The Automotive Industry Of “The Big Three”

Categories: Car Company

Essay, Pages 11 (2682 words)

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Introduction

The Ford Motor Company is indebted to Henry Ford for his inspiration and innovation in the production of affordable automobiles for a mass market. Stemming from his ingenuity. Ford purchased enough stock from the bank in Detroit to oust out John S. Gray who was the company’s first president. Through Ford’s expertise, the Model T, a simple, economical vehicle, offering no factory options, paved the way for American consumers to have affordable transportation. In summary, Ford was the founding father of the automotive assembly production line that led the way for mass production of transportation for the nation (Ford, 2005).

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As both a pioneer in engineering, and an early designer (the quadricycle), Ford entered the Detroit Automobile Company in 1901 and by 1902 he had established himself as his own boss to head Henry Ford Motor Company. His early stanza did not last until 1908 when Ford presented to the world his Model T. Following his initial beginning, Ford became the Father of the assembly line for mass production of cars.

By 1914, Ford had created a moving assembly line industry which was imitated by other competitors (Ford, 2005). As a result, the world credits him as the pioneer who did not invent the car but as the one who launched the concept of supply and demand for the American consumers by producing automobiles that were within the economic reach of the nation. Ford’s strategy become a plan, he began the theory of “Outsourcing the Sources” (his competitors) GM and Chrysler. He instituted the minimum wage standard for workers from .

83 for a 9-hour day to $5.00 for an 8-hour day. Unexpectedly, Ford stunned the nation by doing something no other dealership had ever imagined. Ford was able to target a market that would prove very lucrative in the manufacturing of automobiles. Ford had developed a strategy that reduced the prices of cars which in turn the automobile industry changed from just a luxury item to an essential and affordable one which was within the economic reach for the masses.

GM, another one of the Big Three, played a significant part in the history of the evolution of the automobile, too. According to history, The General Motors Company was founded in 1908 under the leadership of William C. Durant. His strategy for competing in the world market was to outsource his competitors by acquiring car dealerships. This in turn would give the company leverage in the sales and promotion departments. Durant was able to consolidate Buick, Oldsmobile, Cadillac, Pontiac, Ewing, Marquette, and other auto dealerships. By 1912, Durant had introduced the electric self-starter which made the hand crank of the Model T obsolete. Besides this, GM Delco (still based in Detroit) became known as General Motors Corporation. In 1916. GM became known as General Motors Corporation and two years later Chevrolet and Delco Products connected with GM in 1918. In addition, Fisher Body Company and Frigidaire were added to the corporation. Due to controversy, Durant was forced out of office at GM and replaced by Alfred P. Sloan, Jr. He served as president (1923-37) and chairman (1937-1956). Under Sloan’s leadership, GM was converted into one mega-corporation divided into five automotive divisions. They consist of Cadillac, Buick, Pontiac, Oldsmobile, and Chevrolet (Wikipedia,)

The most significant contribution of Sloan to GM was creating a conglomerate of automobile styles. In doing so, Sloan strengthened GM’s sales organization, pioneered annual style changes in car models. In addition, he introduces the concept of consumer financing through GM for its customers. With its unique stratification in marketing and production, GM became the global leader in marketing automobiles. Countries like England, Germany, and Australia came under GM’s operations (Britannica). As the global leader, GM produced trucks (the Yellow Truck & Coach Manufacturing Company) 1925. By 1941, GM had taken Ford’s ideas of mass production and had become one of the largest industrial corporation in the world. In astonishment, during the 1950’s and 1960’s. Following these years of much success GM ran into terrible times. It is noted that with the rise of the Japanese imports in the 1970’s and 1980’s GM could no longer compete with the more compact Japanese cars. As a result, GM attempted to create similar type smaller cars to compete with the Japanese to no avail. As a last resort, GM shut down numerous plants and laid off tens of thousands of employees due to the retail marketing of GM products. In order to counter the marketing slump, GM purchased Saab Motors, dropped the Oldsmobile line of cars, reduced its stocks in GM Acceptance Corporation also later sold it to Cerebus Capital Management who changed the name to Ally Corporation.

