...Impact of Importing Intermediate Automotive Parts The United States auto industry provides an estimate of 1.6 million jobs across the 50 states and it is the second-largest manufacturing employer. The domestic automakers strive in order to design their vehicles more and more appealing to the consumers. The U.S. auto makers are able to maintain their cost lower and provide quality product by outsourcing most of the vehicle intermediate parts such as tires, batteries, and wheels. The American people and economy are affected by the outcome of the U.S. auto industry when purchasing these intermediate parts from foreign manufacturers. Figure 1.0 – Reflect the amount of imported parts from foreign manufacturers. The United States automotive industry chooses to outsource most of their intermediate parts from foreign manufacturers when building their vehicles. The most important outcome of this practice is that domestic auto makers are able to maintain the final vehicle cost lower for the consumers. By outsourcing the intermediate parts the U.S. auto industry is able to eliminate the overhead cost of manufacturing these parts. If the auto industry where to manufacture their own intermediate parts they would have to increase the cost of their vehicles. Another important reason why manufacturers outsource the intermediate parts is to be able to provide quality parts to the consumer. The U.S. auto industry is able to focus their efforts towards the building of the vehicle...
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...Alex Bernauer Block 2/3 World Studies Since the automotive industry constitutes more than 40% of North American trade, NAFTA saves the automotive industry immense amounts of money. The North America Free Trade Agreement is a trilateral agreement that encourages free trade between Mexico, Canada, and United States. The NAFTA agreement has affected the automotive industry by increasing the amount of U.S. automotive imports. It has also increased the amount of U.S. automotive exports to NAFTA partners and it has caused outsourcing in the automotive industry. The North American Free Trade Agreement came into effect on January 1, 1994. The president of Mexico, Carlos Salinas de Gortari, the prime minister of Canada, Brian Mulroney, and the president of the U.S., George H. W. Bush, signed NAFTA in 1992, which then required the legislatures of the three countries to approve it before it went into effect. After the legislatures passed the NAFTA agreement, it became in effect on January 1, 1994. Under NAFTA, the partnering countries agreed to eliminate and reduce most barriers to trade freely between the countries. Most of the United States automotive trade is done with Mexico. This is because the United States and Canada were already highly integrated following the U.S.-Canada Free Trade Agreement and a U.S.-Canada Auto Pact in 1965. Before the NAFTA agreement, Mexico had strict automotive decrees on foreign automotive production in Mexico. After NAFTA was signed...
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...the U.S” (Scissors, Espinoza, & Miller, 2012). This happens by supplying jobs in all aspects of the business market from transportation, construction, retail and it keeps our ports running strong. Providing jobs throughout the United States is a great advantage of having imports coming to our country. On the negative side, the higher number of imports that we have shows a down side in our own manufacturing sector. The cost of materials and manufacturing overseas impacts what we can produce here. “Auto sales since the depths of the recession have increased more than twice as fast as employment in auto parts in part because of the rapid growth in auto parts imported from China—the fastest-growing source of U.S. auto-parts imports” (Scott, 2012). The auto industry has been on a rise since the United States government help them out and turned around there sales margin. With the number of parts that are being brought in from China is having a direct effect on the industry here. Again the reason is the low cost of materials and labor that china can offer compared to the Americas. International trade is a lucrative part of every...
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...THE AUTO INDUSTRY The automobile industry played a critical role in the current USA recession. In recent years, the auto industry has made a rapid growth, propelled by the governmental bailout and technological innovation stemming from international competition. Businesses The acquisitions in the auto production were part of a series of consolidation in the global automobile industry (BEA). The American car industry introduced many new vehicles that have attracted consumers as they pay attention to fuel efficiencies, and environmental soundness. There is a stronger than ever need for cars in the automobile industry as new and efficient models are being manufactured. This has driven a fierce competition between auto-makers with price a major factor. The industry sold over 15 million in 2013 which was 1 million higher than that of 2012. The forecast for 2014 is even higher as a result of many factors, one of them a renewed economy as well a constant high demand. The average age of vehicles on the road is 11 years and consumers want and need to upgrade to higher mileage, safer, higher-tech vehicles with the latest electronic gadgets and personal comforts. An example is General Motors who is abreast of the competition with many redesigned vehicles expected for 2014. Small cars, as well, will stay competitive as it serves as a point of entry into this business by younger people purchasing their first vehicle with maybe student loans and concerns about the cost of gasoline...
