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The Competitive Status
of the U.S. Auto industry:
A Study of the influences
of Technology in Determining
international ~nclustria~
Competitive Advantage
Prepared by the Automobile Panel,
Committee on Technology and
I International Economic and Tracle Issues
of the Office of the Foreign Secretary,
National Academy of Engineering
and the Com m issi on on E ng i neeri ng
and Technical Systems,
National Research Council
William J. Abernathy, Chairman
Kim Clark, Rapporteur
NATiONAE ACADEMY PRESS
Wash i ngton, D.C. 1 982
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NOTICE: The project that is the subject of this report was approved by the
Governing Board of the National Research Council, whose members are drawn
from the Councils of the National Academy of Sciences, the National Academy
of Engineering, and the Institute of Medicine. The members of the committee
responsible for the report were chosen for their special competences and with
regard for appropriate balance.
This report has been reviewed by a group other than the authors according to
procedure] approved by a Report Review Committee consisting of members of
the National Academy of Sciences, the National Academy of Engineering, and
the Institute of Medicine.
The National Research Council was established by the National Academy of
Sciences in 1916 to associate the broad community of science and technology
with the Academy's purposes of furthering knowledge and of advising the federal
government. The Council operates in accordance with general policies
determined by the Academy under the authority of its congressional charter of
1863, which establishes the Academy as a private, nonprofit, self-governing
m embership corporation. The Council has become the principal operating
agency of both the National Academy of Sciences and the National Academy of
Engineering in the conduct of their services to the government, the public, and
the scientific and engineering communities. It is administered jointly by both
Academies and the Institute of Medicine. The National Academy of Engineering
and the institute of Medicine were established in 1964 and 1970, respectively,
under the charter of the National Academy of Sciences.
This project was supported under Master Agreement No. 79-02702 between
the National Science Foundation and the National Academy of Sciences.
Library of Congress Cataloging in Publication Data
Main entry under title:
The competitive status of the U.S. auto industry.
Bibliography: p.
1. Automobile industry and trade--United States.
I. National Academy of Engineering. Committee on
Technology and International Economic and Trade
Issues. Automobile Panel. II. National Research
Council (U.S.). Committee on Engineering and
Technical Systems.
HD97 10.U52C58 1982 338.476292'0973 82-12506
ISBN 0-309-03289-X
Available from
NATIONAL ACADEMY PRESS
2101 Constitution Avenue, N.W.
Washington, D.C. 20418
Printed in the United States of America
First Printing, August 1983
Second Printing January 1984
Third Printing, March 1987
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Participants at Meetings of the Automobile Panel,
Committee on Technology and
International Economic and Trade Issues
Panel
WILLIAM J. ABERNATHY (Chairmanj; Professor, Harvard
University Graduate School of Business Administration
ALAN A. ALTSHULER, Professor and Chairman, Political
Science Department, Massachusetts Institute of Technology
JAMES K. BAKKEN, Vice-President, Operations Support
Staff, Ford Motor Company
DONALD F. EPHLIN, Vice-President and Director of National
Ford Department, United Auto Workers
DONALD A. HURTER, Manager, Automotive Technology Unit,
Arthur D. Little, Inc.
T REV OR O. J ON ES, V ice-President and General Manager,
Transportation and Electrical and Electronics Operations
TRW, Inc.
HELEN R. KAHN, Bureau Chief--Washington, Automotive News
DUANE F. MILLER, Vice-President, Engineering, Volkswagen
of America, Inc.
RALPH L. MILLER, Vice-President of Market Development and
Strategic Planning for the Light Vehicles Group, Rockwell
International*
RICHARD H. SHACKSON, President, Shackson Associates,
Inc.t
PETER D. ZAGLIO, Vice-President--Securities Division,
Lehman Brothers Kuhn Loeb
*Formerly, Director, Manufacturing Facilities Planning, General
Motors Corporation.
fFormerly, Assistant Director of Transportation Programs,
Energy Productivity Center, Carnegie-Mellon University.
· . .
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Rapporteur
KIM B. CLARK, Assistant Professor, Harvard University
Graduate School of Business Administration
Additional Participants
JOHN ALIC, Project Director of International Security of
Commercial Programs, Office of Technology Assessment,
U.S. Congress
LARRY BURDETT, Vice-President, Marketing, Gelco, Inc.
