Topic: Production and Operational Management in the auto Industry Focusing GM vs FORD vs Foreign Auto Makers. Submitted to: Submitted by: Submitted on: 29 June 2011 Present Day US Auto Industry Termed as the Big Three, Ford, GM and Chrysler are the world renowned US auto makers that were once the sole dominating powers over the US Auto Industry…
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They even had a great deal of say in the political sector of USA. Their political power was due to a fact that had been narrated by the CBC News article in the following words: “The L.A. Times recently calculated that since 1990, the auto industry as a whole has donated $100 million US to Republicans and $34 million to Democrats.” From the year 1951 to the year 2007 Ford had been ranked third in all the automotive manufacturers of the world. After maintaining this position for fifty six years the company lost its position worldwide. It, however, still remained at third position in the US auto industry. The recent times have however depicted a recession of Ford and GM in their native country’s automobile industry. This recession has given space to foreign automobile manufacturers to establish their position by introducing their models in the industry. Currently these foreign automotive industrialists are leading the industry. BACKGROUND OF THE PROBLEM. Ford and GM were the largest vehicle producing giants in USA once. They assisted their country’s economy massively by producing generous revenue and benefit packages for labor. Ford and GM held their importance in the US automobile industry not only because of their size but also because of their business volume. Their loosing of their stature, however, was owing to a number of reasons. Those reasons can be summarized as follows: This meant that a major number of operations in them were distributed into unions or rather termed as being “Unionized”. This led to a rising labor cost that incurred to these industrial giants. The labor costs of their international emerging counterparts were however very less as they did not practice unionization. Even the counterparts that had their manufacturing units in the US did not face the said problem. (Van Praet, 2008). WHY THE RECESSION? A number of issues led to the downfall of Ford and GM along with other US automobile manufacturers. Quality Compromised Among various issues was that of the maintenance of Quality by these giants. Stephen Robbins (2009) mentions their carelessness and compromise in the maintenance of their products in his book ‘Management’ in the following words: “U.S. car industry is often used as a classic example of what can go wrong when managers focus solely on trying to keep costs down. In the late 1970s, GM, Ford, and Chrysler built products that many consumers rejected...... When the costs of rejects, repairing shoddy work, product recalls, and expensive controls to identify quality problems were considered, U.S. manufacturers actually were less productive than many foreign competitors. The Japanese demonstrated that it was possible for the highest-quality manufacturers to be among the lowest-cost producers. American manufacturers in the car and other industries soon realized the importance of TQM and implemented many of its basic components.” (Robbins, 2009) The above statement clearly highlights how the erroneous strategy of leading automobile manufacturing giants of USA gave room to their foreign counterparts. Even though they learned their lesson and tried to improve on their mistakes but it was too late then. The market shares that they once lost were not repairable. So was the inclusion of these counterparts in the industry. Retailers knew they had equally better options to go for and that too often at lesser costs. Product SUV’
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