SIC 3711
MOTOR VEHICLES AND PASSENGER CAR BODIES



This industry classification is comprised of establishments primarily engaged in manufacturing or assembling complete automobiles, trucks, commercial vehicles, and buses, as well as specialty motor vehicles intended for highway use such as ambulances, armored cars, hearses, fire department vehicles, snow plows, and tow trucks. This classification also includes establishments involved in manufacturing passenger car bodies and all types of vehicle chassis. Although some establishments within the industry also manufacture motor vehicle parts, establishments primarily involved in manufacturing motor vehicle parts (other than chassis and passenger car bodies) are classified in SIC 3714: Motor Vehicle Parts and Accessories.

Establishments primarily engaged in the manufacture of truck and bus bodies or in the assembly of completed trucks and buses on purchased chassis are classified in SIC 3713: Truck and Bus Bodies. Establishments primarily engaged in the manufacture of truck trailers are classified in SIC 3715: Truck Trailers. Other motor vehicle classifications include motor homes assembled on purchased chassis ( SIC 3716: Motor Homes ), motorcycles ( SIC 3751: Motorcycles, Bicycles, and Parts ), off-highway tractors ( SIC 3523: Farm Machinery and Equipment ), industrial tractors ( SIC 3537: Industrial Trucks, Tractors, Trailers, and Stackers ), combat tanks ( SIC 3795: Tanks and Tank Components ), and stamped passenger car body parts ( SIC 3465: Automotive Stampings ).

NAICS Code(s)

336111 (Automobile Manufacturing)

336112 (Light Truck and Utility Vehicle Manufacturing)

336120 (Heavy Duty Truck Manufacturing)

336211 (Motor Vehicle Body Manufacturing)

336992 (Military Armored Vehicle, Tank, and Tank Component Manufacturing)

Industry Snapshot

The motor vehicle industry represents one of the largest segments within the U.S. economy and forms the core of the nation's industrial strength. In 2001 an estimated 217 million vehicles were on U.S. roads. General Motors, Ford Motor Co., and DaimlerChrysler AG led the U.S. motor vehicle manufacturing industry, accounting for more than half of industry sales, followed by a number of foreign firms—most notably Toyota Motor Corp., Honda Motor Co., and Nissan Motor Co.—that manufacture cars in the United States. Collectively, the industry produced nearly 17.4 million vehicles in 2001.

A number of facts demonstrate the industry's overall importance to the U.S. economy. Based on a study conducted by the University of Michigan and the Center for Automotive Research, the Alliance of Automobile Manufacturers revealed that the motor vehicle industry is among the nation's leading users of computer chips, textiles, aluminum, copper, steel, iron, lead, plastics, vinyl, and rubber. According to the study, almost seven jobs are created for every worker employed by an automaker. At the retail level, 2001 sales of motor vehicles were approximately $375 billion, or about 3.7 percent of the nation's gross domestic product (GDP)—the broadest measure of the nation's economic output.

Organization and Structure

Nine automakers formed a new trade association named Alliance of Automobile Manufacturers. The members were General Motors Corporation and Ford Motor Company of the United States; DaimlerChrysler A.G., BMW A.G., and Volkswagen A.G. of Germany; A.B. Volvo of Sweden; and the Toyota Motor Corporation, the Mazda Motor Corporation, and the Nissan Motor Company of Japan. This organization replaced the American Automobile Manufacturers Association (AAMA), which previously represented only American manufacturers. The goals of the group were to work together on public policy matters of common interest to provide credible industry information and data, and seek consistent global regulatory standards.

Globalization of the automobile industry gave rise to the Alliance, which replaced the AAMA. The AAMA, formerly the Motor Vehicle Manufacturers Association (MVMA), was originally founded as the National Automobile Chamber of Commerce in 1915. Its purpose was to administer the cross licensing of patents, and during the 1930s, the organization established a code of fair competition.

Background and Development

History of the Automobile. The modern automobile was not invented by one person. Many people in many nations contributed the ideas, inventions, and innovations required to assemble useful motor vehicles. Roger Bacon, the thirteenth-century English philosopher and scientist, prophesied its development. Leonardo da Vinci envisioned plans for its construction. Nicholas Joseph Cugnot constructed the first functioning self-propelled unit; Cugnot's vehicle, built in 1769, had three wheels and was powered with a steam engine. The first U.S. patent for a self-propelled vehicle was awarded to Oliver Evans by the state of Maryland in 1787. The newly organized Federal Patent Office awarded its first patent for a self-propelled land carriage to Nathan Read in 1791. By 1891 the country had seen more than 100 renderings of motorized vehicles.