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...Vertical Specialization and the Changing Nature of World Trade David Hummels, Dana Rapoport, and Kei-Mu Yi T he world’s economies have become increasingly integrated and increasingly global. Among the most important and often cited features of the rise in globalization is the enormous growth in the export and import shares of GDP since World War II. In the United States, international trade— that is, exports plus imports—accounted for 23.9 percent of GDP in 1996, up from 9.2 percent in 1962.1 Worldwide, the merchandise export share of production has more than doubled over the last forty-five years, while the manufactured export share of production has almost quadrupled (Chart 1). Most countries—emerging nations as well as highly developed economies—have experienced increases in their export share of GDP (Chart 2). Clearly, a greater number of countries are trading more today than in the past. David Hummels is an assistant professor of economics at the University of Chicago’s Graduate School of Business; Dana Rapoport is an assistant economist and Kei-Mu Yi an economist at the Federal Reserve Bank of New York. Another significant feature of increased globalization is the internationalization of production. Rather than concentrate production in a single country, the modern multinational firm uses production plants—operated either as subsidiaries or through arm’s-length relationships—in several countries. By doing so, firms can exploit powerful locational advantages...
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...What is outsourcing? We have all heard the term thrown around but what does it really mean? Outsourcing is defined as contracting, sub-contracting, or 'externalizing' non-core activities to free up cash, personnel, time, and facilities for activities where the firm holds competitive advantage(BD,09).Outsourcing happens when company’s choose to purchases their needed products and or services from an outside supplier ( mainly other countries), rather than doing the same work within their own facilities. Why companies outsource. The main reason companies outsource is because it saves them money. Many different types of jobs are outsourced, IT, telecommunications, auto manufacturers, physicians and so on. Outsourcing by General Motors to avoid high wages paid to auto workers was a major issue with the United Auto Workers union in the 1990’s. Companies view outsourcing as a way to drastically cut their cost when it comes to paying for supplies, facility’s and employees. Company’s also save money because they do not have to pay for healthcare or worry about keeping up with OSHA regulated standards. Here are the top five reasons companies outsource: 1. Reducing Costs - This is the number one reason why companies outsource. In most situations you can find cheaper labor through outsourcing and if the quality level is the same there is no reason why you should not outsource. 2. Improved Business Focus - By directing a part of the work towards outsourcing you gain flexibility...
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...Cause and Effect of Out Sourcing Auto Parts Jim Banta Strayer University English 115 Professor Daniel Burrello November 25, 2012 An increase in foreign auto parts supplier has cause grave concerns amongst some American suppliers the protectionists have set their sights on eliminating these new competitors: The foreign manufacturers, especially Japanese auto parts makers that have built plants and limited distribution in the United States and according to some are having an adverse effect on the U.S. economy. A small but politically vocal coalition of American auto parts manufacturers and their unions is complaining that the Japanese auto parts suppliers located in the United States do not supply the quality of parts for their cars. By purchasing auto parts from Japanese suppliers located in Japan and in the United States, automakers are accused of nothing less than a conspiracy to "colonize" American industry. The increased competition provided by Japanese auto parts manufacturers provides significant benefits to the auto industry and workers and to consumers. Consequently, any legislative action that restricted such competition would have harmful effects on the economy. As with all protectionist legislation, such actions would provide short-lived benefits to a small segment of the auto parts industry but would be harmful to the industry in the long run by reducing its incentives to produce better products. An estimated 15,000 parts and accessories...
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...3.5 STRUCTURE OF INDIAN AUTO COMPONENT INDUSTRY Most of the auto component manufacturers are distributed in the north, south, and, western parts of India around major Automotive Vehicle Manufacturers (AVMs). The AVMs contribute largely towards the development of component suppliers through technical and or financial collaborations. These are however, concentrated in some pockets such as Chennai and Bangalore in the south, Pune in the west, the National Capital Region (NCR, which includes New Delhi and its suburban districts) in the north, Jamshedpur and Kolkata in the east and Pithampur in the central region. Following global trends, the Indian automotive sector also has most auto suppliers located close to the manufacturing locations of OEMs, forming regional automotive clusters. Broadly, the three main clusters are centred around Chennai, Pune and the NCR. The Indian automotive component industry is highly fragmented. There are nearly 6,400 players in the sector, of which only about 6 per cent are organised and the remaining 94 per cent are small-scale, unorganized players. In terms of value added, however, the organised players account for nearly 77 percent of the output in the sector. The auto ancillary industry caters to three broad categories of the market: 1) Original equipment manufacturers (OEM) or vehicle manufacturers, that comprises of 25% total demand 2) Replacement market, that comprises 65% of the total demand 3) Export Market, that comprises primarily...
