Automobile Industry

Automation

Robots weld parts of an automobile together on an automated production line in Fenton, Missouri. As computer and robot technology has become more advanced, robots are increasingly able to perform more complicated tasks.

Automobile Industry, industry that produces automobiles and other gasoline-powered vehicles, such as buses, trucks, and motorcycles. The automobile industry is one of the most important industries in the world, affecting not only the economy but also the cultures of the world. It provides jobs for millions of people, generates billions of dollars in worldwide revenues, and provides the basis for a multitude of related service and support industries. Automobiles revolutionized transportation in the 20th century, changing forever the way people live, travel, and do business.

The automobile has enabled people to travel and transport goods farther and faster, and has opened wider market areas for business and commerce. The auto industry has also reduced the overall cost of transportation by using methods such as mass production (making several products at once, rather than one at a time), mass marketing (selling products nationally rather than locally), and globalization of production (assembling products with parts made worldwide). From 1886 to 1898, about 300 automobiles were built, but there was no real established industry. A century later, with automakers and auto buyers expanding globally, automaking became the world's largest manufacturing activity, with nearly 58 million new vehicles built each year worldwide.

As a result of easier and faster transportation, the United States and world economies have become dependent on the mobility that automobiles, trucks, and buses provide. This mobility allowed remote populations to interact with one another, which increased commerce. The transportation of goods to consumers and consumers to goods has become an industry in itself. The automobile has also brought related problems, such as air pollution, the emission of greenhouse gases that contribute to global warming, congested traffic, and highway fatalities. Nevertheless, the automobile industry continues to be an important source of employment and transportation for millions of people worldwide.

II

ECONOMIC IMPORTANCE

Automobile manufacturers are among the largest companies in the world. These corporations are often multinational, meaning they have subsidiaries and manufacturing plants in many different countries. These companies often share parts, use parts made in foreign factories, or assemble entire cars in foreign countries. The three major automobile manufacturers in the United States—General Motors Corporation, Ford Motor Company, and Chrysler, formerly DaimlerChrysler AG—provide much of the industry's total direct employment in the United States, but increasingly foreign automakers, such as Toyota Motor Corporation and Nissan Motor Co., Ltd., are building automobile assembly plants in the United States.

Foreign automakers are taking advantage of tax incentives and laws that discourage union organization in the Southern United States, in particular. Eleven foreign-owned auto plants operated in the United States in 1993. By 2007 that number had grown to 28. Many of these plants were located in such states as Alabama, Mississippi, South Carolina, Tennessee, and Texas.

Automotive parts manufacturers are another large section of the U.S. auto industry, comprising about 5,000 firms, including Japanese, European, and Canadian companies. These firms supply the original equipment market (for manufacture) and the replacement parts market (for maintenance and repair). By some estimates, for every job created in the automobile assembly industry, three to four jobs are created in the automotive parts industry. Numerous other industries support the automobile industry. These include the insurance, security, petroleum, and roadway design and construction industries. Still other industries, such as motels, drive-in theaters, and fast-food restaurants, owe their existence to the mobility provided by the automobile.

A

Domestic Impact

The automobile industry directly influences the economies of the United States and other countries around the world. In a typical year, the U.S. automobile industry generates between 12 and 14 percent of manufacturers' shipments of durable goods (products designed to last at least three years). Automobile production consumes large amounts of iron, steel, aluminum, and natural rubber. The automobile industry also consumes more copper, glass, zinc, leather, plastic, lead, and platinum than any other U.S. industry.

Rising imported car sales in the United States during the 1980s threatened the economic strength of U.S. automakers. Domestic sales rebounded in the 1990s, but as the 21st century began, foreign carmakers resumed making inroads in U.S. car sales. Ford saw its car and truck market share in North America fall to about 17 percent in 2005, returning to its percentage share in the 1980s, and General Motors saw its North American market share drop to 26 percent in 2005. In July 2007 foreign automakers outsold U.S. car companies in the United States for the first time ever, taking 51.9 percent of the market in cars and light trucks, including sport utility vehicles (SUVs). In the first quarter of 2007 Toyota overtook GM as the largest car seller worldwide.