The first internal combustion engine was developed by the Belgian inventor, Etienne Lenoir. He used it to power a car during a demonstration in Paris in 1862. Nicholas Otto, a German inventor, developed a quieter, four-stroke, coal-gas engine in 1878. The first gasoline vehicles were developed in 1885 by two Germans working independently—Karl Benz and Gottlieb Daimler. The world's first motor vehicles built for commercial sale were offered in France by Armand Peugeot in 1889 and Panhard and Levassor in 1890. The French are also credited with coining the term "automobile," formed from two Latin words meaning self-moving.

During the early 1890s, many people in the United States were working separately on producing better "horseless carriages." According to some accounts two brothers—Charles and Frank Duryea of Springfield, Massachusetts—developed the first successful American gasoline automobile. The Duryea model was based on Benz's work, as reported in Scientific American. Other contenders for the honor of producing the first American motorcar included Gottfried Schloemer of Milwaukee, Wisconsin; Henry Nadig of Allentown, Pennsylvania; Charles H. Black of Indianapolis, Indiana; and John W. Lambert of Ohio City, Ohio.

The 1890s brought commercial automobile production to the United States. Elwood Haynes and Edgar and Elmer Apperson were among the first entrepreneurs of the new technology. They built Haynes-Apperson vehicles in a machine shop located in Kokomo, Indiana. By 1899 some 30 motor vehicle producers were offering electric, steam, and gasoline powered vehicles. The 1900 U.S. Census listed motor vehicle manufacturers under "Miscellaneous Manufacturers."

Among the long list of early automotive pioneers, the best remembered is undoubtedly Henry Ford. Henry Ford built his first car, called a "quadricycle," in 1896. He established the Detroit Automobile Company in 1899—the venture failed. Ford's second company, the Henry Ford Company, founded in 1901, also failed. He finally achieved success with his third organization, the Ford Motor Company, officially founded on June 10, 1903.

Many other popularly known names in automotive history entered the industry during the last decade of the nineteenth century and the first decades of the twentieth century. Studebaker, originally a manufacturer of wagons, carriages, and horse-drawn vehicles, entered the automotive industry in 1897. Packard Motor Company was founded in 1899 and produced its first car in 1900. Ransom Eli Olds established the Olds Motor Vehicle Company in 1897; the company was later reorganized to form the Olds Motor Works, and by 1904 Olds was producing 5,000 "Olds-mobiles" annually. Cadillac Motor Car was established in 1902 with the help of financial backers who abandoned Henry Ford's earlier efforts. Buick Motor Car Company was founded by David D. Buick in 1903 and was later sold to William Durant, the founder of General Motors. Louis Chevrolet, born in Switzerland, came to the United States in 1905 and began his automotive career as a race car driver for Buick. Walter P. Chrysler purchased his first car in 1908. Following a career at Buick Motor Car Company, he assumed the presidency of the Chrysler Corporation, formed from the remnants of the Maxwell Motor Car Company on June 6, 1925.

Industry Growth. Throughout the early decades of the twentieth century, Henry Ford dominated the industry. He achieved nearly legendary status by introducing the automotive industry to the benefits of automated production and by providing an automobile at a price that most people could afford. In 1908 Ford decided to focus his company's efforts on the construction of only one model—the Model T. To help lower costs and speed production, he began moving toward assembly line production.

In 1913 a moving belt was installed in Ford's magneto department. (A magneto was a part that provided the electric current required for ignition.) After its installation, the moving belt enabled each worker to perform a single task rather than assemble a completed magneto. Production experienced a four-fold increase, and Ford transferred moving assembly lines to other parts of the plant. In its first complete year of assembly line production, the company built 248,000 cars—compared with 78,000 the previous year. In 1915, Ford's annual production reached 500,000, and prices fell. The 1912 Model T sold for $600, the 1914 Model T cost $490, a 1915 touring car cost $440, and the price of the 1925 model dropped to $290. By 1920 an estimated three-fifths of U.S. cars and 50 percent of all the cars in the world were Model Ts. Although its sales diminished as consumers turned to more modern offerings, the Model T earned its place in history. When Model T production was halted in 1927, an estimated 11 of every 20 cars on American roads were Model Ts; 15 million units had been sold. No other single model surpassed Model T sales until the 1960s, when the record went to the Volkswagen Beetle.

