The city of Detroit has suffered a major shock and it shows. Years of economic decline have ripped the heart out of its commercial centre: buildings lie unused, wasteground abounds and few retailers prosper in the downtown area. Motor City, once a tribute to US industry and the American dream, bears the physical scars of the decline of the motor industry.
For most of the century, General Motors (GM), Ford and Chrysler controlled the US market with little or no fear that their position or work method would be challenged. Before the recessions of the 1970s, these three US multinationals controlled 90 per cent of the US market and fuelled Detroit's prosperity. GM's market share was between 45 and 55 per cent, Ford's was 20 per cent and in 1970 Chrysler had 15 per cent of the market. The big three manufacturers made cars and people bought them. Then the Japanese came.
"In American terms they started to eat our lunch," says General Motor's Mr William O'Neill, executive director of Product Communications Development. "Customers began to say they wanted different things and we were slow to react to them, as an industry not just GM."
Ford's market share did not decline as much as GM's but with the oil crises in the 1970s the smaller, quality cars from overseas which were conservative on fuel consumption, hurt their company also, according to Mr George Pipas, Ford's sales analysis manager The three big US manufacturing car groups now admit that people in the 1970s and 1980s went into denial when the competition came on board. "It took us a while to learn from them but we have learned a tremendous amount," says Mr Van Bussmann, global economist with the now merged Daimler Chrysler. Valuable customers were also lost during the confusion which the new imports caused. "There is a whole cadre of buyers in this country who don't consider GM products anymore," says Mr O'Neill. "It's not because they don't like them . . . it's because they've never had one." Since the early to mid-1990s the "big three" have been making gains on the market share they lost. This is partly due to a huge increase in car sales in the US with a record 17.4 million cars sold last year. Ford's share of this market is up to between 24 and 25 per cent, and Daimler Chrysler over 16 per cent. GM now has about 29 per cent of the market share and last year's sales were up 14 per cent.
The road to resurgence has not been painless. Mr O'Neill says a restructuring of the board of directors took place in GM, to bring in people who were not afraid of taking risks. There were problems also with workers and unions with hundreds of thousands of employees laid off. The Financial Times reported recently that in the 1920s about 55 per cent of workers in the car industry lived in the Michigan area, and one in every two cars was built in or near Detroit. Today that figure is closer to one in 10. Outside the US this process has not ended, with the announcement last week that 2,000 Ford employees in Dagenham are to lose their jobs. Ford's Mr Pipas says this has to do with cutting the cost of making cars. "The first rule of thumb is to make sure capacity is linked up with demand. Not to do this is a prescription for failure," he said. Nowadays, the US car firms function as global companies. GM has used firms abroad to cut down on duplication of tasks. It has also started to look more at what the customer wants than on what it can deliver and conducts focus groups with people as young as nine years old.
Chrysler brought in platform teams whereby the various sections required to make cars - such as design, engineering and manufacturing - came together to lower cost and time in manufacturing through co-operation.
Strategic alliances with other car firms are also helping the "big three" regain their foothold. Chrysler merged with the German company Daimler in 1998 to expand its overseas operations, according to Mr Bussmann. The merged group now has an alliance with BMW to make engines and with Mitsubishi for distribution in Asia. Ford owns one-third of Mazda and is also involved in a joint venture with a German firm to manufacture manual transmission.
GM holds equity stakes in Isuzu, Suzuki and Subaru. It recently signed a deal with Fiat and also buys engines from Honda. It has a manufacturing association with Toyota in California where it builds cars and trucks together. GM also supplies right-hand drive vehicles to Toyota in Japan. So is the war over? "They are still the enemy in the market place," says Mr O'Neill. "While we work with them together on these things we don't want them to sell one more vehicle than we do."
The term "Motor City" is now only a hark back to a time when car companies were masters of their markets and competition was unheard of. Those days are truly over.
