######################################## #Written by David Tam, 1996. # #davidkftam@netscape.net Copyright 1999# ######################################## The Automobile Industry ======================= The 10 main problems the American auto industry is/has suffered from. 1. Union versus management problems 2. Short-term gains viewed by management 3. Positive feedback loop in production, not negative feedback 4. Low quality in intermediate parts and final product 5. Low productivity 6. High capital costs in inflexible automation 7. Highly centralized production, bureaucratic management 8. Supplier / assembler problems 9. Communication barriers in design teams, with assemblers, suppliers, engineers, management, finance, marketing, etc... 10. Long product-development cycle I believe union versus management problems are the most important problems facing the american industry because unions are now becoming the only barrier preventing change in the industry in North America. From the CAW and UAW strike, we can see the immediate impacts on the industry, as well as the significant effects on production and profits. These unions are preventing the changes that the "Big Three" are finally starting to make. One of these changes is the move towards outsourcing certain parts of the manufacturing process, which the unions are against. The short-term view taken by management in the past created an underlying cultural problem in America. I believe it was this influence that spawned the losing battle between the American companies and foreign companies. The American companies have always viewed and fixed problems from hindsight, without anticipating them in the first place. They preferred to treat the symptoms of problems rather than the cause of the problem. This problem is all-encompassing one that is tied to the next two problems. The low level of quality of intermediate parts and the final products were due to the use of positive feedback, neglecting the use of positive feedback loops. Low productivity may also be tied to this fact. High capital costs in inflexible automation prevented the american industry from changing with market demands and industry trends. The highly centralized methods of production and management helped to create economies of scale but also prevented quick changes in response to market conditions. Supplier / assembler problems were created from the underlying problems of using positive feedback loops, and short-term business planning. This problem contributed to quality issues as well. Finally, communication barriers increased expenses and the product-development cycle. 3a. The 3 most important problems: 1. Positive feedback loop used in production 2. High capital costs in inflexible automation 3. Communication barriers in design teams, with assemblers, suppliers, engineers, management, finance, marketing, etc... These three reasons were decided to be the most important from an aspiring entrepreneur's perspective because these problems present new business opportunities. These problems were ranked in the order of potential size of the opportunities created. For instance, a industrial/environmental engineering consulting firm can be started that specializes in applying the modern preventative engineering approaches of utilizing negative feedback loops to control and enhance the development, production and marketing process of the auto industry. In the past, the traditional approach in industry was to utilize positive feedback loops in the production processes, where symptoms were dealt with, not the causes of problems. An example of this was mentioned in the article, where the assemblers would simply throw out defective parts delivered by the supplier. No effort was exercised by the assembler to find the causes of the defects in the supplier's production process. I believe this specialized engineering consulting firm would have a very high potential in making a lot of profits for both the consulting firm and the american auto industry. To solve the problems of high capital costs in inflexible automation equipment, I believe they should outsource those specific manufacturing processes that have high levels of customization. Outsourcing has many benefits to small companies, and creates immense new opportunities for further small business niches. Outsourcing also benefits the large auto companies as well because, through the mechanism of the free market system, they will receive higher quality supplies in a timely manner, at a reduced cost. This would allow auto companies to quickly change to accommodate changing market demands. To solve part of the communication barrier problem in these very large american auto companies, developing a corporate intranet could facilitate communication between the various departments such as marketing, engineering, and financing. A separate website could be created for suppliers and outsourced companies to supply information on demand. This has benefits for suppliers and contracted companies that are spread throughout the North American continent. Of course, building these corporate intranets presents business opportunities. 3b. If I were to purchase a car today, on a realistic basis, I would purchase a Japanese car because of their higher ownership satisfactory rating in comparison to American cars. Such a rating includes better quality, craftsmanship, reliability, market re-sale value, and repairs. Other factors for my decision include better engineering and newer technologies used. Most of these Japanese cars are made in North American 'transplants' so support for the North American economy would still be present. American cars usually can not match the qualities mentioned above and usually have connotations of being generic, standard-issue, mass produced, and one-size-fits-all.