The Modern Industry
The modern automotive industry is huge. In the United States it is the largest single manufacturing enterprise in terms of total value of products, value added by manufacture, and number of wage earners employed. One of every six American businesses is dependent on the manufacture, distribution, servicing, or use of motor vehicles; sales and receipts of automotive firms represent more than one-fifth of the country’s wholesale business and more than one-fourth of its retail trade. For other countries these proportions are somewhat smaller, but Japan, South Korea, and the countries of western Europe have been rapidly approaching the level in the United States.
Consolidation
The trend toward consolidation in the industry has already been traced. In each of the major producing countries the output of motor vehicles is in the hands of a few very large firms, and small independent producers have virtually disappeared. The fundamental cause of this trend is mass production, which requires a heavy investment in equipment and tooling and is therefore feasible only for a large organization. Once the technique is instituted, the resulting economies of scale give the large firm a commanding advantage, provided of course that the market can absorb the number of vehicles that must be built to justify the investment. Although the precise numbers required are difficult to determine, the best calculations, considering both the assembly operation and the stamping of body panels, place the optimum output at between 200,000 and 400,000 cars per year for a single plant. Increasingly stringent and costly regulations aimed at correcting environmental damage due to the rising number of vehicles on the road also have been a factor in the move toward consolidation.
The structural organization of these giant enterprises, despite individual variation, resembles the pattern first adopted by General Motors in the 1920s. There is a central organization with an executive committee responsible for overall policy and planning. The operating divisions are semiautonomous, each reporting directly to the central authority but responsible for its own internal management. In some situations the operating divisions even compete with each other. The Ford Motor Company was consciously reorganized on the GM pattern after World War II; other American automotive firms have similar structures.
