Situation in Auto Industry - Term Paper Example

? Info Auto Industry The auto industry was one of the most powerful job providers since manufacturing began on the Model T. The auto industry provides great benefits and great pay to its employees. A declining economy has led to many layoffs and the cause of buy outs for many auto workers. Many question what could have gone wrong to cause the layoffs and bankruptcies. Although there are many factors, evaluating the Auto Industry’s organizational theory can help to better understand the current situation of the Auto Industry and discuss the future. The “Big Three” of the auto industry are known as Ford, Chevy and Chrysler. The Big Three are shadowed by smaller auto companies such as Toyota and Nissan. These auto companies together make up the auto industry. The auto industry is one of the largest job providers since it provides over one million jobs in the United States. In November of 2010 the auto industry provided over 700,000 jobs (Linebaugh2010). It takes a strong industry to be able to provide that many jobs. An industry of that size is dependent on being organized in a manner that allows managers and CEO’s the resources needed to make strong business decisions. Events Leading Up To a Struggling Auto Industry Many factors played a role in allowing the auto industry to decline into its current position. In 2008 gas prices jumped to over $4.00 a gallon for most of the United States (U.S. Bureau of Labor and Statistics2011). The rise in gas prices nearly halted the production of vehicles that got terrible gas mileage. Many Diesels, SUV’s and large Trucks were no longer popular. Many just could not afford to use the vehicles because of the price of gas. Smaller options better on gas mileage were a new trend. Since the vehicles were not being sold, there was less of a need to manufacture the vehicles. Less manufacturing meant for less income and decisions to slow and shut down many manufacturing facilities. Globalization has allowed the auto industry to target markets throughout the whole world and not just the United States. The auto industry was more focused on setting up manufacturing facilities in other parts of the world and somewhat neglecting issues that were happening in their home country. Many are upset about allowing jobs to go oversees and will not even buy new vehicles from the auto makers. Decisions made to globalize the auto industry have put a damper on U.S. sales, jobs and reputation. This type of damage takes a lot of re organizing in order to return to a happy medium where business can boom and customers are satisfied. Current Situation of the Auto Industry, What went wrong? The current situation of the auto industry is somewhat of a mess. Stocks for the auto industry have declined, auto makers have filed bankruptcy and production has been drastically reduced. Chrysler which is one of the big three auto makers filed for bankruptcy in April of 2009 (Isodore2009). This bankruptcy was a final attempt to try and save the auto maker. Even after receiving a large bail out from the government, Chrysler was still unable to clear its deficit. Chrysler is not the only company caught up the mess of the auto industry. Bad manufacturing by Toyota has caused for those in authority positions to be forced to rethink ethical decisions about the quality of vehicles manufactured. Toyota had over 100 issues of vehicles causing accidents by the gas pedals getting stuck. This type of problem has reduced sales and could have been prevented by being better organized in Toyotas safety department. It is apparent that being better organized and prepared for rising gas prices and a decline in sales could have stopped the hurt of the situation that the auto makers are currently in. Being better prepared could have reduced the need for a government bailout. It would have been in the auto maker’s best interest to address the issue at the first sight of declining sales rather than pretending as if the fallout was not going to happen. Prevention would have lessened the impact on the rest of the economy since the crash of the auto industry had the greatest affect on the economy. The reason for the current situation has a lot to do with the economy. When the economy is barely able to function at an adequate level there is always repercussions. The auto industry is fueled by oil. Oil helps the car run and makes the car move. Without oil there is essentially no vehicle. The auto industries dependency on oil for success has been a concern since the 1950’s (Williams 2009). The auto industry knew that if oil reached a not affordable level that they would not be able to survive. When oil is too high it creates a lower demand for vehicles and a higher costs of operating. These indicators are a nightmare for any auto maker. In 2008 this nightmare became a reality and created a need to reprioritize operating costs for the auto makers. Proper Recovery In order for an organization to function properly there are several different aspects of the organization that need to be addressed. An organization is made up of employees, customers, creditors, management, government, union, community, suppliers and stockholders (Daft2009). Each one of these different areas of an organization is vital. The employees need to be paid along with government regulation to ensure union order. Managers need to make sure customers are happy with products and service. Creditors need to be addressed accordingly and supply costs need to be kept down. When all of these issues are addressed and profit is generated, stockholders are happy and the organization can recover. The auto industry could have made sure employee costs are kept at a minimum and suppliers are offering the best product. This is where proper management needs to be in place to improve the health of the auto industry. If gas prices are to remain high, new focus needs to be put in place on electric vehicles. Production can be slowed down too improve product efficiency and amount of vehicles produced. There are so many precautions and procedures the auto industry can take to aid in the recovery of a declining industry. The future of the auto industry can be promising as long as changes are made. It may be time to bring in new managers and fire those who are not contributing. Once management issues are taken care of and proper figures are put in place. A plan can be implemented to improve the state of the industry. The future of the auto industry can have a good outcome. It will be necessary to look over what has not worked in the past and what can be done for the future. The focus needs to be on current and future trends. If oil is expected to increase then cars need to become less dependent on oil. Without these changes the auto industry will not survive. Conclusion The auto industry is an important part of the economy. The failure of an industry that houses over one million jobs is shown to be devastating. The auto industry has had to rely on the federal government for bailout as the rest of the economy suffers. Proper organization within the auto industry could have lessened the effects and been prepared for events such as the rise in gas prices. Since the failure of the auto industry there have been efforts to rebuild and the future looks promising. Bankruptcy and government loans help to buy some time while companies face having to restructure and prepare for a company that is not so dependent on oil. The future outlook for the auto industry is in electric cars and the ability to keep operating costs low. Strong ethics and globalization to an industry that needs to be reconfigured will aid in efforts. It is safe to conclude by saying mistakes happen but it is important to face the mistakes to ensure they don’t happen again. It will be the auto industries responsibility to handle their organizations in a more responsible matter. Bibliography Linebaugh, Kte. "Ten Hard Questions Facing the 'Car Czar' - WSJ.com." Business News &Financial News - The Wall Street Journal - Wsj.com. Wall Street Journal. Web. 12 Mar. 2011. "Gasoline Price History." Random Useless Info. U.S. Bureau of Labor and Statistics. Web. 12 Mar. 2011. Isidore, Chris. "Chrysler Filing for Bankruptcy - Apr. 30, 2009." Business, Financial, Personal Finance News - CNNMoney.com. CNN, 30 Apr. 2009. Web. 12 Mar. 2011. Williams, Tim. "California Chronicle | Why The American Auto Industry Failed." California Chronicle. Web. 12 Mar. 2011. Daft, Richard L. "Organization Theory and Design." Google Books. Web. 12 Mar. 2011. Read More