Detroit's lessons for American competitiveness

THE American automobile industry is operating in high gear these days -- sparked by increased sales, first-rate products, and a multibillion investment program in new plants and new car products. The revival -- the reignition, really -- of the United States car industry offers important lessons for other key segments of American industry. The lessons may be particularly relevant to US high-technology firms, which now, after years of worldwide dominance, find themselves facing sharpened competition from abroad, particularly Japan, in much the same way Detroit found itself challenged by overseas competitors in the 1970s.

Detroit's lessons seem evident:

Competition from abroad has been beneficial to US auto firms and US consumers. It has forced US firms to rethink their products; to streamline management techniques and outmoded assembly line operations; to be innovative. Example: General Motors announced this week that it will form a new subsidiary, the Saturn Corporation, to produce and market a new line of small cars.

Carmakers have discovered -- as Japanese firms clearly perceived in the 1970s -- that the car industry of the future will be a worldwide industry. A firm that builds products just to satisfy domestic market considerations will not survive. Japanese firms, for example, now employ some 6,400 workers in factories located in the United States and envision direct employment of 15,000 Americans by the late 1980s.

The car-buying public will seek out the best product at the best price. In that regard, it should come as no surprise that Japanese firms now hold close to one-quarter of US sales. There is every indication that if current import quotas restricting Japanese cars to 1.2 million units annually are lifted at the end of next March -- as they should be lifted -- Japanese products will likely take an even larger market share. However, the stepped-up competition from overseas firms could help hold the line on prices offered to consumers.

Currently, US firms are raising prices, despite heavier sales than in recent months and despite promises made to consumers some months ago that Detroit would hold the line on car costs and help pass earnings gains along to consumers in the form of reduced sticker prices.

Is US industry in general studying the changed prospects in the US auto industry? One would hope so. The Jan. 14 issue of Business Week magazine, for example, notes that the American high-technology industry -- perhaps the nation's premier industry in terms of national pride -- is facing many of the challenges associated with competition from abroad, particularly Japan: increasing loss of domestic market shares; higher capital outlays by overseas firms than by US firms; US companies being priced out of export markets, in part because of the high value of the dollar vis-`a-vis other currencies.

The solutions to such challenges as now faced by high-technology firms will not be easy. But at the least, there will be a need for the federal government not to make matters worse by intervening and introducing new regulations and new strictures that inhibit firms from competing abroad. At the same time, greater cooperation among industry, labor, and government now are needed. Such cooperation might include greater sharing of technical information and more joint ventures between US firms. That will mean a rethinking of antitrust laws.

Detroit has proven that American industry in general is far from a ``declining'' industry. High-tech firms should take note. At the same time, Detroit might well recall its promises to American consumers to hold the line on car prices. If Detroit inadvertently forgets, it seems almost certain that American consumers will not forget -- nor will Japanese firms, eager to step up their domestic market shares. ------30{et