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1Why has the world auto industry become more global qWith the oil prices rising in 1973 and worldwide recession car manufacturers all over the world rushed to downsize their models and make them more fuel efficient q the 1980s promised the introduction of a host of new technologies into passenger cars- ie newly designed engines sophisticated electronic controls increased use of new materials like plastics and ceramics more extensive safety features qProduction of automobiles was undergoing a revolution with the advent of robotics and the use of computers to assist design and manufacturing These changes increased the capital expenditure associated with automobile manufacturing qA plant for the stamping of major body parts attained efficient sales at an annual scale of over 2 million units and cost over 500 million in 1980 qTo design and produce a new model in the 1980s took about five years and involved an investment of between 3 - 5 million qGATT resulted in lower trade barriers for automobiles qCheap labor in outside countries and cheap costs of outsourcing qNot possible to do all the investments by a single company as technology was also changing rapidly did not know if the future was for small cars or large cars segment qDespite freight charges of 500 -700 to the US the landed cost of a typical Japanese small car was estimated to be 1500-2000 less than a comparable US built vehicle in 1982 2Why is GM interested in NUMMI qGMs strategy was to offer a car for every purse and purpose GM launched a massive program to downsize its models in the mid 1970s It envisaged the change to be gradual but due to the second oil crisis demand for large cars in the US evaporated before GM could make progress qGM lost over of billion dollars in 1980 its first loss since 1921 qGM began to modernize its plant and equipment and reduce labor costs and modify its
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