Next, Chrysler,” third of the “Big Three” was found by Walter Chrysler, June 6, 1925. He had been hired as an engineering consultant to help overhaul the Maxwell Motor Company which had been established in 1904. Chrysler worked on cars in both the Maxwell-Chalmers and Willy’s Car Company, Walter launched the Chrysler 4 (Kimes, Clark, Chalmers, 2017). It was the first proto-type of its kind. Its designed incorporated a 6-cyclinder engine, which made affordability a luxury for the American consumers. Included in this vehicle were the following parts: a carburetor, an air filter, a high compression engine, an oil filter, in addition, hydraulic brakes, oil light bearings, and super finishing for shafts. From 1924 to 1926, the production of Chrysler products was very low. In 1926, Chrysler, as a phoenix, rose to soar with its new revived. Maxwell, the Chrysler II kept the Chrysler Corporation afloat as a second-place leader from 1936 until 1949 (Kimes, Clark, Chalmers,2017). Other brands surfaced as best sellers to keep Chrysler in the mainstream of the industry. By this time which was before WWII, Chrysler had enter into the mainstream again by producing such dynamic models such as the Jeep, Dodge Ram, DeSoto, the Eagle, the Imperial, and the Fiat 500. Chrysler stood tall as a contender in the world market. To enhance this, Chrysler entered the space program as well. From this angle, it appears that Chrysler is trying to outsource the other two major automobile manufacturers. This time evolved the recession. What is it? How can it be described? In other words, this was time in history when housing, and gasoline was extremely high and very few were able to afford.

The Great Recession

The great recession centered around high prices and price gauging. In other word, what was being done in Washington affected the rest of nation and the world. As a result, the automobile industry was also caught up in the recession which carried drastic effects throughout the world. The Big Three each felt the impact of the dilemma. It is noted that the impact went viral. The entire was affected. What caused this situation? According to statistics, the gas prices had increased substantially. What is significant about this crisis centers around the price gauging from the middle east. Each of the “Big Three” General Motors, Ford, and Chrysler each were affected by the shutdown. With fewer fuel-efficient models to offer to consumers, sales began to slide. Demands became widespread.

By 2008, the situation had become so crucial that the auto industry had to result to seek other means for survival. In other words, the automotive industry had been weakened by a substantial increase in the prices of gasoline from the Middle East. With fewer fuel efficient cars, consumer criticized and protested because they wanted smaller, cheaper, more fuel-efficient imports from Europe and Japan. What is noted is that the situation had turned critical as the credit crunch placed pressure on the prices of raw materials. In other words, the automotive industry had been weakened by a substantial increase in the prices of gasoline from the Middle East. With fewer fuel efficient cars, consumer criticized and protested because they wanted smaller, cheaper, more fuel-efficient imports from Europe and Japan. What made matters worse was when Americans stopped buying big vehicles and chose to purchase smaller more fuel-efficient ones. This caused the economy to become very unstable and the “Big Three’s” profit sharing and sales plummeted. Because of the instability of Americans, the “Big Three” had to turn to the government for assistance. Automakers turn to the government for assistance became known as (TARP). President George W. Bush announced the availability of the funds. It literally stands for Troubled Assets Relief Program. This plan was designed for the government to make available for the three auto corporations to receive 13.4 billion in government loans from this fund. In the meantime, Congress approved a $700 billion fund to aid the fund, too. While the legislature was in session, General Motors filed Chapter 11 bankruptcy. Ford Motor did not accept the funds because they felt that their assets would keep them safe and a float without borrow money from the government. In the meantime, GM did emerge from bankruptcy victoriously in 2010 and dissolved its ties with the stock market. Following this, GM downsized the corporation into four vehicle divisions which became Buick, Pontiac, Cadillac, and Chevrolet. In the meantime, GM regained its position as the largest IPOs in the history of the U.S. Following this, scandal broke out about the corrupt dealing that GM had participated in and caused numerous deaths due to faulty parts in GM products in 2010. By 2014, GM had dissolved all of its European company ties because of the scandal.

During this year the federal government took over GM and Chrysler in 2009. As part of the takeover, they fired the (CEO) Rick Wagoner as well as made Chrysler merge with Italy’s Fiat. Next, the Obama administration to promote new auto efficiency standards. It was noted this method encouraged all of the U.S. Following suit, GM entered bankruptcy in June, too. By July 31, each one emerged from bankruptcy reorganization. GM became two separate parent companies. First, General Motors Acceptance Corporation became Allied Financial. Also, Chrysler became a brand owned mostly by Fiat. Following this, the Treasury Department began selling off its ownership of GM in 2010. Finally, Chrysler paid off the last of its loans by 2011. On December 18, 2014, the US. Treasury Department ended the bailout. After this episode, it sold all the shares from the old GMAC account. That is when it sold its last remaining shares of Ally Financial, formerly known as General Motors Acceptance Corporation. It had bought them for $17.2 billion to infuse cash into the failing GM subsidiary. The Treasury Department sold the shares for $19.6 billion, making a $2.4 billion profit for taxpayers. On March 19, 2009, the Treasury Department approved $5 billion in loans to auto suppliers to begin again since the automotive industry was an essential part of the American. The topic dealt with the tragedy of the auto industry. Each major company began to experience the unwarranted dilemmas (Vlasic, Bunkley,2008).

