Made in America? The U.S. Auto Industry, 1955-95

I came across this scholarly paper when looking for data on the declining market share of domestic automakers. Lorraine Eden and Maureen Appel Molot present that data in a variety of useful ways. However, what is even more interesting about this article is that it offers a theory-driven analysis of the rise of foreign automakers in the U.S.

Made in America? helps fill in the business-side aspects of Brock Yates’ classic critique, The Decline and Fall of the American Automobile Industry (1983). For example, one of the questions that the authors ask is why it took the Big Three so long to respond to the rise of the Japanese automakers. Two reasons are offered:

• The Big Three “misunderstood the nature of the challenge” so relied upon cost reductions through downsizing, outsourcing and plant closures (p. 535).
• Detroit automakers were slow to switch to lean manufacturing techniques. It wasn’t until Japanese automakers started building plants in the U.S. that the Big Three went beyond making excuses.

Unlike some other scholars who have written about the auto industry (e.g., here and here), Eden and Molot don’t make basic factual mistakes (at least any that I found). That said, when discussing more recent industry dynamics, the authors paint a picture of Detroit’s prospects that, in hindsight, looks overly rosy.

“Made in America? The U.S. Auto Industry, 1955-95”

• Lorraine Eden and Maureen Appel Molot
• The International Executive; Vol. 38(4), July/Aug., 1996; pp. 501-541 (now called Thunderbird International Business Review)
• Accessed from voxprof.com Sept. 27, 2014

“We hypothesize that incumbents, faced with a new entrant, are slow to realize the challenge of technological competition and to respond to it. They may not perceive the entrant’s product for the long-run threat that it really is. Even when they perceive the threat, they will resist adopting new technologies due to inertia, lack of information, and the costs of switching.” (p. 507)

“In practice, each insider firm is different in terms of its mix of resources, history and institutional structure, and therefore will have a somewhat different response to the threat from the outsider. For example, larger, better positioned firms may be more willing to ignore the threat, viewing the outsider as having little potential impact on their market share. Smaller, nimbler, or more farsighted firms may be more likely to respond, either due to necessity (smaller, weaker firms) or greater flexibility (nimbler, farsighted firms).” (p. 510)

“Between 1945 and 1960, the US-owned auto companies opened 25 plants and closed none. Between 1960 and 1978, four more were opened and four closed. Between 1979 and 1991, eight were opened and 20 were closed.” (p. 518)

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RE:SOURCES

• Critchlow, Donald T.; 1996. Studebaker: The Life and Death of an American Corporation. Indiana University Press, Indianapolis, IN.
• Glasberg, Davita Silfen; 1989. The Power of Collective Purse Strings: The Effects of Bank Hegemony on Corporations and the State. University of California Press, Berkeley, CA.
• Yates, Brock; 1983. The Decline and Fall of the American Automobile Industry. Empire Books, New York, NY.