Automotive Industry: The Competitive Challenge to U.S. Companies

GAO discussed issues related to the competitiveness of the U.S. economy and the U.S. automobile industry. GAO noted that, in order to maintain and enhance U.S. competitiveness in the international market, the: (1) United States should establish a macroeconomic policy that lowers the cost of capital; (2) United States needs to improve education, make the health care system more cost-effective, and improve its transportation and communications infrastructure; and (3) private sector should strive to be the best-in-class producer in the world and improve management systems. GAO also noted that: (1) the Japanese automobile manufacturers have expanded their share of the U.S. automobile market from 8 percent to almost 33 percent of all cars sold; (2) the primary source of the production efficiency and product quality of successful Japanese automobile companies operating in the U.S. appears to be Japanese management systems; (3) the commitment to total quality control, under which products are designed to meet customer expectations and are produced with a goal of zero defects, is fundamental to Japanese companies' success; and (4) U.S. automobile companies are responding to Japanese success by changing their management systems, how they define workers' roles, and how they implement their quality standards. GAO believes the federal government needs to encourage automobile industry firms to make the needed management changes to be world-class competitors, rather than merely protecting them from competition and necessary change.