During the mid-1920s, the automobile market became saturated. To bolster sales, auto manufacturers aimed their marketing efforts at creating two-car families. To help families make purchases more quickly, they offered financing, and an estimated 75 percent of all new cars were purchased on installment in 1925. By 1929 motor vehicles had been driven a total of 198 billion miles, and the average motorist logged 7,500 miles per year.

Auto sales dropped in 1929—an indication of the coming Depression. As the 1930s opened, auto output was down 37 percent. Production in 1931 tumbled 30 percent. The auto industry fell from first place, as measured according to the value of products sold, to fourth in the national economy, and its decline created a ripple effect throughout the nation's entire economic infrastructure. Auto makers, however, were among the first to emerge from the Depression years. By 1936, for example, General Motors was close to its pre-Depression profits.

The late 1930s brought technical innovations to the automotive industry. Automatic transmissions became common, increased precision enabled manufacturers to produce better cars, and attention to styling and aerodynamics improved stability and fuel efficiency. Post-Depression era work projects also improved the nation's highway system, and the mileage of paved roads more than doubled between 1933 and 1941. The Pennsylvania Turnpike opened in 1940, and although initial estimates projected the toll road would carry 715 vehicles per day, within two weeks 26,000 vehicles were using the new roadway each day.

Post-World War II Period. When World War II arrived, the nation refocused its attention on producing items for the war effort; civilian car production stopped in 1942. One of the most popular cars developed for military use was the "Jeep." Although not all historians agree, some contend that the name "Jeep" was coined from the initials GP—taken from the military lexicon where the "General Purpose Vehicle" had become a "GP." After the war's end, the Jeep was redesigned for civilian use and designated a "Civilian Jeep" or "CJ" model.

American automakers found an eager market in the post-war years. One-half of the nation's 25.8 million registered cars were 10 or more years old, and people were ready to purchase new cars. Between 1946 and 1950, 21.4 million new cars were sold. Production in 1949 topped the five million mark for the first time since the pre-Depression era. The dominance of car and truck transportation was further assured in 1958, when the National Highway Act was passed. This legislation provided funds for significant construction to improve the nation's highway system.

During the 1950s a car's appearance assumed greater importance. Car buyers preferred big and powerful vehicles, which resulted in advertising that emphasized engine horsepower. Ornamental tail fins, inspired by aircraft fuselages, were first incorporated into a Cadillac design and came to symbolize cars of the era. Technical developments included power steering, power brakes, and improvements in automatic transmissions—all necessary to help control large cars.

Modernization of the Motor Vehicle Industry. By the 1960s the new car market was saturated. Manufacturers relied on promotions and annual model changes to boost sales. The market was dominated by the "Big Three" (Chrysler, Ford, and General Motors) and American Motors Corporation, which had been formed following the merger of two independent producers—Hudson and Nash—in the post-war years. Imported cars, led by the Volkswagen Beetle, began to make an impact on the American market during this period. In 1968 approximately 10 percent of all auto sales were captured by foreign manufacturers. The two largest Japanese manufacturers, Toyota and Nissan (Datsun), had entered the U.S. market during the late 1950s and saw rapid growth during the 1960s. By 1970 Toyota was the nation's number two import; Datsun was number three. That year imports accounted for 15 percent of the U.S. passenger car market.

In addition to increased competition, the 1960s brought rising criticism to the auto industry. Ralph Nadar's Unsafe at Any Speed: The Designed-in Dangers of the American Automobile was published in 1965 and inaugurated a crusade for safer cars. In 1966 Congress passed the National Traffic and Motor Vehicle Safety Act, which mandated improvements in passenger safety, driver visibility, and braking. The Act also required public announcement of recalls to correct safety defects. During the first 10 years of regulation, 52 million cars and trucks were recalled. Safety was not the only arena for critics; cars were also identified as a source of air pollution. In 1965 Congress passed the Vehicle Air Pollution and Control Act setting mandatory pollution standards. The 1970s opened with another antipollution effort—Congress passed the Clean Air Act, which mandated a 90 percent reduction in auto emissions within six years.

