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The American Automotive Industry Supply Chain – In the Throes of a ...

Source: www.ita.doc.gov
Topic: Automotive Industry

Sort Desciption: Until the rude awakening of the 1973 oil embargo, the U.S. auto industry ..... are failing to improve their position in the auto industry’s value chain, ...

Content Inside: The American Automotive Industry Supply Chain – In the Throes of a Rattling Revolution Until the rude awakening of the 1973 oil embargo, the U.S. auto industry – vehicles and parts together – was a domestically focused business producing strictly for the home market with little in the way of foreign competition with which to contend. Ford and GM had extensive operations around the world, Chrysler had some small operations in Europe, American Motors had none. Their foreign holdings were run mostly at arms length, producing vehicles having little or nothing in common with those assembled in the United States. The industry imported very little, just $5.7 billion for all vehicles, engines and parts in 1970. It exported even less, a total of $3.9 billion. The Auto Industry’s Traditional Supply Chain Into the 1970s the vehicle manufacturers (Original Equipment Manufacturers or OEM’s) relied heavily upon their captive, in-house parts manufacturing operations for as much as 70% of their requirements, but were beginning to buy increasing quantities of products from outside suppliers. Even so, virtually all engineering and product design work, and all vehicle assembly was undertaken by the OEMs. OEM engineers designed most of the bought-in components, developing all product parameters in the process. The OEMs would provide detailed blueprints to potential suppliers and invite them to bid against each other for a contract, employing an auction market model in which the two lowest price bidders usually won a “build to print” contract for an agreed fixed price, for an agreed quantity, supplied over a finite time period of generally not more than one year. OEMs frequently would pay for and retain legal ownership of any unique molds, tool sets, or stamping dies used to manufacture the products they engineered. Suppliers were expected to do little more than to determine how to actually manufacture the item for the lowest cost and a reasonable profit. ...

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