General Motors, Ford and Chrysler (The Big Three) concentrated in the Mid West, USA were once the most dominant forces in the automobile industry. Since the 1970s however, there has been a significant decline in these once powerful automotive companies. The oil crisis was the first of the beginning of a plethora of problems for the US auto industry. This was further perpetuated by rising competition particularly from Japan and the recent economic recession which sent vehicle prices in the US spiraling downwards.
As a result, employment has seen sharp declines. Figures have shown that employment in the industry has declined from one million, three hundred thousand jobs (1,300,000) in 2000 to ten million jobs (10,000,000) in 2005. In addition, an estimated two hundred and sixty thousand (260,000) jobs were lost since 2005. This has had several ripple effects on the US economy.
The 1970s saw the beginning of rising oil prices. Consequently, small cars such as the Toyoto Corolla became an attractive alternative to big American vehicles. Although the US car companies tried to design a competitive small car, they failed in doing so.
The rise of Japan and European Manufacturers
The importation of Japanese vehicles into the US soared in the decade that followed the 1970s. Japanese and European manufacturers have been seeing increasing market shares and their vehicles are also viewed as better quality and more reliable than US vehicles. Even US customers have responded to these changes. These foreign brands have steadily led to the decline of ‘The Big Three’ US market share, which has fallen from seventy percent (70%) in 1998 to approximately fifty-three percent (53%) in 2008. This has resulted in huge decline in employment rates. For example, in 2006, the “Big Three” all announced downsizing programmes. General Motors had one hundred thousand (100,000) employees in its prime which was reduced to sixty thousand (60,000) in 2007. Between Ford and General Motors a total of 70,000 jobs were lost.
The impact of the recession took a heavy toll on the already struggling automobile industry, with a reduction in sales from both local and international clientele alike. Decline in purchasing power of many people and companies caused by the recession, resulted in less output and a shrinking workforce within the automobile industry.
The decline in the automotives industry and loss of jobs played a significant role in the US economy. It is so important that in 2009 the government saw it necessary to intervene in the situation. The intervention bailed out three of the major auto companies as the economic effects of further deterioration of these companies were seen as too great to leave to chance. Currently, the industry has not really improved and only time will tell the fate of the auto industry.