Concerns about fuel efficiency dominated the 1970s. In 1973 General Motors' cars averaged less than 12 miles per gallon, and other domestic car makers' offerings were only slightly better. Two oil crises during the decade brought the nation increased gas prices, local shortages, a 55 miles per hour speed limit, and federally mandated fuel efficiency. The Energy Policy and Conservation Act, passed in 1975, specified that car manufacturers must meet a sales weighted "Corporate Average Fuel Economy" (CAFE) standard of 20 miles per gallon by the 1980 model year and 27.5 miles per gallon by the 1985 model year.

During the early 1980s, domestic auto makers found themselves unprepared for the sudden surge in the small car market, and as a result, they lost substantial ground to imports. A growing sense that the products coming out of Detroit were inferior to those of imports further exacerbated the slide of the domestic automotive manufacturers. Chrysler wavered on the brink of bankruptcy and secured a federal loan guarantee of $1.5 billion to survive. A resurgence during the middle of the decade failed to provide long-term stability. The auto industry achieved record sales of 16.3 million units in 1986, but new light vehicle sales fell in four out of the five years between 1986 and 1991. In 1990 the Big Three reported combined losses of $1.1 billion, and General Motors was in particularly bad shape. During 1991 U.S. production facilities operated at only 60 to 65 percent of their capacity. In 1991 sales of cars and trucks totaled $189 billion, representing 3.3 percent of the nation's gross domestic product (GDP).

U.S. auto makers' profitability suffered during the economic slowdown of the late 1980s and early 1990s, but vehicle sales during 1992 and 1993 indicated that the industry was rebounding. In the fall of 1993, Fortune reported that domestic production was up 6 percent. Lower costs and improved productivity helped bolster the industry's profit picture. Cars were manufactured more efficiently, and manufacturing processes had less environmental impact.

Environmental concerns, however, continued to influence the industry. California introduced stringent clean air standards in 1990. The legislation required automakers to begin offering Zero Emission Vehicles (ZEV) in 1998. The regulations also called for incremental increases in the percentage of ZEV cars sold—beginning with 2 percent in 1998, moving to 5 percent in 2001, and expanding to 10 percent by 2003. Other states were considering adopting California-style legislation. Moreover, the federal government continued to insist on compliance with the CAFE standards previously established by the Energy Policy and Conservation Act.

New passenger cars were required to average 27.5 miles per gallon, and light trucks needed to average 20.2 miles per gallon. Noncompliance by a manufacturer brought penalties of as much as $7,700 per vehicle. According to Environmental Protection Agency (EPA) statistics, the U.S. passenger car fleet averaged 26.9 miles per gallon in 1992; U.S. light trucks averaged 20.4 miles per gallon. Imported passenger cars averaged 29 miles per gallon, and imported light trucks averaged 22.4 miles per gallon.

Some critics in the industry charged that fuel efficiency standards were contradictory to safety requirements. The Coalition for Vehicle Choice (CVC) was formed to counter legislative attempts to increase CAFE requirements to 40 miles per gallon. The CVC argued that high CAFE standards reduced the availability of family-sized vehicles and impeded efforts aimed at enhancing auto safety. To speed efforts at increasing vehicle safety, Congress passed the Intermodal Surface Transportation Efficiency Act in 1992. Its requirements included the installation of driver and front seat air bags in passenger cars by 1998 and in trucks, minivans, and sport-utility vehicles by 1999. The legislation also established rules concerning rollovers, brakes, child booster seats, head injury protection, and side impact protection.

Another issue facing domestic automakers during the early 1990s was the continued impact of foreign competition. Entering the mid-1990s, however, the Japanese manufacturers were on the defensive, and Americans were increasingly attracted to the Big Three's pricing structure, while new features maintained buyers' interest. In 1994 Fortune noted that General Motors, Ford, and Chrysler all introduced new small and intermediate size cars.