WILLIAM CHANDLER, Director of Energy Conservation
Project, Environmental Policy Center
ROBERT COLEMAN, Automobile Industrial Specialist, U.S.
Department of Commerce
PETER FROST, Office of Advanced Technology, U.S.
Department of State
K E N FRIEI)MA N. Director of Policy Coordination and
Support, U.S. Department of Energy
RICHARD JOHN, Director, Office of Energy Environment,
Transportation Systems Center, U.S. Department of
Transportation
WILBERT JONES, General Engineer, Office of Industrial
Policy, U.S. Department of Commerce
ALAN KANTROW, Associate Editor, Harvard Business Review
LUCY LAUTERBACH, Presidential Management Intern, Office
of Industry Policy, U.S. Department of Transportation
LARRY LINDEN, Senior Policy Analyst, Office of Science
and Technology Policy, Executive Office of the President
MARK MARTICH, Sloane Fellow, Massachusetts Institute of
Technology
RICHARD NANTO, Analyst in International Trade & Finance,
Congressional Research Service, Library of Congress
ROLF NORDLIE, Director of Transportation and Heavy
Equipment Division, Office of Producer Goods, Bureau of
Industrial Economics, U.S. Department of Commerce
SUMIYE OKUBO, Policy Analyst, Division of Policy Research
and Analysis, Scientific, Technological, and International
Affairs, National Science Foundation
ROLF PIEKARZ, Senior Policy Analyst, Division of Policy
Research and Analysis, Scientific, Technological, and
International Affairs, National Science Foundation
ALAN RAPOPORT, Policy Analyst, Division of Policy
Research and Analysis, Scientific, Technological, and
International Affairs, National Science Foundation
1V
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BRUCE RUBINGER, Operations Research Analyst,
Transportation Systems Center, U.S Department of
Transportation
Consultant
BENGT-ARNE VEDIN, Research Program Director, Business and
Social Research Institute, Stockholm, Sweden
Stat f
HUGH H. MILLER, Executive Director, Committee on
Technology and International Economic and Trade Issues
MARLENE R. B. PHILLIPS, Study Director, Committee on
Technology and International Economic and Trade Issues
ELSIE IHN AT, Secretary, Committee on Technology and
International Economic and Trade Issues
STEPHANIE ZIERVOGEL, Secretary, Committee on Technology
and International Economic and Trade Issues
v
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Committee on Technology and
International Economic and Trade Issues (CTlETI)
Chairman
N. BRUCE HANNAY, National Academy of Engineering Foreign
Secretary and Vice-President, Research and Patents, Bell
Laboratories (retired)
Members
WILLIAM J. ABERNATHY, Professor, Harvard University
Graduate School of Business Administration and Chairman,
CTIETI Automobile Panel
JACK N. BEHRMAN, Luther Hodges Distinguished Professor of
International Business, University of North Carolina
CHARLES C. EDWARDS, President, Scripps Clinic and
Research Foundation and Chairman, CTIETI Pharmaceutical
Panel
W. DENNEY FREESTON, JR., Associate Dean, College of
Engineering, Georgia Institute of Technology and Chairman,
CTIETI Fibers, Textiles, and Apparel Panel
JERRIER A. HADDAD, Vice-President, Technical Personnel
Department, IBM Corporation (retired)
MILTON KATZ, Henry L. Stimson Professor of Law Emeritus,
Harvard Law School
RALPH LANDAU, Chairman of the Board and Chief Executive
Officer, Halcon International, Inc.
JOHN C. LINVILL, Professor, Department of Electrical
Engineering, Stanford University and Chairman, CTIETI
Electronics Panel
RAY McCLURE, Program Leader, Precision Engineering
Program, Lawrence Livermore Laboratory and Chairman,
CTIETI Machine Tools Panel
. .
V11
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BRUCE S. OLD, President, Bruce S. Old Associates, Inc.
and Chairman, CTIETI Ferrous Metals Panel
MARKLEY ROBERTS, Economist, AFL-CIO
LOWELL W. STEELE, Consultant--Technology Planning and
Management*
MONTE C. THRODAHL, Vice-President, Monsanto Company
*Formerly, Staff Executive, General Electric Company.
