History And Causes

The market share of the “Big Three” U.S. declined from 70 in 1998 to 53 in 2008. The companies lost market share for imports and “transplants” (cars manufactured in U.S. factories owned by foreign producers). (As opposed to Peter Schiff). Must face constant financial losses, the Big Three have closed many factories and drastically reduced employment, especially in Michigan. General Motors transferred many of its employees in certain divisions into independent companies, including American Axle in 1994 and Delphi 1999. In 2000, Ford segregated division in the company Visteon. The subsidiaries and other parts makers have shared the decline of Detroit as well as plants in Canada owned by U.S. companies. Overall, auto parts fabricanets employ 416,000 people in the U.S. and Canada.It is estimated that General Motors alone has lost 51 billion in the three years preceding the financial crisis of 2008. The Big Three are distinguished not only by its size and location, but also for their business model. Most of its operations are unionized (United Auto Workers and Canadian Auto Workers), resulting in higher labor costs than other multinational car manufacturers, including those with North American plants, which have managed to keep unions at bay . The Harbor Report 2005 estimated that Toyota’s leadership in labor productivity amounted to a cost advantage of 350 to 500 per vehicle on U.S. manufacturers.The auto workers union agreed to a salary in two tiers in negotiations conducted in 2007, something that the Canadian union had refused before. Delphi, which was created from General Motors in 1999, requested bankruptcy after the union refused to cut their wages and it is expected that GM is responsible for a loss of 7 billion. To improve profits, the Detroit automakers made deals with unions to reduce wages while making commitments on issues of pension and social security.For example, GM took the total cost of funding health insurance premiums for their employees, relatives and retirees, as the U.S. does not have a universal health system. With most of these plans short of funds to late 1990s, companies have tried to provide retirement packages to older employees and have made agreements with the union to transfer pension obligations to an independent fund. However, the Japanese automakers do not unionized work forces with younger Americans (and many fewer American retirees) will continue to enjoy an advantage in cost. A Chevrolet TrailBlazer, SUV from General Motors. Despite the history of their brands, many cars have been discontinued or relegated, because the Big Three shifting resources from compact cars and midsize in support of the “trendy SUV.”Since the late 1990s, more than half of its profits have come from these SUVs. Ron Harbor said that many “econobox” of the past were aimed at attracting consumers to the brand with the hope that remain loyal and then acquire more expensive models. A 2008 report estimated that a car manufacturer to sell 10 small cars needed to achieve the same benefit as a large vehicle, and had to produce small and medium cars profitably to succeed, something the Detroit Three have not made yet. SUV sales peaked in 1999 but have not returned to that level since, due to high gasoline prices. The Big Three have suffered from a perception of inferior quality and reliability of their cars compared with their Japanese counterparts, which has been difficult to overcome.They have also been slow to introduce new vehicles on the market, while the Japanese are considered leaders in the production of smaller cars with better fuel efficiency in terms. The drop in sales and market share have resulted that the Big Three plants operate below their installed capacity (the GM plants were at 85 capacity in November 2005, considerably less than the plants of its Asian competitors), which in turn led to production cuts, plant closings and layoffs. They have been heavily dependent on considerable incentives and subsidized loans to sell cars, which was crucial to keep the plants running, since they run a significant part of Michigan’s economy. These promotional strategies, including sales, prices employees and full financing, sales have risen, but have also cut benefits.

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