Still another reason for the success enjoyed by General Motors, Ford, and Chrysler was in the realm of truck sales. In 1994 individual units of trucks sold by the Big Three automakers was more than double the number of cars. While the quality of the American products was one reason for their success, America's 25 percent tariff on imported trucks was another important factor.

In 1993 General Motors, Ford, and Chrysler sold 14.2 million cars and trucks—the most since 1989, and a figure indicative of the turnaround the three Detroit-based automakers have enjoyed in the early 1990s. By the first quarter of 1994, Chrysler was posting a profit per vehicle sold in North America of $1,203, while Ford and General Motors tallied $656 and $355 respectively of profit for every vehicle sold.

Minivan sales represented one of the fastest growing market segments in the United States and Europe. Business Week estimated U.S. minivan sales at 1.1 million units. Annual sales were forecast to increase substantially. Offering affordability to the public with price ranges of $14,000 to $28,000, the manufacturers realized increased profit margins.

In 1998 car and light truck sales totaled 15.55 million units. The totals—comprised of cars, sport-utility vehicles (SUVs), pickup trucks, and vans—were an increase of 2.8 percent over 1997 levels. Light truck sales rose 8.1 percent for 1998, while car sales fell 1.6 percent for the same period.

The end of the century saw abundant activity involving automotive company mergers. The era of the U.S. Big Three ended on November 12, 1998. Germany's Daimler-Benz A.G. and Chrysler Corporation merged to form DaimlerChrysler A.G., the largest foreign takeover of a U.S. firm in history. The merger created the world's third-largest automaker in terms of revenue.

In March 1999 Ford Motor Company purchased Volvo's car operation, adding nearly 400,000 units to Ford's car volume. This acquisition, along with their outright ownership of the British line of Aston Martin and Jaguar and 33.4 percent ownership of Mazda, strengthened Ford's presence.

General Motors took a 50 percent share of the Swedish manufacturer Saab Automobiles A.B., adding it to the 49 percent it held of Isuzu Japan, and its full ownership of Opel, which demonstrated the automaker's focus on global markets.

The late 1990s experienced the beginning of changes in the way automakers looked to manufacture cars and trucks. Depending on big suppliers to provide larger and more complete chunks of each vehicle, instead of hundreds of pieces that need to be bolted together, automakers will be changing the process of assembly in plants. Changes in this procedure indicated that the automakers were on track to reach productivity gains in the assembly plants.

Current Conditions

In the early 2000s, the U.S. motor vehicle industry faced a number of challenges including rising competition from foreign automakers and a sluggish economy. According to Value Line, on a seasonally adjusted basis industry sales fell more than 24 percent between October 2001 and October 2002. In the latter half of the 1990s, yearly domestic sales averaged approximately 16 million cars and light trucks, including sport-utility vehicles. This number surpassed 17 million in 1999, and averaged about 17.6 million in 2000 and 2001. Aside from fluctuating levels of demand, some industry analysts see this as an indication of a higher overall industry sales threshold.

Rising unemployment levels and decreasing consumer confidence were among the many challenges facing U.S. industries in the early 2000s. To stimulate demand, the auto industry introduced a number of special consumer incentives in 2001, including zero-percent financing and cash-back offers. Although helpful in the short-term, such tactics normally are not sustainable long-term because they represent hefty interest income reductions for automakers. According to some analysts, the initial success of these incentives began to wane in late 2002. Increased productions levels, coupled with a slowdown in sales, were leading to rising inventory levels. These were expected to affect manufacturing output in early 2003.

In the early 2000s, a continuing industry trend was a marked U.S. consumer preference for light trucks, minivans, and sport-utility vehicles. Toward the end of the twentieth century, analysts predicted cars would quickly lose market share to trucks. In 1997 car sales numbered 8.3 million units, and light trucks accounted for 6.9 million units. However, by 2000 the gap between cars and light trucks had almost vanished. In 2001 light truck sales (8.7 million units) surpassed car sales (8.4 million units) for the first time.

