As we move towards a globalized business world, new competitors have risen from developing nations. These nations now pose a threat to the many industries still stuck in their old ways. One industry in particular is the American auto industry that has seen a large fall in their earnings. Japan is one nation who has revolutionized the auto industry through Toyota. The world is growing and with this growth we see a need for energy and with it has come a high price at the pump. Ford Motor Co. and General Motors Corp.
due to a lack of planning, inability to adjust to this energy crisis, and other problems have led to massive losses. With investors anxious for change, American auto industry in order to compete in the car industry has sought ways to cut their costs. Both Ford and GM have resolved to plant closed downs and massive layoffs. To compete with foreign automakers GM announced in Nov. of 2005 that it would be cutting costs by eliminating 30,000 hourly jobs and close or scale down operations at about a dozen U. S. and Canadian locations in attempts to save in a bid to save $7 billion a year.
Ford announced similar plans in Jan. 23rds 2006 press release. They planned to close 14 plants in North America and cut between 25,000 to 30,000 Jobs by 2012 as they try to stop losses and adjust to a significantly lower market share. Rival Toyota has been able to present a more fuel economic car, which has brought on this lower market share. Further on, back in 2003 the American car industry reported inventory levels were at a record high, finishing of the year with 3. 2 cars and trucks in stock (Mergentonline. com).
This goes to show that with further planning and more concern toward globalization they could have lessened the blow. Now where does this leave all those people who lost their jobs? Jim McIlreavy, 34, from South Lyon, Michigan, has worked for Ford for seven years said, “Many of us are going to have to sell our homes and move our families to wherever the work is. ” He went even further to address what was to blame, but this has been coming for a long time. The ‘Big Three’ [Ford, General Motors, Chrysler] have been losing the market share for the past 10 years.
These companies have lost focus on what the customer really wants. They kept building trucks, but people just can’t afford to pay for the fuel for these gas-guzzlers (BBC NEWS, 01/24/2006). Many agree with this comment if these automakers were stuck in the old ways of and didn’t have to worry about foreign competition. However with many companies overseas expanding it was inevitable that Japanese automakers would seize the opportunity. To add to their list of competitors we see Chinese automakers jumping in to get their share.
Asian automakers have not made it easy for The U. S. They have been able to cut cost by using the cheap labor provided by their huge labor forces. Further more they have provided more sleek looking and fuel economic cars. With their sleek cars they have been able to attract the future which is to say the youth market, and with fuel economy to round it off they seem to have the ability to touch upon a large market. So what’s the American industry to do? They should design more appealing cars and trucks.
The reality is that all these job cuts in the world won’t help if Ford, and General Motors, don’t offer Americans many more cars that can run on fuels other than gasoline. They need to invest in more research and development and this begins with proper planning for the future. Ford needs not to look inside but outside and see where it can find alternatives and new projects. This could be done through various ways one being overseas. Like stated before with globalization we see information more easily attainable. These car manufacturers know what buyers in the U. S.
want the thing is obtaining the information. With developing nations in India, Japan, China these automakers might want to consider putting some research and development centers in these countries to further expand their capabilities of creating more innovative cars. Ford seems to be attempting to do just that with its recent hiring Moray Callum, previous general manager of design at Mazda Motor Corp. Callum is credited with reviving Mazda’s product portfolio (The Wall Street Journal, 5/1/2006). Beyond planning, cutting costs, globalization these automakers need leadership.
In the long run we may see new technologies that improve the American auto industry’s power but for now what the industry is a leadership. In recent months ford hired a number of new executives to head key areas related to North American operations, such as product development, marketing, engineering and manufacturing. GM has done the same. One person shaking things up at GM is their newest director, Jerome York. The 67-year-old former auto executive has helped engineer turnarounds at Chrysler and International Business Machines Corp.
He has been going over financial statements, seeking new engines and transmissions, and has even met with GM’s labor-relations executives to deal with the tense negotiations with the United Auto Workers, which is another ongoing problem for the company. Outside directors are increasingly looking to him to set the tone and agenda (The Wall Street Journal, 5/1/2006). That is what GM needs, leadership that understands the automobile business and is willing to fight for survival. Both Ford Motor Company and General Motors Corporation are in the midst of restructuring.
The American auto industry is beginning to accept that it needs to change its cars. But beyond that they need to realize that simply making cuts is not going to work. Ford and General Motors have lost US market share to more efficient Japanese competitors such as Toyota, therefore they need to look into what they are doing different and implement it into their production. Though Ford’s North American unit made a $2. 9bn loss in the first three months of 2006, Bill Ford (Ford’s chief executive) says Ford intends to restore automotive profitability in North America by no later than 2008(BBC NEWS, 04/21/2006).
Many in the American car industry seem optimistic despite all these problems faced. They know that the potential that could be reached from Global business will pull them back to where they should be. Works Cited BBC News. We’re the end of the American dream. 24 Jan 2006. April 2006 BBC News. US problems fuel huge Ford loss. 21 April 2006. April 2006 JOHN D. STOLL. “Ford Names Mazda Exec Head Of N America Car Design”. The Wall Street Journal. May 1, 2006 Mergent Online. Industry Reports. 9 Mar. 2006 < www. mergentonline. com > MONICA LANGLEY. “Driving Force”. The Wall Street Journal. March 20, 2006: Page A1