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...hampering Canadian competitiveness. Firstly majority of the companies in Canada are foreign owned or foreign controlled. From manufacturing sector including auto, chemical, and electronics to giant retail stores such as Wal-mart, Costco, Sears, Hudson Bay, etc are all foreign owned. In automobile sector GM, Ford, Chrysler, Toyota, Honda, etc dominates the auto industry in Canada. The automotive industry employs 158,302 people in automotive assembly and component manufacturing, and another 336,212 in distribution and aftermarket sales and service[1]. These foreign operated companies are extremely aggressive in nature, tough for domestic companies to compete and have monopoly over Canadian market. In addition they are usually productive than domestically controlled companies. Equally important it seems that foreign industry has assisted Canadian economy to become stronger and employ Canadian, however Government studies revealed that foreign enterprises had generally employed Canadian capital to expand their resource and manufacturing concerns rather than bringing new capital into the country to fund growth[2].Therefore foreign control in Canada directly affects the economy and has prevented the capacity of domestic industry to be innovative and competitive. Secondly Canadian corporations or firms are outsourcing all or parts of their company to foreign countries where wages are...
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...George Brown College School of Business Bailout or Bust? Case Study Noelle Nurse Tran Monica Molina BUS 1038 Professor Joyce Manu April 5, 2013 A perfect combination of unfavourable factors contributed to a major automobile manufacturing industry crisis in North America in 2009. The auto manufacturing industry had taken such a dramatic turn from being large and successful to becoming an industry full of debt and bad reputation; especially for three big and important companies: General Motors, Ford Motor and Chrysler. The “big three”, as they call it, had faced a major turndown leaving thousands and thousands of employees without jobs as a result of a series of bad long term “strategic “decisions. To aid these large industries, the government offered to help, by bailing them out with billions of dollars. This was a very risky decision from the government because of the size of the bailout; hence they needed to keep an open eye on these companies to make sure that this large amount of money was being used wisely. One of the ways the government was taking cautions was by examining the actions being taken by Japanese companies (Toyota Motor, Honda Motor and Nissan Motor) facing the same situation without requiring any government bailout. Their response had been the implementation of a more intelligent strategy, for example, Honda Motor reacted by closing down its plants for 13 days to reduce the production of even more cars they were aware they could not sell....
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...A STUDY ON SUPPLY CHAIN MANAGEMENT IN AUTOMOBILE INDUSTRY DR. Anu Maheshwari DR. Sanjay Shankar Mishra Guest Lecturer, Prof. & Hod of Commerce Dept. Govt. T.R.S.College, Rewa (MP) Govt. T.R.S.College, Rewa (MP) The changing business conditions of the 21st century has led to companies facing issues ranging from globalization, economic uncertainty to new technologies and increasing consumer demands. In the automobile industry, as manufacturers design and build vehicles globally, their supply chains become increasingly complex with challenges that often stand in the way of profitability and higher shareholder value such as long order-to-delivery lead times, unreliable production schedules, excess inventory across the supply chain, lengthy demand planning cycles and lack of visibility of suppliers. The effect of the global economic meltdown increased the pressure on automotive executives to make right decisions about their supply chain for better performance. In a highly challenging and competitive environment such as today, where supply chain is a popular tool for improving the organizational competitiveness. OVERVIEW OF SUPPLY CHAIN MANAGEMENT IN AUTO-INDUSTRY [pic] The Auto Ancillary Industry can be Further Divided into Six Main Segments: ❖ Engine Parts - Engine assembly, fall into 3 broad categories: core engine parts; fuel delivery system; and others. ❖ Electrical Parts - The main products in this category include starter motors, generators...