The Internet continues to play a more integral role in the automotive industry at several levels. In its infancy at the close of the twentieth century, by the early 2000s the Internet had moved somewhat closer to the forefront. In 2002 J. D. Power and Associates conducted a study involving more than 27,000 new vehicle buyers. According to the study, "of the 60 percent of new-vehicle buyers who use the Internet while shopping, 88 percent visit automotive Web sites before arriving at a dealership for a test drive. The average automotive Internet user visits seven Web sites while shopping for a new vehicle and starts the online shopping process nearly two months before they purchase." The study revealed that third-party Web sites were the most widely used by consumers shopping for new vehicles, but that Web sites for automotive manufacturers and dealers were receiving increasing amounts of traffic. Increased visits to dealer sites were especially noteworthy, with traffic levels rising 55 percent from 1999 to 2001.

The Internet also was having an impact at the manufacturer level. Business-to-business marketplaces provided opportunities for automakers to lower costs and increase efficiency. In February 2000 Ford, General Motors, and DaimlerChrysler announced plans to form a global online exchange for suppliers and original equipment manufacturers. Initially called NewCo, the exchange was renamed Covisint in May 2000. In January 2002 Covisint revealed it would establish its headquarters in Southfield, Michigan. By the middle of that year, Harold R. Kutner was the organization's chairman and CEO, and Bruce R. Swift served as president and chief operating officer.

In August 2002 General Motors announced it was about to begin sending requests for quotes to suppliers through Covisint using a tool called QuoteManager. In the August 5, 2002, issue of Automotive News, Kutner elaborated on the benefits behind GM's decision, explaining: "It allows a complex company with a complex supply base to do a lot of real-time analysis before they actually go to market. QuoteManager brings in engineering data and historical supplier performance data, and lets the buyer do a complete analysis. It puts everything relevant in front of the buyer.

Industry Leaders

General Motors. In 2002 the world's largest full-line vehicle manufacturer was General Motors Corporation (GM). GM offered domestic automobiles under the nameplates Chevrolet, Pontiac, Oldsmobile, Buick, Cadillac, GMC Truck, and Saturn. International products included Opel, Vauxhall, Saab, Lotus, and Isuzu.

General Motors was incorporated in 1908 by William C. Durant. Its first components were Oldsmobile and Buick. The company acquired two more manufacturers in 1909—Oakland and Cadillac—, and between 1910 and 1920 Durant obtained more than 30 companies. The unit that would go on to become GM's largest division, Chevrolet, was acquired in 1918.

Unlike competitors DaimlerChrysler and Ford, GM turned a profit in 2001, earning $1.5 billion on annual revenues of $177 billion. In calendar year 2001, the automaker also broke an industry record for truck sales, when it sold more than one million sport-utility vehicles. GM reduced the size of its workforce from about 608,000 workers in 1998 to 365,000 in 2001, and was making international inroads by acquiring stakes in Asian automakers like Isuzu Motors Ltd. and Suzuki Motor Corp. In April 2002 GM also acquired financially troubled Korean automaker Daewoo Motor Co. Ltd.

Ford Motor Company. With 2001 sales of $162.4 billion, the second largest auto manufacturer in the United States was the Ford Motor Co. Ford was established in 1903 by Henry Ford, whose early models bore alphabetic designations. His first offering, the Model A, was introduced in 1903, and the company introduced the Model C the following year. Looking for a car with mass appeal that could be produced at a low cost, Ford continued making innovations. The Model N was introduced for the 1906 and 1907 season and boasted speeds up to 45 miles per hour and a fuel economy of 20 miles per gallon. It sold for $600. The Model N was followed by an upgraded Model R and a refined Model S. Arguably the most famous car in automotive history, Ford's Model T was introduced for the 1908 and 1909 seasons. Ford's ninth model in six years, the Model T achieved nearly legendary status and dominated the industry for 18 years.

After a number of accident-related deaths occurred involving the Ford Explorer, in 2000 Ford responded with a $300 million recall of Firestone tires. A second recall took place in 2001, costing Ford billions of dollars. In addition to the financial woes associated with these recalls, the company also faced strained relationships with its workers and dealers. William Clay Ford Jr., Henry Ford's great-grandson, replaced Jacques Nasser as the firm's CEO in 2001. William Ford has increased the company's attention on being more environmentally friendly. In late 2002 a report issued by the Union of Concerned Scientists revealed that Ford had improved somewhat in this area. In addition to its established vehicle lines, including Mercury and Lincoln, Ford operates rental car company Hertz and has acquired foreign automakers like Jaguar (1990), Volvo (1999), and Land Rover (2000).