B

Foreign Trade

Sales of U.S. motor vehicles to Americans are expected to remain near the same level in the future, with about 1 to 2 percent growth per year, while foreign markets are expanding at rates that are two, three, and even ten times faster. Because exports will be essential to expanding the auto and auto parts industries, U.S. trade officials have negotiated trade agreements such as the Memorandum of Understanding with Korea (1993), the North American Free Trade Agreement (NAFTA, 1994), and the U.S.-Japan Automotive Framework Agreement (1995). These and other agreements have increased automobile and other exports to Japan, Mexico, and Korea many times over.

In 1994 the United States successfully promoted the Uruguay Round of the General Agreement on Tariffs and Trade (GATT), which helped American auto export potential because it improved access to both major and developing markets. These initiatives have helped the U.S. automotive industry achieve the highest level of exports on record.

III

HOW CARS ARE BUILT

Making a car involves several major decisions about the design of the car, how it will be built, and how it will be sold. Managers must also coordinate factory production, purchase materials, and train workers—all within a budget. Marketing teams must then sell the car and project returns on shareholder investments. New models are introduced yearly, but a single car design can take several years to get from the drawing board to the showroom floor. A typical company will therefore have several new designs in various stages of development at any given time.

The group within an automobile company that makes the main decisions about new cars often includes the chairman of the board and board members, the president, the marketing director, the sales director, the finance director, and the head of product development. These leaders must budget money, recruit a workforce, and set realistic deadlines. Rather than sending ideas from step to step as they are completed, leaders collaborate from the start with designers and engineers in a process known as simultaneous engineering to increase the speed and efficiency of car production. Engineering, manufacturing, sales, and other specialized departments in turn support the leadership decisions. Most of these positions require college degrees and extensive training. Companies also rely on the administrative services of clerks, typists, telephone operators, and others to support the process of automaking.

A

Research, Design, and Development

Before a new car is built, it must be researched, designed, and developed into a workable product. Researchers analyze market trends, consumer surveys, and buying patterns to determine what consumers want, and then suggest what kinds of cars to make. Designers work to shape these new ideas into tangible parts or products. Engineers adapt existing parts for the new model and draw up new plans for the prototype. A prototype is a custom-built working example of a new design. Manufacturers begin by building a few prototypes before they set up a factory to build the new car. Product planners monitor the process along the way and make sure that an approved new car program finishes on time and within budget.

As technology advances, new cars continually feature new systems and innovations. Change and innovation in the auto industry take time to implement and must allow for, but not be overwhelmed by, consumer whims or government regulations. New systems are usually introduced one at a time, or new technologies applied to one area at a time. A new component system (such as a new braking system) in a fully developed prototype can take as long as four years to incorporate into a new model. Part of this time is needed to design, build, and install production tools to make the new model. Testing the new system on rough mock-ups (called test beds) and in preproduction vehicles to see what happens to overall performance takes additional time.

Meanwhile, members of the marketing and sales staffs select a name for the new product, conduct surveys to determine what share of the market the new model can anticipate, and troubleshoot potential problems. Initial production targets are set according to available market research results.

Once the board approves the model and name, the first working prototype emerges from experimental workshops. Board members try out the working prototype, then experts take it through extensive tests, including wind tunnel, dust tunnel, factory track, water-proofing bays, desert heat, arctic cold, and crash tests.

B

Manufacturing and Assembly

Before a new model can be built, the factory must first be retooled. Retooling a factory involves changing the machines on the factory floor to produce a different style of automobile. Skilled tool makers, pattern makers, and die makers look at the specifications for the new car parts and cooperate with the tool design office to craft the tools and modify, or tool up, the machines.

The purchasing department assures that needed supplies for production are available on time and within budget. Qualified buyers have knowledge of both engineering and accounting, and they are responsible for ordering the raw materials to make the parts in-house or for ordering finished components from a parts supplier.

