Lead Firms in the Automotive Commodity Chain
Uploaded by surfchick on Feb 20, 2005
Lead Firms in the Automotive Commodity Chain
The United States is the world's largest consumer market for passenger cars and light trucks. The "Big Three" U.S. automakers - General Motors, Ford Motor Company, and Chrysler Corp. (now part of DaimlerChrysler following its merger with Daimler-Benz AG) - accounted for 68% of the passenger cars produced in the United States in 1997. The remaining 32% of U.S.-made cars came from Asian and European "transplant" firms. Along with these giant assemblers, the automotive commodity chain also includes parts manufacturers. The auto parts industry is fragmented, consisting of thousands of suppliers ranging in size from small shops to large multinationals. The auto parts segment of the chain is divided between original equipment manufacturers (OEMs) and the replacement market. OEMs are companies that produce parts and components that automakers use in the assembly of new vehicles. Participants in the replacement market (also known as the aftermarket) make parts and components to substitute or supplement items that were included in the original assembly of the vehicles. Both OEMs and replacement parts suppliers and distributors may be independent firms or subsidiaries of larger companies.
The basic method of making automobiles changed very little between 1913, when Henry Ford first invented the moving assembly line, and the 1970s, when a radical new system of "lean production" began to emerge in Japan. Pioneered by the U.S. Big Three, the automobile industry was the mass-production industry par excellence. The Fordist method of production made a limited range of standardized cars for mass-market customers. Auto manufacturing was carried out in massive assembly plants using rigid methods in which each assembly worker performed a highly specialized and narrow task very quickly and with endless repetition. The big U.S. and European automakers developed a particular kind of relationship with their suppliers, based on short-term, cost-minimizing contracts. As the major producers scoured the world for low-cost components, the increased geographical distance between the assemblers and their suppliers made it necessary for assemblers to hold huge inventories of components at their assembly plants. In this "just-in-case" system, the possibility of the assembly line being disrupted by a temporary shortage of components (or by faulty batches) was reduced.
Since the early 1980s, the auto industry has been marked by intensifying competition and increased globalization, which has resulted in lower costs and also improved product...