Automobile Manufacture
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Industry Overview
The US automobile manufacturing industry includes about 160 companies with combined annual revenue of about $250 billion. Major companies are Chrysler, Ford, and GM. The industry is highly concentrated: the eight largest companies account for more than 90 percent of revenue and the top 20 for 98 percent.
Competitive Landscape
The major drivers of US demand for autos are employment and interest rates. The profitability of individual companies depends on manufacturing efficiency, product quality, and effective marketing. Large companies manufacture multiple product lines, marketed under different brand names. Smaller companies manufacture a few or single product lines. Large companies have advantages of economy of scale; smaller companies compete by focusing on specialized markets. Due to highly automated manufacturing processes, the average annual revenue per employee is about $1.4 million.
Products, Operations & Technology
Major product categories are cars (45 percent of industry revenue) and light trucks (55 percent). Light trucks include SUVs.
The assembly line is an invention of the auto manufacturing industry of the early 1900s. Many refinements have made the assembly line more efficient, and it remains the primary method for automobile assembly. Robotics and other computer automation have reduced the number of workers on a line. Between 2002 and 2005, the number of auto production workers decreased 8.5 percent while shipments increased 5 percent. Assembly plants now require as little as 15 to 25 labor hours per vehicle.
A typical automobile plant has capacity to produce about 200,000 vehicles annually. Flexible manufacturing has enabled different car models to be manufactured on the same assembly line, saving hundreds of millions in setup and tooling costs. Tighter tolerance of parts enables greater consistency of product quality and reduces line stoppages. US manufacturers also operate facilities that make parts for their assembly plants. Foundries, powertrain facilities, and transmission plants deliver parts and sub-assemblies to final assembly locations.
Raw materials include steel, aluminum, glass, plastic, rubber, and coatings. As many as 15,000 parts are required on some vehicle assemblies, and material costs represent about 70 percent of total shipment value. Assembly plants require a high degree of supply chain management and coordination, as many parts and sub-assemblies are delivered to assembly plants for same day usage to minimize inventory storage and carrying costs. Many suppliers have established manufacturing or warehouse locations near assembly plants
In addition to automated assembly processes and supply chain management, computer technology is used extensively for product design. Sophisticated computer modeling programs help with material, fuel efficiency, emissions, safety, and product quality design choices.