This period in American history became very grim. According to the press, there has never been such a disturb nation. For the first time, since 1993, automakers sold fewer than a million new cars and trucks in a single month in the United States. Accustomed to huge amounts of sales and income; it seemed very strange to be so suddenly dealt a mass blow that changes one way of life so quickly.to a different way of life. This caused frustration to sat in; people everywhere became baffled at the notion that their way of life and livelihood was giving way a reeling economy. This scared people away from showrooms in September, and many eager buyers were unable to get loans. In other words, fear had taken hold of the masses. Besides this, individual credit plummeted. Panic set in the nation. Statistics indicated that industry was at a standstill. The media addressed the nation that businesses were experiencing credit. With industry sales dropping 26.6 percent over all compared with a year ago, car companies are likely to cut more production and jobs to compensate for falling revenues.

The Impact of the Automakers on the U.S. Economy

The credit crisis contributed heavily to the steep decline - analysts estimated that it cost the industry up to 100,000 vehicle sales in the final week of the month, on top of lost sales because of high gas prices and the shaky economy. On the other hand, car companies from Asia, Europe, Canada, and elsewhere have begun to implement more creative marketing strategies to entice reluctant consumers to trust the system and do not abandon the “The Big Three”. Although the ‘Big Three continue to face criticism because of their mistakes in the past, there is still hope and trust in the American way of Life. Earlier, the Big Three has faced criticism for their mix of available vehicle types offered, while facing criticism for being ill-suited to a climate of rising fuel prices (Davis,2018). Even as our North American consumers turned to smaller, cheaper, more fuel-efficient imports from Japan and Europe, it reminds one of the economic theory of supply and demand and who introduced it to the world.

The Impact of the Automakers on the U.S. Economy II

Despite some criticisms, the automotive industry “the Big Three” went aground and had to be bailed out of the crisis; they fell into trying to accommodate the needs of consumers. Yes, there was trouble during those earlier years. While facing those changing times, the general public was fed and clothed through the jobs created by the bailout. Statistics indicate that approximately 340,000 jobs were created because of the bailout. Besides this point, the auto industry contributed 3.6 percent/$500 billion in revenue. Furthermore, the sale of automotive parts and manufacturing as a whole contributed to the economy. A 30 percent decline in auto sales translated directly into a 1 percent decrease in economic output. Many analysts disapproved. They felt that Chrysler would go bankrupt even with a bailout and that Ford didn't really need it. The main impact of the bailout was to save jobs at GM. But the recession caused GM to slash its employment and production, despite the bailout. Furthermore, once the recession was over, Toyota and Honda would continue to increase their U.S. factories, providing jobs for U.S. auto workers. If there had been no bailout, Ford, Toyota, and Honda would have picked up market share. That would have increased U.S. factories and jobs once the recession has past. The loss of GM would be like the loss of Pan Am, TWA, and other companies that had a strong American heritage but lost their competitiveness. It would have perhaps tugged at the heartstrings of America but not really hurt the economy. As a result, the auto industry bailout was not critical to the U.S. economy, like the rescue of AIG or the banking system. It is noted that despite the criticism; the “Big Three “were the trailblazers for the automobile industry. What Ford first presented gave the world a look through a kaleidoscope of the possibility for reaching the “Stars”. Following him, GM, and Chrysler, each company gave to the world a design or designs, an experience(s), a thrill, a ride, a look, a hope, a desire, as well. Amid the avenues the world of supply and demand came into existence. Through their successes, the founders of the “Big Three” and failures, we consumers are able to buy, ride, trade, insure, and drive.

According to a Ford update- it’s moving toward artificial intelligence (2017). There is not much talk about the rivalry between the” Big Three, Ford still intends to outsource the other sources. The competitiveness has been hard fought but Ford is not a quitter. It has been stated that Ford is still progressing toward the future. According to San Francisco Daily, (2017), Ford has invested approximately $1billion with Argo AI (Artificial Intelligence). Basically, this new program will be tested for production of an artificial intelligence software that will create autonomous vehicles for the future. The leaders are roboticists, and Ford engineers working together to produce a product by 2021. It is noted that the next generation will be defined by the automation of the automobile. Dr. Mark Fields, heads the team up. Although they are in the initial stage, Argo AI, and the staff will continue to perfect the robotics self-driving vehicles of the future.