Essay by doeeyedgirl_16 November 2004

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1. Why has the world auto industry become more global?

q With the oil prices rising in 1973 and worldwide recession, car manufacturers all over the world rushed to "downsize" their models and make them more fuel efficient.

q the 1980's promised the introduction of a host of new technologies into passenger cars- i.e newly designed engines, sophisticated electronic controls, increased use of new materials like plastics and ceramics, more extensive safety features.

q Production of automobiles was undergoing a revolution with the advent of robotics and the use of computers to assist design and manufacturing. These changes increased the capital expenditure associated with automobile manufacturing.

q A plant for the stamping of major body parts attained efficient sales at an annual scale of over 2 million units and cost over $500 million in 1980.

q To design and produce a new model in the 1980's took about five years and involved an investment of between $ 3 - $5 million.

q GATT resulted in lower trade barriers for automobiles.

q Cheap labor in outside countries and cheap costs of outsourcing.

q Not possible to do all the investments by a single company as technology was also changing rapidly ; did not know if the future was for small cars or large cars segment.

q Despite freight charges of $500 -$700 to the US, the landed cost of a typical Japanese small car was estimated to be $1500-$2000, less than a comparable US built vehicle in 1982.

2. Why is GM interested in NUMMI?

q GM's strategy was to offer a car for every purse and purpose. GM launched a massive program to downsize its models in the mid 1970's. It envisaged the change to be gradual but due to the second oil crisis, demand for large cars in...