After raw materials are received and inspected, they are cast, forged, stamped, or molded into different body shapes (see Forging). Press shop workers operate the machines that stamp steel into body panels. Fiberglass molders and cutters help mold large plastic body parts and cut the rough edges. Paint shop workers and spray gun operators put the final touches on the plastic or steel shell. Since many of these body-making jobs have been or are being automated, there is an increasing need for computer analysts, programmers, and technicians. These computer-oriented positions usually require college degrees or post-high-school training.

Machine operators, who work in all parts of the factory, are particularly important in engine building. They take the rough castings and forgings of the engine parts and machine them to the required tolerances and accuracy. Machine operators need to be skilled, with experience on numerically controlled and computerized machinery. Engine builders put the engine parts together by hand, a job for car mechanics who can quickly understand changes in engine design.

Manufacturing personnel work on the assembly lines and operate numerous machines, computers, robots, and other equipment to produce the items needed for each car. Heat treatment tempers and strengthens the forged and cast parts, which are then shaped into components that are assembled into subassemblies (gearboxes, axles, engines, doors, dashboards). The chassis (the underlying frame of the automobile) and body are joined and painted. Electricians, many of whom are first hired as apprentices or trained in company training programs, make sure that electrical parts are correctly fitted and connected in the car.

Components and subassemblies are gradually combined along the assembly line at different points to construct the car. Line operators generally are less skilled workers who carry out one or two simple assembly line operations. The manufacturer gives these workers limited training. At almost every stage of the assembly process, skilled inspectors assure the quality of the work.

This pattern of production, which emerged from 1900 to 1920, changed little in the first 80 years of the century. Beginning in the late 1970s and early 1980s, manufacturers began buying completed subassemblies instead of their components—completed dashboards, for instance, rather than individual instruments—and began building the auto body around these subassemblies. These and other production strategies have enabled companies to address the fast-changing market more rapidly and effectively. Companies can now change production lines faster and make more specialized cars more economically.

C

Sales and Service

Market researchers contribute to the original design process and continue their studies throughout the manufacture and sale of a car. Market researchers compile newspaper, industry, and public reaction from polls and product surveys. They use these findings to help plan sales campaigns. For example, if surveys show consumers like the energy-saving features of a car, then those features might be the focus of advertising. The advertising department uses results from polls and focus groups (small groups of potential consumers) to shape advertising tools for dealers as well as national advertising campaigns aimed directly at the public.

The corporate sales staff works with the car dealers throughout the country to prepare them to sell the new product. Toward the end of the 20th century, the number of dealerships declined, but their size and the number of total cars sold increased. In 1950 about 47,000 dealers sold 7.2 million vehicles. By 1985 half as many dealers sold twice as many cars. High-volume dealers, called megadealers, with multiple locations and multiple franchises (agreements with several companies to sell their cars) compete most favorably. Car supermarkets (establishments that sell used cars at a fixed price, often with a 30-day return policy) and dealerships with separate repair and sales departments are two current trends that are likely to continue. Many car dealerships in the United States also devote a portion of their sales staff to Internet sales. Internet sales associates help potential buyers research and purchase cars online.

Dealership mechanics must learn how to maintain and repair new models. More than 80 percent of the functions of the average automobile are controlled by electronics. This has created a large need for educated mechanics who can also operate computerized diagnostic equipment. The National Institute for Automotive Service Excellence (ASE) was established in 1972 to help consumers select competent service professionals. ASE Certification of mechanics increased from 8,567 in 1972 to more than 400,000 in 2002. Trade and technical schools continue to be the major source of training for service professionals, who work in car dealerships, service stations, tire shops, and elsewhere.

D

Customer Feedback

Consumers have increasingly become part of the team that shapes the products that are designed and built—especially since the 1960s and 1970s. The company maintains a press fleet so automotive correspondents can test drive new models and review them. In some companies, top executives also test drive new cars and give their feedback. Focus groups of consumers are organized to test recent innovations to see if they would be suitable to apply across a product line. For example, focus groups of consumers who like off-road operation provided the initial market test of four-wheel drive passenger cars. Other consumer groups have road tested innovations such as fuel injection, turbocharging, and trip computers. After these focus groups give their feedback, designers refine the innovations and introduce them into other vehicles.