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...Supply Chain management In Automotive Industry Auto SCM India 2006, Chennai 1 Supply Chain Management Automobile Industry in the major reasons for surge in demand for automobiles in India. Domestic sales have grown at CAGR of 14.27% from 2001-02 to 2005-06. The commercial vehicle segment, in particular, has increased at CAGR of 24.35% during the above-mentioned period; whereas total sales of passenger cars in domestic market have increased at CAGR of 14.02%. In terms of production, commercial vehicles have registered a CAGR of 24.55% from 2001-02 to 2005-06; while passenger vehicles have registered a CAGR of 18.24%. There is a declining trend in mopeds production as well as in sales in the domestic market. During 2001-02, mopeds production and sales have declined at CAGR 2.93% and 5% respectively. Exports on a roll The significant development in Indian automobile sector is the outstanding growth of its exports. From 2001-02 to 2005-06, total exports of automobile sector has gone up at CAGR of 44.56%. Exports of motorcycle segment have registered highest annual growth rate of 61.42% during this period. This has clearly indicated that Indian automobile sector is going global. Chart- 2: Export Trend in Indian Automobiles (‘000 units) 900 800 700 806.49 600 Overview of Indian automobile and auto components industry Indian automobile industry is riding high with overwhelming economic growth rate of 8.4% in 2005-06. The industry has been growing at CAGR of 16.33%...
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...Company Background Clutch Auto, established in 1971, is India's largest clutch manufacturer and exporter with over threedecades of undisputed leadership. Its production facility is located at Faridabad. The company enjoys over60% market share in tractors and commercial vehicles (CVs). Its clientele includes Tata Motors, AshokLeyland, Maruti Udyog, Mahindra & Mahindra, Bajaj Auto, TAFE, Toyota, BEML, Escorts and State-runtransport undertakings. In CVs, it is a major supplier to Tata Motors with a 60% market share. It hasdominant market share of 80% in tractors and supplies to all manufacturers in India. CAL is growing both organically and inorganically. In FY05, it expanded clutch plate capacity by 122% to2 millions pieces and trebled clutch cover capacity to 1.5 millions pieces at capital expenditure (capex) ofover Rs 5 crore. It acquired the clutch division of Pioneer Inc, US, in March 2006, which was renamedPioneer Clutch Inc. Thrust on exports CAL is targeting the US heavy-duty clutch market (estimated at $550 million) with its patented products.The acquisition of the clutch division of Pioneer Inc will strengthen its foothold in the US. Pioneer is aquasi manufacturing and distribution company in the US with a warehouse facility of over 55,000 squarefeet, access to 7 warehouses, 20 marketing networks, sales force of over 100 people, and most importantlya client base of 500 companies in the replacement market. Pioneer's established distribution would helpCAL acquire...
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...Government Policies The automotive industry is a diverse and ever evolving market. With equally as diverse consumers, products and regulations. However firms often have to overcome new competition in the form of new companies entering the market as well as mergers through the course of a company’s history. Often forming large new competitors from smaller firms. As well as government regulations at the local and international level, from environmental issues to safety standards. Meeting these standards comes at the expense of the firm, though it is an expense that can be passed off to the consumer. All while doing this they must maintain state of the art production plants to keep up with demand and run at highly efficient levels. These plants are consistently the standard to which other manufacturing fields look for as examples of how to operate at a highly efficient manner. The auto industry has to deal with specific situations some other industries do not have to deal with at least not as consistently as the auto industry does. For example mergers, mergers have long been a part of the automobile industry. It can be at times confusing because one parent company has several brands that some may confuse with being merged but this is not the case. Mergers have happened in the past to brands that perhaps are on a downward spiral of sales such as the Hummer brand when General Motors picked it up. These types of horizontal merger help the industry at times by reviving what would be...
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...Outsourcing Teresa McGlown BUS 630 Wendy Achilles 08/27/2012 Table of Contents Introduction 1 Forms of business aspects covered by outsourcing 1 Outsourcing with reference to Hechlinger, J. Article 2 Other articles highlighting the application of new learning with respect to outsourcing 3 Dean Meyer’s Article highlighting the advantages of outsourcing 3 Sholstica’s Article highlighting the disadvantages of outsourcing 6 Present and future application of outsourcing within workplace 6 Conclusion 7 References 8 Outsourcing Introduction In the present dynamic environment, one way the companies can gain competitive edge over their competitors is by taking full advantage of all the business aspects. One of such possible aspect of performing organizational activities in an efficient manner is through the platform of outsourcing that provides a company an opportunity to hire an outside firm having proficiency in a particular field and then getting some of the organizational tasks completed through this hired firm either at a reduced cost or an increased productivity rate. A number of factors (both related to internal and external environment) are considered that helps to decide that whether outsourcing is a right answer for a particular company. The process of outsourcing facilitates learning of a number of aspects that if properly applied within an organization can serve as a competitive element for the company, enabling them to remain a competitive force within...
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