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Industry Research Completion

Industry Research Completion

The automotive industry produces automobiles and other gasoline-powered vehicles, such as buses, trucks, and motorcycles. The automobile industry is one of the most important industries in the world, affecting not only the economy but also the cultures of the world. It provides jobs for millions of people, generates billions of dollars in worldwide revenues, and provides the basis for a multitude of related service and support industries (Helmut, 1994).

Automobiles revolutionized transportation in the 20th century, changing forever the way people live, travel, and do business. As a result of easier and faster transportation, the United States and other countries have become dependent on the mobility that automobiles, trucks, and buses provide. This mobility allows remote populations to interact with one another, which increases commerce. The transportation of goods to consumers and consumers to goods has become an industry in itself. The automobile has also brought related problems, such as air pollution, the emission of greenhouse gases that contribute to global warming, congested traffic, and highway fatalities (Helmut, 1994). Nevertheless, the automobile industry continues to be an important source of employment and transportation for millions of people worldwide.

The automobile industry changed people’s ideas of boundaries, limits and distance. With the arrival of the automobile, people suddenly had the freedom to go farther than ever before. It changed where people lived and worked. It changed how and where they shopped and traveled. It changed how they thought about distance and time, making a significant impact on how people live their lives and how they behave on a daily basis.

Automobile manufacturers are among the largest companies in the world. These corporations are often multinational, meaning they have subsidiaries and manufacturing plants in many different countries. These companies often share parts, use parts made in foreign factories, or assemble entire cars in foreign countries. The three major automobile manufacturers in the United States are General Motors Corporation, Ford Motor Company, and Chrysler, formerly Daimler Chrysler AG, provide much of the industry's total direct employment in the United States, but increasingly foreign automakers, such as Toyota Motor Corporation and Nissan Motor Co., Ltd., are building automobile assembly plants in the United States (Associated Press, 2007). Foreign automakers are taking advantage of tax incentives and laws that discourage union organization in the Southern United States, in particular. Eleven foreign-owned auto plants operated in the United States in 1993. By 2007 that number had grown to 28. Many of these plants were located in such states as Alabama, Mississippi, South Carolina, Tennessee, and Texas (Associated Press, 2007).

Automotive parts manufacturers are another large section of the U.S. auto industry, comprising about 5,000 firms, including Japanese, European, and Canadian companies. These firms supply the original equipment market (for manufacture) and the replacement parts market (for maintenance and repair). By some estimates, for every job created in the automobile assembly industry, three to four jobs are created in the automotive parts industry. Numerous other industries support the automobile industry.

These include the insurance, security, petroleum, and roadway design and construction

Industries. Still other industries, such as motels, drive-in theaters, and fast-food restaurants, owe their existence to the mobility provided by the automobile (Helmut, 1994).

Through the years the automotive industry has seen its ups and downs. Over the years there have been decreases in production ad sales and adjustments made to bounce the industry back on top. For example, in the summer of 1993, production and sales were not very good for the automotive industry. Production and sales for the industry slumped and the impact on the manufacturing sector and the overall economy was startling (Helmut, 1994). The declines in shipments and industrial production of the motor vehicles were several times larger than the overall declines in manufacturing. The slump in the industry was directly translated into more than just poor manufacturing statistics. The third quarter drag in the auto sector had a substantial impact on GDP for the quarter. Fortunately this drag was temporary due in large measure to short-term developments that subsequently corrected themselves (Helmut, 1994).

The automotive industry is under immense stress. To survive, companies must turn obstacles into opportunities through innovative business models, enhanced collaboration and process transformation (Morris, 2005). Today’s fast moving automotive industry demands state of the art technology combined with a high level of safety. Vehicles in today’s automotive industry must keep up with the demand of changing technology (Morris, 2005). With record high gas prices the automobile industry had to make adjustments to accommodate the demand for more fuel efficient vehicles. The older gasoline vehicles emit carbon monoxide, nitrogen oxides, and hydrocarbons. The industry has developed fuel efficient vehicles called hybrids (Morris, 2005).

A hybrid electrical vehicle is a vehicle that uses two or more distinct power sources to propel the vehicle. With the negative externalizes of carbon emittion, some positive externality would be safer roads and safer and more reliable vehicles (Morris, 2005).The demand for these vehicles is one the rise, while older gas guzzlers are decreasing. Today’s soaring gas prices have caused the demand of bigger vehicles to decrease. Americans are now investing in more gas efficient vehicles, which is causing manufactures of SUV’s to make modifications to their models, (Morris, 2005).

General Motors Corporation is planning for half of its cars in the United States to be running on ethanol by 2012. GM North America President Troy Clarke at the Chicago Auto Show is saying GM will have 11 ethanol capable vehicles on the market this year and 15 in 2009 (The Economic Times, 2008).