. . .
vail
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Preface
In August 1976 the Committee on Technology and International
Economic and Trade Issues examined a number of technological
issues and their relationship to the potential entrepreneurial
vitality of the U.S. economy. The committee was concerned with
the following:
.
Technology and its effect on trade between the IJnited
States and the other countries of the Organization for Economic
Cooperation and Development (OECD).
· Relationships between technological innovation and U.S.
productivity and competitiveness in world trade; impacts of
technology and trade on U.S. levels of employment.
· Effects of technology transfer on the development of the
less-developed countries and the impact of this transfer on U.S.
trade with these nations.
· Trade and technology exports in relation to U.S. national
security.
In its 1978 report, Technology, Trade, and the U.S. Economy,*
the committee concluded that the state of the nat~on's
competitive position in world trade is a reflection of the health of
the domestic economy. The committee stated that, as a
consequence, the improvement of our position in international
trade depends primarily on improvement of the domestic
economy. The committee further concluded that one of the major
factors affecting the health of our domestic economy is the state
of industrial innovation. Considerable evidence was presented
* National Research Council, 1978. Techn~
U.S. Economy. Report of a works Hole,
Massachusetts, August 22-31, 1976. National Academy of
Sciences, Washington, D.C.
1X
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during the study to indicate that the innovation process in the
United States is not as vigorous as it once was. The committee
recommended that further work be undertaken to provide a more
detailed examination of the U.S. government policies and
practices that may bear on technological innovation.
The first phase of the study, based on the original
recommendations, resulted in a series of published monographs
that addressed government policies in the following areas:
· The International Technology Transfer Process.*
The Impact of Regulation on Industrial Innovation.*
· The Impact of Tax and Financial Regulatory Policies on
Industrial Innovation.*
· Antitrust, Uncertainty, and Technological Innovation.*
This report on the automobile industry is one of six industry-
specific studies that were conducted as the second phase of work
by this committee. Panels were formed by the committee to
address electronics; ferrous metals; machine tools; pharma-
ceuticals; and fibers, textiles, and apparel. The objective of these
studies was to (1) identify global shifts of industrial technological
caDacitv on a sector-by-sector basis. (2) relate those shifts in
~ ~ ~ ,. .
.
International competitive Industrial advantage to technological
and other factors, and (3) assess future prospects for further
technological change and industrial development.
As a part of the formal studies, each panel developed (1) a
brief historical description of the industry, (2) an assessment of
the dynamic changes that have been occurring and are anticipated
as occurring in the next decade, and (3) a series of policy options
and scenarios to describe alternative futures for the industry.
The methodology of the studies included a series of panel
meetings involving discussions among (1) experts named to the
panel, (2) invited experts from outside the panel who attended as
resource persons, and (3) government agency and congressional
representatives presenting current governmental views and
summaries of current deliberations and oversight efforts.
The drafting work on this report was done by Kim B. Clark,
Harvard University Graduate School of Business Administration.
Professor Clark was responsible for providing research and
resource assistance as well as producing a series of drafts, based
on the panel deliberations, that were reviewed and critiqued by
the panel members at each of their three meetings.
*Available from the National Academy of Engineering, Office of
the Foreign Secretary, 2101 Constitution Avenue, N.We,
Washington, D.C. 20418.
x
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Contents
Summary
1 The U.S. Auto Industry in Crisis
2 An Industry Primer
3 The Evolution of Technology: From Radical
to Incremental Innovation
4 International Competition: Trade Flows and
Industry Structure
5 Government Regulation: The Evolution of
Public Demands on the Industry
6 The Sources of Competitive Advantage:
Cost and Quality Comparisons
7 Jobs and People: The Impact of Workforce
Management on Competition
8 Technology and Competition in the
U.S. Automobile Market
9 The Character of Automotive Innovation in
the 1970s and Beyond
10 The Automotive Future: Three Scenarios
and Their Implications
X1
10
17
35
51
76
90
109
122
133
150
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Appendixes
A Estimates of Comparative Productivity and
Costs Under Alternative Methods
~ Productivity and Absenteeism
C Statistical Analysis of Technology,
Sales' and Prices
Bibliography
Biographical Sketches
169
189
192
197
201
. .
X11
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The Competitive Status
of the U.S. Auto Industry
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