Automobile Manufacture
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Industry Overview
The US automobile manufacturing industry includes about 200 companies with combined annual revenue of about $250 billion. Major companies are GM, Ford, and Chrysler (which is controlled by Italy's Fiat). The industry is highly concentrated: the eight largest companies account for more than 90 percent of revenue and the top 20 for more than 95 percent.
Besides the three main US-based automakers, the industry includes companies that only manufacture automotive chassis, and extremely small, boutique manufacturers. Auto parts manufacturers are covered in a separate industry profile.
Competitive Landscape
Demand is driven by employment and interest rates. The profitability of individual companies depends on manufacturing efficiency, product quality, and effective marketing. Large companies have economies of scale in purchasing and marketing; smaller companies can compete by focusing on specialized markets. The industry is capital-intensive: average annual revenue per employee is nearly $2 million.
US-based automakers compete with numerous foreign rivals, including companies such as Toyota, Honda, and Nissan that have extensive auto assembly operations in the US. Through stateside manufacturing capacities and exports to the US, foreign carmakers collectively have about half of the US market.
US auto manufacturers' financial positions have deteriorated dramatically in recent years. The "Detroit Three" (Chrysler, Ford, and GM) have suffered from import competition and high cost structures. High gas prices, few small car offerings, and near record-low consumer demand during the late 2000s recession drove Chrysler and GM into bankruptcy, where their debts were restructured. Chrysler and GM also received billions in loans from the US and Canadian governments. Ford, which has joined GM and Chrysler in various government incentive programs but has not received direct federal investment, avoided bankruptcy largely due to more than $20 billion in secured and unsecured loans it took out in 2006.
Products, Operations & Technology
Major products are cars and light trucks; each category accounts for about half of annual unit sales. Light trucks include SUVs.
Cars and trucks are produced on assembly lines, an invention of the auto manufacturing industry of the early 1900s. Many refinements have made the assembly line more efficient. Robotics and other computer automation have reduced the number of workers on a line. Automotive production, while decreasing, still manages to do more with fewer workers; between 2004 and 2007, the number of auto production workers decreased 16 percent while shipments decreased less than 4 percent.
A typical automobile plant has capacity to produce about 300,000 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. Most parts used to assemble passenger cars are bought from OEM parts manufacturers, but car companies often operate plants that manufacture key components such as engines and transmissions.
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.