When one thinks of hybrid automobiles, the image of subcompact economy cars, high on gas mileage and low on top-end performance, undoubtedly comes to mind. However, with gas prices consistently increasing over time, occasionally in sudden spikes and environmental awareness growing in all quarters, there is a movement to bring hybrid technology into the realm of high performance sports cars (Howard, 2007).

Japanese automakers in particular seem to be spending a great deal of effort in fusing hybrid technology with sports cars appearance and performance. The Subaru Scrambler, the Mazda Ibuki, and the Mitsubishi’s hybrid in its Eclipse line are all progressive in development (Murray, 2007).

The economy has had negative and positive impacts on the industry. The automotive industry has had its ups and downs in the past. For example, Chrysler plans to cut between 8,500 and 10,000 hourly jobs and 2,100 salary jobs through 2008. They plan to eliminate some vehicles from their product line as well. This will allow them to focus on more gas efficient vehicles for the future (Associated Press, 2007).

U.S. automakers have long denied there is a link between fuel prices and vehicle sales. One source that supports this claim is Americans are unwilling to pay for fuel economy. American manufactures’ reaction to rising fuel prices over the last few years revealed the shortcoming of the U.S. automakers’ recent product and power train strategies (McManus, 2006). The effect of rising fuel prices has in fact, been offset by reducing prices of vehicles in inverse proportion to fuel economy, thus unit sales of large SUVs could be maintained, but their revenue and profit fell because vehicle prices were cut directly or indirectly (McManus, 2006).

The rise in the real price of gasoline has been modest in historical terms, and sales of low-mileage sport utility vehicles and pickups have been stable, leading many observers to conclude that consumer demand has not been responsive to the rise in gasoline prices (Murray, 2007).

For the first time in a century, vehicles will look and run entirely different from what they are now. Design and technological advancements are changing an industry once dominated by the United States and from a political perspective, jobs are going south.

Supply and demand is perhaps one of the most fundamental concepts of economics and is the backbone of a market. The law of demand states that if all other factors remain equal, the higher the price of a good, the less people will demand that good. In other words, the higher the price, the lower the quantity demanded. The law of supply demonstrates the quantities that will be sold at a certain price, in other words, the higher the price, the higher the quantity supplied. Vehicles that are selling well don’t get big rebates and discounted financing deals. Vehicles not in demand any more become cheaper (McManus, 2006).

Four primary motives drive the search for workable alternatives to petroleum as a fuel source. They are decreased risk of health effects caused by poor air quality, national security through self reliance cost control and reduction of greenhouse gas emissions that contribute to global warming. American consumers are upset at recent increases to about $3 per gallon. Unfortunately for struggling U.S. car makers higher gas prices mean lower sales and diminished profit and high costs at the pumps can cause quakes that rumble through the entire economy with destructive effects (Murray, 2007).

Companies are experimenting with different fuel alternative such as biodiesel, which works well for trucks, buses, and heavy equipment. It is available for use today and is produced from organically derived oils through the process of transesterification. Ethanol is another alternative that is being experimented with. Ethanol is fermented from grain and is already in use around the world, especially in the form of E85 a mixture of 85% ethanol and 15% gas (McManus, 2006).

Natural gas formed from plants by geological processes has long been used for cooking, heating and fuel. More than one million vehicles on the world’s roads today use natural gas. One other alternative is Hydrogen cars. Hydrogen cars represent an example of the unlimited potential of the hydrogen future. Hydrogen is the most plentiful gas in the universe (though it never occurs by itself in nature) and harnessing its energy is a vision toward which much research and development is directed (McManus, 2006).

Some companies believe by increasing the fuel economy of America’s new automobiles to 35 miles per gallon by 2018 would save consumers $61 billion at the gas pump and increases U.S. employment by 241,000 jobs in the year 2020 (Murray, 2007). This study comes as the House of Representatives prepares to consider energy legislation. Putting technology to work means putting people to work. According to research, nearly $24 billion of the gasoline savings would become new revenue for automakers in 2020 paying for the improved technologies plus some profit.

The auto industry of the future will be characterized by vanishing boundaries: between countries and companies, between suppliers and manufacturers, between engineering fields, between departments (that is, marketing, design, and finance), between labor and management, and between automotive and consumer electronics. Companies that rapidly adapt to unpredictable and dynamic events will prevail (McManus, 2006).

References

Associated Press, (2007). Automotive Industry. Retrieved July 2, 2009, Web site:

Helmut,T (1994). The Automotive Industry. Retrieved July 2, 2009, Web site:

Howard, J (2007). The Automotive Economy. Retrieved July 2, 2009, Web site:

McManus, R (2006). The Economy. Retrieved July 2, 2009, Web site:

Morris, K (2005). The Automotive Industry and the Economy. Retrieved July 2, 2009, Web site:

Murray, I (2007). The Automotive Industry. Retrieved July 2, 2009, Web site:

The Economic Times, (2008). GM Making more Ethanol Cars. Retrieved July 2, 2009, Web site:

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