Research Paper on "Compare Auto and Light Truck Sales Between GM and Ford"

Research Paper 5 pages (1786 words) Sources: 4

[EXCERPT] . . . .

Auto and Light Truck Sales between GM / Ford

Compare auto and light truck sales between GM and Ford

Since the end of World War II, the American automobile industry has undergone a tremendous transformation. Where, they were once the most dominate players throughout world markets. Then, as globalization began to slowly take shape, is when the industry would face a number of different headwinds that would result in the near meltdown of the entire industry in 2008. To effectively determine the long-term causes that have contributed to the problem a detailed study was conducted. The results were that three common causes helped to exacerbate the problem to include: high labor costs, reduced trade barriers and the use of fuel efficient technology by competitors. These three different elements led to the sharp decline seen in auto sales between Ford and GM, as they would slash production in response to imploding sales. This is the root of the underlying causes that contributed to the demise of an icon of American industrial strength.

Table of Contents

Statement of the Problem 1

Background Information 2

Description of the Methodology 4

Conclusions 5

Statement of the problem

Since the 1970's the American automobile manufacturers have been going through a number of different challenges. Where, oil prices, the cost of labor and globalization have created a dramatic shift in the business model for the industry. At which point, Ford and General Motors began to face a number of different challenges competing against the foreign automobile manufacturers. There have been times, such as the 1980's and 1990's that the industry appeared to have learned from the lessons of the past, only to revisit them nearly 30 years later. To determine why the different manufacturers are going through similar situations requires: conducting an analysis of the causes that have contributed to the current state of affairs and examining the various statistics to support or refute these facts. Together, these two elements will provide the greatest insights as to how the U.S. auto industry fell into a long-term decline; where they would lose large portions of their market share to foreign competitors. As industry insiders and the general public will have more precise understanding as to how they can learn from these lessons to become more competitive in the future.

Background information

To determine the underlying causes as to why the different automobile manufacturers are in such a dire position requires examining the underlying causes. To do this an evaluation of three different pieces of scholarly research from: economists, analysts and industry insiders will be utilized.

Singleton, C. (1992). Auto Industry Job's in the 1980's. Monthly Labor Review, 115, 124 -- 137.

The article Auto Industry Job's in the 1980's, talks about the history of the industry until the early 1990's. Where, early on the cost of labor was a major issue that would affect the overall fortunes of automakers. At first these costs were fairly low, when these companies were new and experiencing rapid growth. At they became more successful the cost of labor increased dramatically and management lost focused on producing high quality cars. These two factors would allow the Japanese automakers to capture 33% of the market share by the early 1990's. This information is useful because it shows how one of the biggest factors that helped contribute to the demise of the industry was the high cost of labor. Then, when you combine this with a lack of focus on delivering a superior product to consumers, meant that foreign competitors could easily take market share from the Big Three.

Mannering, F. (1991). Brand Loyalty and the Decline of American Automobile Firms. Brookings Paper on Macro Economic Activity, 67 -- 14.

The article Brand Loyalty and the Decline of American Automobile Firms

talks about how the American automobile industry was able see increased sales during the 1980's mainly in Europe. This is because these markets had higher trade barriers for the Japanese competitors. As a result, researchers believe that industry is facing a serious threat from competitors that could result in a financial crisis. Where, once these trade barriers come down, one of their strongest markets will be vulnerable to foreign competitors. Then when you combine this with the fact, that many Japanese auto companies were building plants in the U.S., meant that they would gain market share at the expense of the Big Three. This is significant because it highlights how globalization would force the U.S. auto industry into a financial crisis (in 2008) because of the reduction of trade barriers.

Greene, D. (2004). The Potential of Hybrid and Diesel Powertrains. Department of Energy. Oak Ridge, TN: Government Printing Office.

The article, the Potential of Hybrid and Diesel Powertrains, talks about how hybrid technology can be used in both gasoline powered vehicles and those that use diesel fuel. According to researchers, they looked at the total effect of having 930 models converted to a hybrid type of system would mean for auto sales. Where, they found that you would see a gradual improvement in the early years of 4% to 15%. Over the long-term, as this technology was implemented more widely there could be a shift of 40% in the demographics of the auto markets. This is significant because it can be used to show how the market was able to change so fast, as high oil prices would fuel this change. There is also an opportunity for the Big Three, as an aggressive shift into this kind of market could help to rebuild market share.

Description of the methodology

The data was obtained by reviewing various scholarly journals and papers for clues as to why Ford and GM saw such a sudden change in fortunes. This was selected because various pieces of scholarly information could highlight the underlying trend that contributed to the problem. Once this occurs, is when you can be able to look beyond the headlines and see, what are the real causes that are contributing to the current situation. The underlying methodology that was selected was: observational sampling. This is when you are looking at the underlying causes by examining sample statistics over a select period of time. (Polit, 2008) to achieve this objective there will be a comparison between the sales of GM and Ford. At which point, an assessment will be conducted by looking at the overall market share of the Big Three in relations to the U.S. domestic market share.

Too effectively see the underlying effects of: high labor costs, foreign competitors more aggressively entering key markets and hybrids, requires looking at the overall effect on auto sales around the globe. This will be accomplished by examining the total amount sales in 2008 and the total U.S. market share for the industry. When you look closely at the numbers it is clear that both companies are seeing a sharp decline because of the various causes mentioned earlier. In 2008 General Motors saw a 36% decline in sales or 2.95 million vehicles sold, while Ford saw a decline of 32% or 2.4 million vehicles. (Ramsey, 2009) (Oberman, 2009) When you look at these two numbers and then compare it to the total U.S. market share of the industry; it is clear that the poor sales figures confirm the underlying causes mentioned above. Where, the Big Three accounted for 47.5% of the total U.S. market share. This is down sharply from 2004, when they accounted for 60% and 1998 when they maintained 71.2% of the U.S. auto market. (Oberman, 2009) When you compare the declining sales at Ford and GM with that of the industry, it is clear that they are both confirming how the underlying causes are contributing to the problem. Where, the sharp decline in auto sales and U.S. market share, confirm that something is contributing to an implosion in sales with both companies. As a result, one could easily infer that the above mentioned causes are contributing to such sharp declines at both manufacturers.

Conclusions

Clearly, the information uncovered during the examination as to why the U.S. auto industry is facing such problems, shows how Ford and General Motors were victims of their own success. Where, in the years after World War II, they had near exclusive dominance of the worldwide auto market. Once, Europe and Japan was able to rebuild is when this success would lead to their own downfall. As executives and workers assumed that they can continue producing large vehicles that are fuel inefficient and expensive. Then, as many of their key markets began to see dramatic reductions in trade barriers, was when they would begin to lose market share to foreign competitors. The overall decline in sales between the two in comparison with the industry's U.S. market share shows how quickly they were loosing market share to foreign competitors. The ramifications of this research are that auto executives must create a new mindset within the industry. Where, they are willing to look for ways to reduce costs, increase quality and… READ MORE

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