IV

HISTORY OF THE AUTOMOBILE INDUSTRY

Automobiles as we know them today are the product of centuries of tinkering and innovation. Automobile production has grown from small companies making simple so-called horseless carriages to international corporations that mass-produce advanced, reliable automobiles for consumers.

A

Early Automobile Concepts

In the 15th century, Italian inventor Leonardo da Vinci envisioned possibilities for power-driven vehicles. By the late 17th century, English physicist Sir Isaac Newton had proposed a steam carriage, and by the late 18th century French army captain Nicholas-Joseph Cugnot had actually built one. By the mid-1800s, the popularity of steam vehicles began to decline because they were dangerous to operate and difficult to maintain. At about the same time, inventors became interested in the internal-combustion engine.

Robert Street of England filed a patent in 1794 that summarized how an internal-combustion engine might work, but it was Belgian-born French inventor Jean-Joseph-Étienne Lenoir who built the first commercially successful internal-combustion engine in 1859. Lenoir’s engine had a carburetor that mixed liquid hydrocarbons, which formed a vapor. An electric spark in a cylinder ignited the vapor. By 1876 German shop clerk Nikolaus August Otto had improved on Lenoir's engine, and the Otto engine became the model of the internal-combustion engines used today. Germans Gottlieb Daimler and Karl Benz attached motors to tricycles and automobiles, building what are regarded as the first modern cars in 1885 and 1886 (DaimlerChrysler AG).

In America, lawyer George Baldwin Selden studied many of the European engines at the Philadelphia Centennial Exposition of 1876, then redesigned what he considered to be the best among them. He reduced the engine weight so it could power a light road vehicle. Selden patented his engine, so he ultimately received a royalty, or small payment, for almost every car made in the United States.

Charles Edgar Duryea and his brother Frank are credited with the first production automobile made in the United States. Their small company produced 13 cars in 1896, ushering in the automobile industry. Only a few more cars were sold in the following year, and the brothers split up to follow separate interests.

B

Henry Ford and Mass Production

Several small automobile manufacturers were making cars in the early 1900s, but American Henry Ford helped popularize the idea that anyone could own a car. Ford successfully challenged the Selden patent in court, opening the door for increased automobile manufacturing. Ford achieved initial success by making cars in large quantities to reduce costs and by making them simple enough so many consumers could easily operate them. Ford standardized parts and reorganized factory production to maximize efficiency.

Ford made the sturdy, black Model T using mass production, the most economical way to make the maximum number of similar copies of the car. He understood that efficient mass production would lower car prices, making cars affordable for the average person, thus generating a huge market. From 1910 to 1924, Ford cars decreased steadily in price as they improved in quality. The Ford Model F in 1904 weighed 630 kg (1,400 lb), had a two-cylinder motor, and sold for $1,200. By 1924 the Ford Model T touring car was heavier at 680 kg (1,500 lb), had a more powerful four-cylinder motor, and included a top and windshield—yet it sold for only $290. Ford made only minor changes to the Model T for nearly two decades, and more than half of the cars sold in the United States were Model Ts during many of those years.

C

Other Automakers

While Ford was perfecting his Model T, William C. Durant established the General Motors Corporation (GM) in 1908. Durant combined the Buick, Oldsmobile, and Oakland companies, and later Cadillac, to form GM. The firm started by Louis Chevrolet was added in 1918. General Motors weathered numerous financial crises in its early years, finally gaining stability when the du Pont family bought much GM stock (since divested) in 1920. The invention by Charles Franklin Kettering of the electric self-starter in 1912 was a benchmark in U.S. automotive development, but others quickly followed, including balloon tires in 1921. Among other U.S. automotive pioneers were brothers John and Horace Dodge, machinists and bicycle builders after whom the Dodge car is named, and Walter Percy Chrysler, a railroad worker who later formed Chrysler Corporation. Ford, GM, and Chrysler, known as the Big Three, eventually became the dominant automakers in America.