DaimlerChrysler A.G. Formed by Chrysler's acquisition of Germany's Daimler-Benz in 1998, DaimlerChrysler is the number three car maker. In 2001 the company registered a $590 million loss on sales of $136 billion. The automaker's brands include Dodge, Eagle, Jeep, and Plymouth. Daimler was best known for luxury sedans. The company employed 441,500 people in 1998. However, its workforce fell to 372,500 workers in 2001, a total that included more than 104,000 workers in the Chrysler division.

Workforce

The auto industry is a significant employer in the United States. According to the Bureau of Labor Statistics, manufacturers of motor vehicles and equipment employed an estimated 923,570 workers in 2001. Because of labor unions, the industry is known for paying higher than average wages. In 2001 the industry's average hourly wage was $21.55 per hour.

Unions in the Automotive Industry. The United Auto Workers (UAW) union represents many employees within the automotive industry. In 2002 there were 710,000 active and approximately 500,000 retired union members. Organization of auto workers began in the post-Depression era. During the Depression, growing labor unrest resulted, as companies cut workers' pay, shortened work weeks, fired people irrespective of their seniority, and rehired only younger workers. Workers also expressed job dissatisfaction, as companies increased the pressure to speed productivity. In 1933 Congress passed the National Industrial Recovery Act, which gave labor the right to organize and bargain collectively. Although the act was declared unconstitutional in 1935, the rights to bargain collectively and insure union elections were again secured when Congress passed the Wagner-Connery Act (Wagner Act), establishing the National Labor Relations Board.

In 1936 the American Federation of Labor (AFL) granted the United Automobile Workers of America its charter. The union later became the United Automobile, Aerospace, and Agricultural Implement Workers (UAW) and was affiliated with the Committee for Industrial Organizations (CIO). Ford was the last of the major auto producers to bargain with the UAW. Elections were held at the Ford Rouge plant in 1941 following years of sometimes violent conflict between union organizers and antiunion forces. Union activity increased following World War II, as auto production resumed. Workers joined together to maintain pay levels achieved during the war. Walter Reuther, the UAW's leader, fought for wage packages with a cost of living index and pension plans.

America and the World

Although foreign nations represent lucrative, multibillion dollar markets for U.S. automakers, the United States has not been as successful as other nations, namely Asian countries, in the export of motor vehicles. Foreign competition has steadily encroached upon the Big Three's domestic market share. Accordingly, the industry's trade deficit has grown significantly since the mid-1990s, exceeding $115 billion in 2000.

Almost from its inception, the automobile industry has been international in scope. Ford began assembly in Britain in 1911 and by 1914 was the largest British producer. General Motors established an export company in 1911 to sell the company's products overseas. Following World War I, Ford built assembly plants in Denmark, France, Germany, Italy, Spain, and Sweden. General Motors purchased existing corporations such as Vauxhall in Britain and Opel in Germany. Ford and General Motors entered the Japanese market in 1925 and 1927 respectively. Chrysler established Chrysler de Mexico in 1938 to import and distribute Chrysler products.

The first foreign companies to sell products in the United States offered luxury and sport models such as Rolls-Royce, Mercedes, Jaguar, and Porsche. In 1950 import sales totaled less than 50 percent of total car sales. The first foreign car to penetrate the mainstream market with a small family car was the Volkswagen Beetle. By 1968 Volkswagen accounted for 62 percent of all imports, but the German manufacturer began losing ground to Japanese producers.

The United States has entered into a number of different international agreements in recent years that are of importance to the motor vehicle industry:

United States-Japan Automotive Framework Agreement. In August 1995 the United States-Japan Automotive Framework Agreement came into being. The five-year agreement, which culminated two years of intensive negotiations, was crafted to increase U.S. and other foreign access to the Japanese motor vehicle and parts market. According to the U.S. Department of Commerce, the three main goals of the Agreement were improved access to Japan's motor vehicle distribution system; increased purchases of U.S. parts by Japanese automakers; and deregulation of Japan's $60 billion replacement parts market.

