The Competitive Status of the U.S. Auto Industry A Study of the Influences of Technology in Determining International Industrial Competitive Advantage (1982) / Chapter Skim
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5 Government Regulation: The Evolution of Public Demands on the Industry
5 Government Regulation: The Evolution of Public Demands on the Industry
Pages 76-89
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From page 76... ...
As a result, manufacturers have long had to meet both the evolving demands of the marketplace and the requirement of changing social expectation, whether expressed in the form of explicit government action or merely of diffuse public sentiment. Public Demands in the Formative Years At the turn of the century, many hailed the automobile as the guarantor of public health in urban areas and awaited the arrival of the "horseless age" with high expectations.
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From page 77... ...
. the nervousness, distraction and strain of modern metropolitan life."2 In turn, suburban living could become a quality, and some observers waxed eloquent in their descriptions of it: I magine a healthier race of workingmen, toiling in cheerful and sanitary factories, with mechanical skill and trade-craft developed to the highest, as the machinery grows more delicate and perfect, who, in the late afternoon, glide away in their own comfortable vehicles to their little farms or houses in the country or by the sea twenty or thirty miles distant They will be healthier, happier, more intelligent and self-respecting citizens because of the chance to live among the meadows and flowers of the country instead of in crowded city streets.3 In a heavily urban, industrial society, still wedded to the values of rural/agrarian life, the automobile had a social value beyond its private appeal.
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From page 78... ...
In 1921 road construction and maintenance were financed mainly by property taxes and general funds, with only about 25 percent of the money for roads coming from automobile registration fees.5 The New Deal and the War Years Public demands on the industry in the New Deal era were little changed from the 1910-1925 period. Expanded highway construction further enhanced personal mobility, and the rhetoric of some New Dealers (even FOR himself)
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From page 79... ...
superiority in mass production techniques had been a major factor in the successful war effort. The auto industry was viewed as a valued national resource; its leaders were called on to serve in responsible public positions; its capabilities were admired and respected.
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From page 80... ...
In early 1966 President Johnson called for a highway safety act to "arrest the destruction of life and property on our highways." Senator Ribicoff again held hearings on safety, and the Senate C ommerce Committee heard testimony on the administration's bill. Those hearings were conducted in a heavily politicized atmosphere.
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From page 81... ...
The political climate would not allow this, and the industry shortly changed its position in testimony before the House Interstate and Foreign Commerce Committee and supported federal authority to set safety standards. The Senate then passed a bill calling for mandatory standards, and President Johnson signed it.
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From page 82... ...
Mandatory standards grew in political appeal, however, and President Ford abandoned his earlier agreements and signed the Energy Policy and Conservation Act of 1975 into law. An Adversarial Environment The motor vehicle regulatory environment that emerged in the 1970s is best characterized as a combination of congressional and agency rulemaking with administrative and judicial review.
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From page 83... ...
Competition and Regulation The form of regulation governing the automobile in the United States -- mandatory standards administered by an executive agency -- imposes a single set of standards on companies employing different competitive strategies and enjoying quite different capabilities. 4 Such regulation inevitably affects each fir m
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From page 84... ...
Chrysler had a different strategic exposure to catalytic converters. The technology was relatively unfamiliar; as an add-on device it did little to create an opportunity for Chrysler to improve its competitive position against other domestic producers; as one of the least vertically integrated domestic producers, Chrysler had little opportunity to capture any value-added in manufacture or assembly of the devices.
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From page 85... ...
Yet in a more general sense it is not clear that the pace and character of innovation is necessarily enhanced by mandated standards.~5 To see the potential barriers to change inherent in regulation, it is important to distinguish between the radical or epochal innovations characteristic of the early stages of production development and the incremental innovations that dominate as a product matures. These two patterns of development may be observed at the same time when radically new products are introduced that challenge existing technology.
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From page 86... ...
Though regulation may increase barriers to new firms seeking entry into the industry with innovative technology, it may also affect the involvement of established firms in the innovation process. Steadily tightening regulatory requirements forces companies to divert discretionary resources into programs to improve existing technologies, in effect entrenching the current technology within the industry.
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From page 87... ...
The stream of automotive regulations in the last decade has broadened substantially from the m inimum safety and pollution-control regulations of the early 1960s to the more extensive standards and rules of the late 1970s; Eugene Goodson has counted 237 regulatory changes pertaining to automobiles and light trucks from 1960 through 1975.~7 In this evolution of standards and rules, regulators have often favored performance regulations over design standards in order to preserve the manufacturers' freedom to innovate. They have also limited regulations to specific objectives and based them on the best available technology.
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From page 88... ...
high-performance markets has been of Importance in the process of innovation. In light of the role of thin markets in furthering radical innovation, regulation often creates a paradox: while encouraging more rapid progress through incremental innovation in established products, intense regulatory pressure can also inhibit epochal innovation by its effect on thin markets, by increasing barriers to development of new technologies, by entrenchment, and by enveloping existing technologies.
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From page 89... ...
8. The chronology used here follows that developed in unpublished work by Karen Tracy of the Baker Library, Harvard Business School.
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