Detroit turns a corner

US auto executives smile a bit more these days. The reasons are not hard to grasp. Because of multibillion dollar car redesign and plant retooling programs the past several years ($43 billion alone by the big three US car firms), innovative financing techniques - and, most important, pent up consumer demand for new cars - Detroit now expects to register a solid upturn in sales this year as well as a resurgence of corporate profits.

The industry has already earned around $3 billion in 1983, compared to a cumulative loss of over $5 billion for the period 1980-82. Sales are running ahead of last year, underscored by figures released last week. In August new car sales jumped 17.1 percent over the same month in the prior year.

Yet, despite a greater public willingness to buy US-made cars, Detroit still faces formidable challenges, including strong competition from abroad, particularly from Japanese firms. In a larger sense, however, Detroit's real challenge today, as it has always been, is more internal than international. Simply put, can the US government, auto officials, labor, with public backing, forge the consensus - the shared purpose and cooperative effort - that will be necessary to put the industry back on its feet? Japan's edge lies in its more unified national industrial policy.

Would the American public want foreign competitors to further undercut Detroit? Allowing Detroit's market share to shrink would be economically and socially unwise. Unwise because of the need to have a healthy auto industry for national security and defense purposes. Unwise because of the sheer size of the US auto industry, still the dominant manufacturing industry in the United States.

A number of steps are necessary to ensure the well-being of the US car industry:

* Management and labor need to work out a greater sense of cooperation. That means, for example, that labor will have to be willing to grant management more authority over plant work rules to better match people to jobs. Labor will also have to exercise wage restraint. Japanese car firms have a price advantage of about $1,500 per car, in large part because of lower wage and benefit packages for their workers. Management, meanwhile, will have to give labor solid commitments regarding job security.

Fortunately, US firms are already moving toward greater management-industry cooperation by setting up joint participation groups that discuss work problems.

* Carmakers need to further upgrade manufacturing processes and use more robots to achieve gains in productivity. GM, for example, is now centralizing some assembly and parts operations.

* US firms need to be more resilient and farsighted about long-range car-buying trends. Detroit's overall lack of vision about the need for smaller, more fuel-efficient cars back in the 1960s and 1970s (with the exception of American Motors and to an extent Ford), is now well-recognized. Detroit is now manufacturing innovative products, such as the Ford Tempo, American Motors Alliance, the Chrysler K cars, the Pontiac Fiero. The great need however, is to produce innovative ''world'' cars that are acceptable anywhere. It is by developing such global cars that Japanese firms have done so well. To its benefit, Ford has long been dominant in Europe.

One key issue that must also be resolved is what to do about Japanese imports now that the recovery is under way. Domestic content bills that would require that cars sold in the US be made out of predominately US-made parts make little sense. But what about quotas? Quotas on Japanese cars expire next spring. Under the current agreement, Japanese imports are limited to 1.68 million units a year. Detroit is presssuring the Reagan administration to seek an additional fourth year of quotas. It argues that if such limits are not imposed, imports could jump sharply from the recent level of around 27 percent to 40 percent or more. At some point, government protection will end. But the industry maintains that risking such a jump in market share by Japanese firms could be financially destructive, given that the three major US firms have considerable long-term debt.

Whatever the decision on quotas, the pattern seems clear: Detroit's period of decline seems over, for the moment at least. Plants are humming. Attractive products are coming off assembly lines. Customers are buying.

In short, the elements are in place for a vigorous US auto industry rebound.

About these ads
Sponsored Content by LockerDome

We want to hear, did we miss an angle we should have covered? Should we come back to this topic? Or just give us a rating for this story. We want to hear from you.

Loading...

Loading...

Loading...

Save for later

Save
Cancel

Saved ( of items)

This item has been saved to read later from any device.
Access saved items through your user name at the top of the page.

View Saved Items

OK

Failed to save

You reached the limit of 20 saved items.
Please visit following link to manage you saved items.

View Saved Items

OK

Failed to save

You have already saved this item.

View Saved Items

OK