North American Free Trade Agreement (NAFTA). Within the U.S. market, analysts expected increased exports for the revitalized domestic producers, in part because of the passage of the North American Free Trade Agreement (NAFTA), which in its first few months pushed a dramatic surge in U.S. car sales to Mexico. In keeping with the Clinton administration's policy to open foreign markets for the U.S. automotive industry, NAFTA was signed in 1993 and implemented on January 1, 1994. Increased market access for U.S. automotive products in Mexico was imperative, especially since trade in motor vehicles was essentially one way—from Mexico into the United States. In the years since the implementation of NAFTA, the U.S. automotive industry experienced significant benefits.

Korea's Memorandum of Understanding. In 1993 the U.S. automotive industry requested assistance from the Clinton administration to open the Korean auto market to U.S. automobiles. In September 1995 the Korean government signed a Memorandum of Understanding (MOU) with the United States, under which it explicitly committed to increase access for U.S. and other foreign passenger vehicles. On October 20, 1998, negotiators from the Department of Commerce and the White House Office of U.S. Trade reached an agreement with South Korea that substantially improved on the previous agreement. In addition to passenger cars, coverage was extended to minivans and sport-utility vehicles. Burdensome South Korean standards and procedures were reduced along with the tax on motor vehicles. It also introduced a system of secured financing to facilitate the purchase of U.S. vehicles and committed the South Korean government to a publicity campaign to improve perceptions of foreign automobiles.

General Agreement on Tariffs and Trade (GATT). In 1994 the Clinton administration passed the Uruguay Round of the General Agreement on Tariffs and Trade (GATT). According to the U.S. Department of Commerce, the Agreement greatly enhanced the export potential of the U.S. automotive industry by improving access to both major and developing markets by achieving a 27 percent reduction in the motor vehicle tariffs of major markets, a 58 percent reduction in the automotive parts tariffs of major markets, and the "binding" of automotive tariffs in many developing countries—including Brazil, Argentina, India, and Indonesia. The U.S. automotive industry experienced positive export results since the January 1995 implementation of the Uruguay Round, especially with developing markets. The Asian monetary crisis stunted any potential growth in the latter 1990s, but automakers continued to eye these markets for the twenty-first century.

Agreement on Global Technical Regulations. In March 1998 negotiators agreed on a global means for governments to develop and harmonize regulations on motor vehicles' design and performance. While offering an opportunity for the cooperative development of safety and environmental regulations (through globally uniform governmental technical regulations), it provided a predictable framework for a global automotive industry. Established under the auspices of the United Nations Economic Commission, the negotiators had consisted of representatives from the United States, Japan, and the European Community.

Research and Technology

In the fierce competitive environment of the international automotive industry, any edge in design, engineering, or technology assumes tremendous importance and can result in shifts of market share worth millions of dollars. Timely research and swift technological adaptation are vital in a wide array of automotive niche markets. Consequently, the industry invests more in research and development than any other industry, according to the Alliance of Automobile Manufacturers.

Further Reading

"About Covisint." 21 December 2002. Available from http://www.covisint.com .

Alliance of Automobile Manufacturers. "Economic Facts." 21 December 2002. Available from http://www.autoalliance.org .

Askari, Emilia. "Auto Show's Green Theme is Subtle." The Detroit Free Press, 14 January 1999.

Bloomberg News Service. "DaimlerChrysler Says Fuel Cells Are Five Years Away." Automotive News, 11 January 1999.

Bradsher, Keith. "Auto Industry Finds Surprises at the End of a Rainbow Year." New York Times, 7 January 1999.

——. "GM and Union are Near Deal on New Plants." New York Times, 8 January 1999.

Bureau of Economic Analysis. "Gross Domestic Product by Industry 1994-2001." Available from http://www.bea.doc.gov .

Carney, Susan. "Covisint Clicks Up Customers." The Detroit News, 9 September 2001. Available from http://www.detnews.com .

Chappell, Lindsay. "Bigger and Fewer." Auto News, 11 January 1999.

Eldridge, Earle. "Blistering Auto Sales on Track for Record." USA Today, 4 August 1999.

——. "DaimlerChrysler Deal Includes Pay Raises, Bonus." USA Today, 17 September 1999.

Evanoff, Ted. "OnStar to be Available to Other Manufacturers." The Detroit Free Press, 3 November 1999.

"Fortune's 20 Largest U.S. Corporations." Fortune Magazine, 26 April 1999.

General Motors. "About Our Company," 20 January 1999. Available from http://www.gm.com .

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