Overtaking an Oligopoly
John E. Kwoka jr.
There have been and always will be many opportunities to fail in the automobile industry. The circumstances of the ever-changing market and ever-changing product are capable of breaking any business organization if that organization is unprepared for change--indeed, in my opinion, if it had not provided procedures for anticipating change.
-- Alfred P. Sloan, Jr. Chairman of General Motors, 1923-1937
For the U.S. automobile industry, the period since 1980 has represented a transformation as profound as anything in its hundred-year history. During this time, changes in manufacturing processes and technology, in employment and labor relations, in products and sales practices, and in market structure and company profitability have completely altered the U.S. auto industry. The magnitude of these changes is evident from even a cursory comparison of the industry at three points in time--just prior to the 1980s, immediately thereafter, and then in the 1990s.
In 1978, General Motors, Ford, and Chrysler truly were the Big Three. As shown in Table 1. 1, they accounted for 81 percent of the 11 million new cars sold in that year; American Motors Corporation, a U.S. assembly plant owned by Volkswagen, and imports comprised the remainder. By itself, GM operated twenty-two assembly plants, earned $63 billion in revenues and $3.5 billion in profits, offered over a hundred models for sale, and sold 48 percent of all new cars. Its Chevrolet division sold over 2 million vehicles, including the industry's top-selling car, a full- size model.
By 1991, the Big Three had ceased to exist in all but name. While General Motors remained the largest firm, its market share had plummeted to 35 percent, the lowest since the 1920s. Ford remained relatively healthy, but Chrysler had only barely escaped bankruptcy some years earlier and now sold fewer of its own cars than two foreign car companies. Both AMC and Volkswagen had abandoned independent operation in the United States.
But if the Big Three no longer dominated, there was now a "second U.S. auto industry." This consisted of joint ventures between Japanese auto producers and the traditional U.S. companies, together with Japanese-owned assembly