture of cars only, they can manufacture any other saleable product. Also, explore a possibility to manufacture low cost small vehicles, which can carry minimum four people. They can manufacture bicycles. They can manufacture any other consumable goods, which have a regular demand in the daily life of a human being, like package drinking water, pharmaceutical products, solar energy, wind energy, electricity-generating units from solar or wind battery storage facilities.
Nanotechnology or robots are useful for anatomy, orthopaedics research. This way the work force will be employed, with a different direction and a focus on training new product lines, the workers families are fed, and the machines are brought back alive with some large or small modifications. An alternative progressive business plan with positive view to re – employ large work force needs to be planned seriously with scientific and economic experts to review the revival Status. The positive attitude to restructure a new type of industry must be the most viable proposition, which can be termed as sure success in the end and it is eligible to work in the short-term market scenario. It is essential that all workforces of American Auto workers to unite and fight this inflation by setting up of new industry with the existing machinery and land where the cars are built. (Pierce 2009)
Bibliography
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