In 1914 Ford announced a generous, unprecedented $5 per day wage for workers who were with the company more than six months, doubling the previous wage. He wanted workers to be able to afford the cars they made, but he also wanted to stabilize his workforce, which had high turnover due to the repetition of assembly-line work. U.S. assembly line production satisfied the huge American market for vehicles and allowed American carmakers to dominate early auto manufacturing. By 1916 annual U.S. auto production reached one million units, a level not reached by any other country until England about 40 years later.

By 1920 Ford's success in building an inexpensive, durable car had produced a large secondhand car market, which meant that new Fords had to compete with old Fords. In the late 1920s and early 1930s General Motors Chairman Alfred Pritchard Sloan, Jr., decided to follow a different strategy. He implemented the annual model and offered different lines of cars at different prices, creating a ladder of consumption that consumers could climb. These concepts helped GM challenge the dominance of Ford. In 1924 GM had about 19 percent of U.S. new-car sales, and Ford had just over 50 percent. Just two years later GM cut Ford’s lead down to 35 percent and raised GM’s market share to 28 percent.

European and Japanese automakers were also growing in this new industry. In 1914 the company that later became Nissan Motor Co., Ltd., completed its first car in Japan. Fiat produced automobiles in Italy, and Daimler and Benz merged together in 1926 to begin production of the Mercedes-Benz line of automobiles. In 1928 the German manufacturer Bayerische Motoren Werke AG (BMW), also known as Bavarian Motor Works, began building automobiles.

D

The Great Depression of the 1930s

Numerous automobile manufacturers, both big and small, existed during the early years of the industry, but increased competition began to reduce the number of companies. The economic depression in the United States following the 1929 stock market crash brought even more consolidation and competition to the auto industry. Many carmakers, such as Duesenberg with its stylish models, disappeared during the depression. Consolidation and sheer size, as well as innovation, helped the Big Three automakers survive. Thinking that farmers might gain by producing crops that could be turned into fuel or raw materials, Ford built a soybean processing plant. Soon two pounds of every Ford were made from soy products. General Motors survived and thrived with the standard volume concept, a financial strategy that has endured. GM set its prices to produce a 20 percent return on investment based on what it sold in an average year. Profits soared when sales were above average, and GM would still profit during leaner years.

E

Labor Unions and Strikes

Some discontented workers cautiously organized into labor unions during the depression in order to improve working conditions and increase pay. By 1936 the United Automobile Workers (UAW) planned to stop work at General Motors. Workers at a GM plant in Cleveland were angered when the plant manager refused to discuss reductions in the piece work rate, and they started one of the first so-called sit-down strike in history, where workers sat down at their posts and refused to leave until their demands were met. The six-week strike involved fewer than 2,000 workers, but it affected more than 150,000 other workers in different production areas. The contract negotiated between management and labor representatives helped boost the reputation of the UAW, although actual concessions gained in the contract were minimal.

F

Wartime Production

World War II (1939-1945) had a drastic effect on automobile manufacturing in the United States. After 12 years of depression, high unemployment, and labor strife, America was attacked by the Japanese on December 7, 1941, at Pearl Harbor, Hawaii. Consequently, the United States entered World War II. Two months later, the last passenger car for the duration of the war rolled off the line. The automobile industry was converted to wartime production. Chrysler Corporation mass-produced tanks, and numerous carmakers built trucks for the military. GM built shells, bombs, fuses, navigation equipment, machine guns, artillery, and antiaircraft guns, in addition to engines and vehicles. Ford mass-produced bomber aircraft. The automakers more than doubled their productive capacity during the war, and women and minorities made up a significant portion of new workers.

G

Postwar Production

Passenger car production resumed after World War II with 1946 models. U.S. automakers had trouble meeting the pent-up demand. Suburbs sprouted up and a nationwide system of interstate highways was planned. In 1949 new-car sales of more than 4.8 million in the United States finally topped the old record set in precrash 1929 by almost 1 million units. By 1955 sales approached 7.2 million.

