Auto Competition Auto Competition Intro When an auto manufacturer needs to cut costs it will sometimes look for help from another manufacturer. This process results in a merging between companies in order to benefit one another. Companies may merge to be cost efficient or even to gain entry into another market segment. Either way, manufacturers try to gain instant results by merging. Auto manufacturers compete with each other to give consumers the state of the art safety systems that they demand. Parents are becoming more concerned about their family’s safety with the lifesaving abilities of airbags. Consumers are looking at airbags as a very important option when making a vehicle purchasing decision. Not only must the automobile come equipped with one, but consumers also want a way to disengage the passenger side of the system if needed for children and infants.
Description of Industry In the 1960’s, automotive safety began with a man by the name of Ralph Nader. In November of 1965 Nader wrote Unsafe at Any Speed: The Designed-in Dangers of the American Automobile. The target of this book was General Motors’ Corvair Nader claimed the rear suspension was faulty and made it possible to skid violently and roll over (Bollier). After Nader made the public aware of safety concerns, automotive manufacturers started putting items such as power disk brakes as standard equipment on new automobiles. GM started impact testing and designed side beam guards in the late 1960’s (General Motors website). Nader’s continued crusading into the 1970’s made GM realize that it had to be proactive in the safety movement.
The result of the movement was designing an airbag in 1973. Volvo had already introduced the airbag in 1972 on its 240/260 series (Volvo History). Companies, realizing that Nader was not going to be disappearing anytime, soon decided to look for suppliers that were safety conscious. Automotive manufacturers began buying safety glass, which reduced injuries from large glass shards in accidents. The introduction of the steel belted tires reduced the amount of tire blowouts, which can lead to rollovers. In the 1980’s the public started to listen and jump onto Nader’s bandwagon.
The public was demanding automobiles equipped with life saving safety features. GM introduced the rear lap/shoulder belt in 1986 as standard equipment. Also in 1986 Volvo introduced a detachable seat for children up to the age of four. In the late 1980’s antilock brakes became optional equipment offered by most car companies. In the 1990’s airbags and antilock brakes became standard equipment on most automobiles. Crumple zones became a priority and were implemented to give added safety during an accident.
The front and rear of the automobile crumple, accordion style, while keeping the cabin intact. Better day-time visibility was an issue, so daytime running lamps became a standard option for many manufacturers. In the mid-nineties OnStar, a roadside assistance program, was developed for GM to be installed on Cadillacs. In the 1990’s, mergers became more important in the automotive industry, but for different reasons than in the decades before. In the 1940’s and 1950’s auto manufactures bought other automotive makers to eliminate competition and increase in size.
This strategy worked in the formative years of the automotive industry because foreign competition was non-existent. People only had American companies to purchase from, so the automaker felt this was the best use of their money. In the 1970’s foreign competition became stronger, but American companies still felt confident in their sales ability. Big American automotive mergers were limited in the 1970’s and 1980’s. Mergers are now taking place to gain entry into a different market segment.
Companies now want to merge with automotive leaders in their respective market segments. Ford Motor Company wanted into the luxury car market, so instead of designing a new car it purchased Jaguar. If Ford had not bought an established luxury car company, it would have had to market a whole new automotive line that was not guaranteed to be successful. Jaguar gave them instant credibility without the struggles of an upstart company. Issue 1: Mergers The global auto industry has been overcome with merger madness. Leading the charge was the union between Daimler-Benz and Chrysler.
This merging changed the landscape of the global auto industry in one stroke. By joining together and combining forces, DailmerChrysler looks to bring formidable and muscle under one roof. To sum up it’s conquest, it wants to change the way the auto industry operates. However, in some merging feats companies like Ford only wish to gain an easy entry into a different market segment. Merging allows for better cost effectiveness as well as easy entry into a specific market segment while instantly gaining a reputation.
Cost effectiveness is gained when companies merge allowing them to share technology like engines, platforms, etc. In the merging of DailmerChrysler, Chrysler’s renowned low-cost production of trucks, minivans, and sport-utility vehicles will be called upon to cut costs. This saving is expected to be around $3 billion annually, including $1.1 billion in purchasing costs alone (Hughes). Chrysler Corporation has shared engines as well as production facilities with Mitsubishi Motors for several years. In the past Chrysler borrowed the 3.0 liter six cylinder engine from Mitsubishi for its minivans.
Currently, Dodge Stratus and the Mitsubishi Eclipse share the same engine as well as production lines in an effort to cut costs. According to Jacques Nasser, Ford Motor Companies president, The next big efficiency isflexibility between vehicles. You are not retooling, redesigning and remanufacturing every part. Ford is looking to cut the number of platforms they use from 32 down to 17 by 2003 (Welch & Howes). Nasser also states that in the coming years the automotive market will demand greater building flexibility between models to build off the same foundation. One example of this is the case of Audi and Volkswagen, where one frame platform serves seven automobiles.
Cost efficiency is not the only goal of auto manufactures in today’s merging feats. Another main reason is to gain entry into a certain market segment. Starting up a new product line has tremendous costs associated with it. Also, it is difficult to conv …