22nd April, 2009 From Fredrick Dumas Ankit Gandhi Tony Godfrey Introduction

The Auto industry was seen as a beneficiary for American growth and economic achievements in the post World War II era. The U.S. automotive industry includes about 160 companies with annual revenue of about $250 billion. The industry is highly concentrated with the eight largest companies accounting for more than 90% of revenue. More than half the automobiles used in United Sates were manufactured by American companies. But these statistics changed pretty soon. General Motor‘s share, 36% in 1990, now stands at 20.9%. Fords 1990 share, 24%, is now 14.2%. The loss of market share was responsible for the plants to operate way below their optimal utilization level. The current US automobile industry is unsustainable and the automobiles manufacturers would have to restructure their operations model in order to sustain in this industry.

This report will give you detail insight on background and current trends in the global automobile industry. --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Industry background and Current Trends

In 1996 the global automotive industry had three major companies holding the majority of the market share; these companies include GM, Ford and Volkswagen. GM was the largest automobile manufacturer with global sales of over 8.3 million units, followed by Fords 6.6 million units. The US automobile industry on the other hand is dominated by the Big Three comprising of GM, Ford and Chrysler. About 30% of the US Automobile industry in 1996 was held by GM, followed by ford with 25% and Chrysler with 16%. Since 1996 the automobile industry has seen a dramatic change in terms of competition and market share. With the increase in competitions from the Japanese automobile giants such as Toyota and Honda, the American automobile manufacturers lost a tremendous market share. Increased competition resulted in the automobile manufacturers to constantly improve their operations in order to stay profitable.

The current economic turmoil is also a major reason for the recent trend seen in the automobile sales. With most of the banks running out of money to loan, it is getting harder and harder for the consumers to borrow money for big ticket items such as cars. The current unemployment rate of 8.1% has led many people give up their idea on buying new cars; on the contrary it is difficult for them to maintain their current vehicles. It is necessary for the Automobile manufacturers to conduct a detail forecasting for the coming years in order to sustain their market position and maintain profitability.

Role of Information Technology

Information technology has always played a transformational role for many industries. IT plays a critical role in most of the initiatives that automakers and suppliers have underway. Information technology has resulted in easy flow of information to every automobile manufacturer which resulted in increase global competition. The global competition is also responsible for improved quality of cars so that the companies could sustain its market share and maintain profitability. Embedding of Information technology into the automobile industry has also improved the capabilities in terms of enhanced product platforms, production and distribution systems and service monitoring. Let us describe eac of these three capabilities with a specific example.