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GloboCars: THE NEXT CENTURY : Auto Makers Drive for New World Markets


The automobile is a century old and showing no signs of putting on the brakes.

More than 600 million vehicles roam the roads--from Germany's high-speed autobahns and America's interstates to the gridlocked streets of Thailand and unpaved byways of interior Brazil.

Last year about 50 million cars, trucks and other vehicles--an average of 135,000 each day--were driven off the world's production lines. Two-thirds came from U.S., European and Japanese factories, but an increasing number were built in Southeast Asia and Latin America.

With their home markets overrun with cars, major auto makers are driving relentlessly into new markets. Aided by globe-shrinking technologies and communications, the push for profits is creating far-flung operations where both risks and potential payoffs are great.

For the Record
Los Angeles Times Tuesday March 8, 1994 Home Edition World Report Page 3 Column 3 World Report Desk 1 inches; 25 words Type of Material: Correction
Photo credits--The cover illustration in last week's "GloboCars" special edition was composed of photographs by Butch Martin and Steve Dunwell, both from the Image Bank agency.

"Companies that don't think globally will be left behind," said John F. Smith, president and chief executive of General Motors. "And so will the countries whose policies impede rather than encourage companies to do so."

The automobile, almost since its infancy in the 1890s, has been the engineering wonder and then the economic engine of the developed world. No other industry turns out a consumer product that requires such a vast array of materials, processes and technologies or such large amounts of capital, labor and allied businesses.

Not surprisingly, the allure is intoxicating for emerging nations with growing middle classes. For them, the auto industry is a jobs machine capable of propelling their people to prosperity and worldly status.

The sheer size of some untapped markets has car makers salivating. China has 20% of the world's population but less than 1% of its vehicles. Sales are expected to triple by 2000 to 3 million annually.

Like desserts, anything this good must be bad, and the auto industry's projected growth has a dark side--congestion and pollution. Traffic is so bad in Bangkok that the 15-mile trip into town from Don Muang Airport can take three hours. The skylines of Los Angeles, Mexico City and Jakarta are darkened by smog largely caused by vehicle exhaust.

"There is increasing social demand on the auto industry to civilize its products," said Jim Olsen, vice president of Toyota's U.S. subsidiary.

These and other pressures are helping redraw the map for the industry as it enters the 21st Century. Here are some of the road signs guiding it into the future:

* The United States, Europe and Japan are mature markets with sales growth rates averaging just 1% to 2% yearly. With worldwide overcapacity, a company can expand only by taking market share from a rival or moving into new markets.

* Globalization means more consolidation and strategic alliances as car makers seek to share costs and spread risk. Efforts are mounting to build "world cars," models that can be sold in multiple markets with only minor changes.

* Southeast Asia is the world's hottest market. But the most coveted prizes are China and India. Latin America also has great potential. Economic and political concerns make Russia and Eastern Europe unattractive now.

* Trade barriers are coming down in emerging nations. Trade frictions will continue to flare up, especially involving big exporters like Japan. To ease tensions, firms are moving production into the countries where their vehicles are sold.

* Environmental and technological pressures are mounting on auto makers worldwide, including those of absolutists who say: Just stop making the things. That's not going to happen, and even reducing emissions, alleviating traffic congestion and improving safety will result in higher car prices.

The automobile has been called "the machine that changed the world." Clearly it has. Many regard it with emotion, awed by the freedom, speed and opportunity it has brought their lives.

Still, its reach is limited. Today only one in 12 of the world's people owns a car. As that figure increases, the auto will certainly bring more change--for companies, consumers and countries.

Troubled Global Landscape

The auto changed Japan. Its auto industry was a juggernaut that made Toyota, Nissan, Honda, Mazda and Mitsubishi household names. For nearly 40 years, it was the classic growth industry, some years increasing 10% or more.

No more. Japan's domestic auto industry has been in decline for three years, a reflection of the economic slump that has overtaken the country. "The Japanese automotive economy is changing from a growth to a cyclical industry," said automotive consultant William Pochiluk.

The shift caught some auto makers unprepared. Nissan lost nearly $1 billion in 1993 and continues to bleed red ink. It became the first Japanese company ever to close a car factory when it shuttered the Zama plant last year.

Japanese sales also fell in the United States as the yen rose in value against the dollar, making their products pricier than U.S. models. They fared worse in Europe, where a severe recession drove industrywide sales down 16%.

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