Quality has been an issue in the auto industry. In 2008 - 2009 the three big automakers – GM, Ford, and Chrysler - ran into what seemed to be insurmountable economic difficulty. Two of these...
Quality has been an issue in the auto industry. In 2008 - 2009 the three big automakers – GM, Ford, and Chrysler - ran into what seemed to be insurmountable economic difficulty. Two of these corporate giants required government intervention and financial bail out to stave off bankruptcy. Since 2009 these companies have posted better sales and financial results.
- How has quality played a role to impact the rise and then fall of these three companies.
- What mistakes were made?
- What new approach to quality has helped these companies rebound?
Since the early 20th Century, and with the exception of very high-end, enormously expensive European cars like Rolls Royce, Ferrari, and Jaguar, American automobile manufacturers enjoyed a near-total monopoly on the global automotive market. Other car makers, like the Japanese companies Honda,
Toyota, and Datsun (later renamed Nissan), were known primarily for their cheapness and small size, an attribute in Tokyo and Osaka, but a liability in the United States, where large, fuel inefficient cars were favored. All of this changes dramatically with the energy crises of the 1970s, especially during the late 1970s. Arab oil embargoes precipitated major increases in gasoline prices, with fuel shortages resulting in long lines at gas stations across the United States for people to refuel their cars. While American automobile manufactures – the so-called Big Three: General Motors, Ford and Chrysler – failed to respond to the changing environment in which consumers were shopping for more fuel-efficient automobiles, the Japanese were quick to adapt and to exploit the huge American market. Seemingly overnight, Honda, Toyota and Datsun/Nissan were producing, and exporting to the U.S., small cars that were much better designed and built than had previously been the case. Those companies were able to implement quality control changes in a very quick manner and, to the consternation of the Big Three, quickly captured the emerging market for smaller, lighter, more fuel-efficient automobiles that were also far more reliable than their American counterparts. And, the Japanese companies continued to refine and improve their products so that Honda, Toyota, and Nissan became synonymous with quality manufacturing. American manufacturers, in the meantime, continued to churn out poorly designed and crafted cars. Chrysler, on the verge of bankruptcy in the late 1970s, was granted a financial reprieve from the American government to keep its factories operating and spare thousands of jobs, but its products continued to improve only very gradually.
Over time, pressure built on the American automotive industry to improve its product or die. While the road has not been smooth, General Motors and Ford in particular have improved the quality of their cars significantly to the point where, for the first time, a G.M. product, the Chevrolet Impala, has recently been rated number one overall for reliability, a major development for an industry that has continued to be viewed as qualitatively inferior to its foreign competitors (the Subaru Forester had, for many years, been rated the most reliable mid-priced car. Subaru is a Japanese corporation). The difficulties experienced by the American manufacturers, however, did not go away, as foreign competition and continued concerns regarding quality continued to threaten their viability. The economic crisis of 2008, then, provided the catastrophic shock needed to tip those companies fortunes further into the abyss.
There is no question that competition from well-made foreign automobile manufacturers forced the American companies to change their ways and implement far better quality-control standards. That they have gradually but consistently risen to the challenge has been both frustrating (for the gradual pace) and promising (for the fact that American cars are far better than they used to be). Unfortunately, Chrysler continues to lag behind in the design and construction of more reliable cars, and its descent, for the second time, into bankruptcy required yet another federal bail-out (such financial assistance was required for all three, but Chrysler was clearly in the worst condition financially).
One doesn’t want to minimize the difficulties and costs associated with the process of recapitalizing large manufacturing facilities to make them more efficient, and one shouldn’t ignore the role of cultural and political factors in placing the American companies at a disadvantage relative to their foreign competitors. The power of the United Auto Workers labor union grew disproportionately great relative to the well-being of the underlying corporate structures without which all of those laborers wouldn’t have had jobs. Demands place upon manufacturers by labor unions were a significant factor in the inability of American companies to create more efficient manufacturing processes, and UAW demands with respect to employee salaries and benefits were directly related to the decline in the competitiveness of the American companies. The automotive crises, however, forced the UAW to accept more reasonable conditions that succeeded in lowering the cost of manufacturing cars. At the same time, and of equal or greater importance, corporate headquarters finally acknowledged the existential need to radically improve the design of the cars they were building. Furthermore, the relationships between most foreign automobile manufacturers and their governments have long provided major advantages to those companies. The Japanese, German and Swedish governments have been active participants in the ability of their respective manufacturers to remain competitive.
American companies have been able to survive due both to large infusions of cash from the federal government and to their new-found commitment to designing and improving the quality of their product. There is no doubt, at all, that the commitment to quality has enabled them to remain alive and competitive.
There are many new approaches present today within the auto industry. Technology is changing rapidly within these sectors. IoT, Bluetooth, Android, Apple iOS, wireless, big data and more are being implemented into these autos. Though the industry has suffered through its tough times during the economic crisis, today's innovations and technologies are re-inventing the wheel.