While large companies enjoyed success, smaller automobile companies and newcomers found it increasingly difficult to compete against the expensive annual model changeovers offered by existing manufacturers. In 1947 and 1948 American automobile pioneer Preston Tucker began production of his Tucker Torpedo, which featured a Cyclops-like, centered headlamp that turned with the front wheels. The design was good, but as a low-volume manufacturer, Tucker ran into production problems, and his company collapsed after managing to make only about 50 cars.

In the 1950s American automobiles increased in size and sported decorative features such as tail fins. GM built a strong sales lead during the 1950s when its cars included tail fins, automatic transmissions, and high-compression V-8 engines. However, by the end of the decade consumers began desiring smaller cars, and average sizes began to decrease.

H

Automobile Safety

In the early 1960s the Big Three American automakers rolled out compact cars, including the unconventional Chevrolet Corvair, with an air-cooled six-cylinder rear engine. Because of the rear engine placement, the car tended to oversteer, or turn more sharply at higher speeds. In high-speed turns, the rear end tended to lift, and the first prototype flipped over on the test track. More than one million Corvairs had been sold before corrections could be made. American lawyer Ralph Nader publicized the defects of the Corvair and condemned the auto industry in his book Unsafe at Any Speed (1965; revised edition, 1972), though the National Highway Traffic Safety Administration would later declare the car as safe as other contemporary vehicles. Automakers responded by improving structural safety and adding features such as seat belts, collapsible steering columns, and safety windshields in their cars.

I

Foreign Imports and the Energy Crisis

Europe and Japan had been busy reconstructing their manufacturing capacity in the years following World War II, and their smaller, more fuel-efficient automobiles became popular with the American consumer. Volkswagen AG began importing its Beetle to the United States in the early 1950s. Sales were slow at first but steadily improved. Early Japanese imports such as the Toyopet, manufactured by Toyota Motor Corporation, and the Nissan Datsun were introduced into the United States in 1958; but sales initially suffered because there was no sound dealer network to service them. Moreover, the American public, raised on large U.S. cars, viewed the smaller autos as second-rate. As Volkswagen sales boomed during the 1960s, partly due to clever advertising, the Japanese imports also grew in popularity. Toyota and Nissan eventually passed Volkswagen in sales in the United States in 1975 and 1976.

Imported cars, with their lower price and better fuel efficiency, became very popular in the 1970s, due in part to the rising cost of gasoline. In 1973 and again in 1979, the Organization of Petroleum Exporting Countries (OPEC) cut off the supply of oil to the United States (see World Energy Supply: The Energy Crisis). In an effort to conserve energy, the U.S. government began setting fuel economy standards, but these often conflicted with the air pollution and safety standards it set in the 1970 Clean Air Act. As American automakers struggled to meet these new demands, Japanese imports skyrocketed. Japanese automakers, such as Toyota, Nissan, and the relative newcomer Honda Motor Co. Ltd., also had the advantage of better industry-government collaboration, newer factories, and a comparatively cheaper, more disciplined labor force. By the end of the 1970s, Japanese automakers were selling 2.5 million cars a year in the United States, which amounted to about one of every four units sold.

U.S. automakers responded to Japanese competition by retooling their factories to build smaller cars. They adopted successful Japanese methods, known collectively as lean production. Examples of this method of production include increased automation, quality control (workers could stop the line to correct a problem, rather than marking it for future correction), and smaller, so-called just-in-time inventories (parts were delivered to workers on the line as they were needed, rather than in large, bulky quantities).

Auto companies responded to the fuel-consumption and air-quality demands by using previously developed innovations. Diesel engines, catalytic converters, electronic fuel injection, turbochargers, high-strength steels, aerodynamic bodies, front-wheel drive, and other technologies were introduced to cut operating costs.

J

The 1980s and 1990s

Revenues for U.S. automakers declined during the late 1970s and early 1980s as the companies retooled to produce smaller cars, and Chrysler in particular was on the verge of bankruptcy. Ford executive Lee Iacocca moved to Chrysler and rescued it by changing the product line and winning loan guarantees from Congress in 1980. The loans were eventually repaid (seven years early), and Chrysler survived.

