U.S. Auto Industry: Strategies for Survival

Report Outline
Sales Boom of 1984
Industry's Evolution
Coping with Competition
Conflicting Priorities
Special Focus

Sales Boom of 1984

Industry Rebound from 1970s Energy Crisis

After nearly a decade of upheaval, the U.S. auto industry is posting record profits. Americans are on a carbuying spree this year, reflecting their increased purchasing power. Interest rates, still high in relation to historic levels, are lower than they have been in recent years and—according to most forecasters—than they will be in the near future. Consumer preferences are also changing. With the current oil glut and falling gasoline prices, many car buyers seem to have all but forgotten the mile-long filling station lines of the late 1970s. U.S. auto makers report they are unable to keep up with the demand for their largest, most powerful and least energy-efficient models.

The sales boom comes as the deadline approaches for the renewal of labor contracts between the United Auto Workers (UAW) and the two largest domestic auto makers, General Motors Corp. and Ford Motor Co. The auto workers “gave back” concessions worth $4 billion under their last three-year contract negotiated in 1981 during the industry's unprecedented slump. They are seeking to recover their losses this year and to gain job security. The UAW condemns manufacturers' attempts to reduce labor costs by contracting with non-union plants both here and abroad and is actively supporting federal legislation to require auto makers selling cars in the United States to produce and assemble them here as well.

Despite booming sales, the industry is hardly out of the woods. The vast and costly restructuring efforts of the past few years have yet to produce a small car that effectively challenges similar Japanese products in cost, durability or consumer preference. Judging from recent models, moreover, the Japanese auto makers may be readying themselves to challenge the American manufacturers over model types the U.S. makers have long monopolized, the mid-sized and larger cars.