Japanese automakers shifted their emphasis in the late 1980s to luxury automobiles, which competed directly against established American and German luxury cars. Honda started its Acura division, while Nissan introduced the Infiniti line and Toyota began producing its Lexus brand of cars. These luxury automobile entries presented significant challenges to existing luxury automakers, such as BMW and Mercedes. Both companies took financial losses as a result, but they have since rebounded.

Industry developments of the late 1990s focused on joint international ventures among the strongest companies and global expansion into new markets. Globalization has made it increasingly difficult to identify an automobile as the product of one company or country. General Motors, for example, allied with Suzuki and Isuzu in Japan to sell several products internationally under GM nameplates. In 1998 Daimler-Benz AG merged with Chrysler Corporation but announced it would maintain Mercedes and Chrysler as separate brands. Ford acquired the automobile division of Swedish vehicle maker Volvo in 1999. A year later GM announced it would purchase a 20-percent stake in Italian carmaker Fiat, which also manufactures cars under the Ferrari, Lancia, and Maserati brands.

K

The Early 21st Century

As the 21st century began, foreign carmakers continued to make inroads in the worldwide and North American markets. In 2000 foreign manufacturers outsold U.S. companies in worldwide automobile sales, although sales of light trucks, including sport utility vehicles (SUVs), kept U.S. companies dominant in total sales of vehicles.

In July 2007 foreign automakers outperformed U.S. companies in the U.S. market for the first time ever. And in the first quarter of 2007, GM for the first time lost its dominance in the worldwide market to Toyota. Toyota sold 2.35 million vehicles during that period compared with GM’s 2.26 million vehicles. Toyota was expected to overtake GM as the world’s largest car and light truck maker by the end of the year.

U.S. automakers continued to close plants in the United States and lay off workers, while foreign car companies continued to open plants in the United States. The domestic U.S. car industry also suffered a setback when the European carmaker Daimler AG decided to divest itself of its Chrysler unit, selling it to a private equity firm. Chrysler became the first U.S. automaker to be privately owned.

V

FUTURE AUTOMOBILE INDUSTRY TRENDS

At the start of the 21st century, the trends of global trade and manufacturing flexibility continue. Computerization continues to be a major part of auto design and manufacture, as do the search for alternative fuels and more efficient automobile designs.

A

Computerization

Computer-aided design tools are already used in the automobile industry and will continue to save months of design time and improve the quality of cars. In 1997 Chrysler designed its first paperless cars (1998 and 1999 full-size sedans) using digital model assembly. In the foreseeable future, the design engineer's computer-aided design might guide computer-controlled machinery and reduce the need for blueprints. See also Computer-Aided Design/Computer-Aided Manufacture.

Microelectronics will be more fully applied to future automobiles and may become as commonplace as radios are today. On-board systems are becoming available that enable drivers to find destinations through voice-activated navigation or make cellular calls using the computer. These computers can access the Global Positioning System (GPS) and display maps to help drivers avoid congested freeways and find better routes to destinations. See also Intelligent Transportation Systems.

B

Alternative Fuel Research

Alternative energy sources for cars, such as natural gas, electricity, ethanol, vegetable oil, sunlight, and water, will vie for consumer use in the future. The Clean Air Act of 1990 and the National Energy Policy Act of 1992 created significant new market opportunities for alternative fuels by requiring government vehicles to use cleaner fuels.

Many vehicle manufacturers now convert existing vehicles or offer factory-built natural gas vehicles (NGV) that burn natural gas and cost less to run than conventionally fueled vehicles do. In many countries, natural gas is cheaper and more available, so NGVs could become popular in the future.

Corn-based gasohol (a combination of unleaded gasoline and ethanol made from corn) reduces fossil energy use by 50 to 60 percent and pollution by 35 to 46 percent. More than 11 percent of all automotive fuels sold in the United States are ethanol-blended, and that percentage may increase in the future. Agricultural sources of fuel have interested carmakers for decades. In 1997 the Veggie Van, a small motor home powered by a diesel motor that runs on a fuel made from used and new vegetable oil (called biodiesel), took a 16,000 km (10,000 mi) journey. The Veggie Van reached speeds up to 105 km/h (65 mph) and achieved a gas mileage of 10.5 km per liter (25 mi per gallon). Some fuel for the Veggie Van was made from used restaurant fryer oil, and its exhaust smelled like french fries.

Many large automakers are now adapting fuel cell technology for automobiles. Fuel cells are cleaner, quieter, and more energy efficient than internal-combustion engines. Fuel cells combine hydrogen and oxygen electrochemically without combustion to supply electricity. Fuel cell engines will likely run on conventional gasoline, but with a fraction of the emissions of a normal engine. The Ford Motor Company announced in December 1997 that it was investing $420 million in fuel cell research.

From 1995 to 1997 Mazda Motor Corporation experimented with a low-pollution hydrogen rotary engine vehicle, which burns hydrogen fuel that will not emit carbon dioxide. Japan reportedly aims to have a hydrogen fuel distribution network in place to support that fuel’s use in transportation by 2010. Scientists are also trying to reduce emissions of existing vehicles and are testing a device that uses electrons to nullify the noxious components of diesel exhaust.

Electric cars, powered by an electric motor and batteries, provide drivers with another alternative. To recharge the batteries, operators plug the car into a 120-volt or 240-volt outlet. A typical electric car averages 60 to 200 km (40 to 100 mi) per charge. Since most car trips are less than 120 km (75 mi), electric cars can help meet the needs of many two- or three-car families. In 1996 GM debuted the EV1, an emission-free electric car that seats two. The EV1 has been slow to catch on, however. Its batteries run out frequently and require several hours to recharge. Moreover, pioneering electric technology makes the EV1 expensive, especially when compared with conventional gasoline-powered cars of comparable size.

Hybrid automobiles combine an electric motor with batteries that are recharged by a small gas- or diesel-powered engine. By relying more on electricity and less on fuel combustion, hybrids have higher fuel efficiency and fewer toxic emissions. Several automakers have experimented with hybrids, and in 1997 the Toyota Motor Corporation became the first to mass-produce a hybrid vehicle. The first hybrid available for sale in North America was offered by Honda Motor Company in 1999. In 2004 the Ford Motor Company became the first U.S. automaker to produce a hybrid vehicle. The Ford Escape Hybrid, introduced for the 2005 model year, was both the first hybrid made in the United States and the first hybrid sport-utility vehicle (SUV).

C

Materials and Safety

Future vehicles will likely be made of different materials. For example, improved plastics or composites will reduce car weight, provide fuel economy, allow for smoother surfaces and more complex shapes, and better manage crash energy. As fuel costs increase and the cost of composite body construction decreases, widespread use of plastics could follow. Ceramics, which cut weight and thus improve fuel economy, will increase operating efficiency in applications such as pistons and turbocharger rotors.

Safety will continue to be a concern for automakers. Airbags have saved numerous lives, but they have also been responsible for injuries and deaths of small children, due to the forceful action of the airbags when they inflate. New rules from the U.S. Department of Transportation in 1997 allowed some consumers to remove the airbags or to disable them when small children are riding in front passenger seats. Another point of controversy concerns the recent popularity of large sport-utility vehicles (SUVs) and pickup trucks. When an ordinary car collides with a truck or SUV, studies show that the car passengers are much more likely to suffer injury or death than are the occupants of the larger vehicles. SUVs and trucks are heavier and higher off the ground than ordinary cars and frequently run over the bumpers of ordinary cars during collisions. Industry representatives, government agencies, and insurance groups are currently working on these problems to create practical solutions and increase safety on the road.

The auto industry of the future will be characterized by vanishing boundaries: between countries and companies, between suppliers and manufacturers, between engineering fields, between departments (that is, marketing, design, and finance), between labor and management, and between automotive and consumer electronics. Companies that rapidly adapt to unpredictable and dynamic events will prevail.