Section A. Gather and organize the supporting information

In Britain there had been several attempts to build steam cars with varying degrees of success with Thomas Rickett even attempting a production run in 1860. Santler from Malvern is recognized by the Veteran Car Club of Great Britain as having made the first petrol–powered car in the country in 1894 followed by Frederick William Lanchester in 1895 but these were both one–offs. The first production vehicles in Great Britain came from the Daimler Motor Company, a company founded by Harry J. Lawson in 1896 after purchasing the right to use the

Сname of the engines. Lawson's company made its first automobiles in 1897 and they bore the name Daimler.

In 1892, German engineer Rudolf Diesel was granted a patent for a «New Rational Combustion Engine». In 1897 he built the first Diesel Engine. Steam–,

и more thanбvery limited success.

electric–, and gasoline–powered vehicles competed for decades, with gasoline internal combustion engines achieving dominance in the 1910s. Although various pistonless rotary engine designs have attempted to compete with the conventional piston and crankshaft design, only Mazda's version of the Wankel engine has had

Speaking

1. Describe the scope of information for the report «Automobile production».

2. What are the possible sources of the primary and secondary research data?

3. What are the possible aims of this report?

4. What is the possible target?

5. What would be more important in this report: supporting factual data, analytical findings, solutions or recommendation? Or it depends on something? Describe the prescription of it (it’s dependence on aims, theme, audience). И

6. Look through the text and compare your answers with given presentation in the text.

AUTOMOBILE PRODUCTION

The large–scale, production–line manufacturing of affordable automobiles was debuted by Ransom Olds at his Oldsmobile factory in 1902. This concept was greatly expanded by Henry Ford, beginning in 1914. As a result, Ford's cars came off the line in fifteen minute intervals, much faster than previous methods, increasing productivity eight fold (requiring 12.5 man–hours before, 1 hour 33 minutes after), while using less manpower. It was so successful; paint became a bottleneck. Only Japan black would dry fast enough, forcing the company to drop the variety of colors available before 1914, until fast–drying Duco lacquer was developed in 1926. This is the source of Ford's apocryphal remark, «any color as

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long as it's black». In 1914, an assembly line worker could buy a Model T with four months' pay.

СиPortrait of Henry Ford (1919)

Ford'sбcomplex safety procedures especially assigning each worker to a specific location instead of allowing them to roam about dramatically reduced the rate of injury. The combination of high wages and high efficiency is called «Fordism» and was copied by most major industries. The efficiency gains from the

assembly line also coincidedАwith the economic rise of the United States. The

assembly line forced workers to work at a certain pace with very repetitive motions which led to more output per worker while other countries were using less productive methods.

In the automotive industry, its success was dominating, and quickly spread worldwide seeing the founding ofДFord France and Ford Britain in 1911, Ford

Denmark 1923, Ford Germany 1925; in 1921, Citroen was the first native European manufacturer to adopt the production method. Soon, companies had to have assembly lines, or risk going broke; by 1930, 250 companies which did not, had disappeared.

Development of automotive technology was rapid, due in part to the hundreds of small manufacturers competing toИgain the world's attention. Key

developments included electric ignition and the electric self–starter (both by Charles Kettering, for the Cadillac Motor Company in 1910 – 1911), independent suspension, and four–wheel brakes.

Ford Model T, 1927, regarded as the first affordable American automobile

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costs and changes in consumer buying habits. The industry is also facing increasing external competition from the public transport sector, as consumers re– evaluate their private vehicle usage. Roughly half of the US's fifty–one light vehicle plants are projected to permanently close in the coming years with the loss of another 200,000 jobs in the sector, on top of the 560,000 jobs lost this decade. As a result, in 2009, China became the largest automobile market in the world.

AUTOMOTIVE INDUSTRY CRISIS OF 2008–2009

The automotive industry crisis of 2008–2009 is a global financial crisis in

the auto industry that began during the second half of 2008. The crisis was primarily felt in the United States'Дautomobile manufacturing industry and by

extension, Canada, due to the Automotive Products Trade Agreement; however, other automobile manufacturers, particularly those in Europe and Japan, are also suffering from the crisis.

The automotive sector was initially weakened by a substantial increase in the prices of automotive fuels linked to the 2003–2008Иenergy crisis. This led consumers to shy away from vehicles with poor fuel economy, such as large sport utility vehicles (SUVs) and pickup trucks. The popularity and high profit margins associated with these vehicles had led them to become the primary focus of the American «Big Three» automakers, General Motors, Ford, and Chrysler. With few fuel–efficient models to offer to consumers, sales began to slide; the Big Three also suffered considerably from the higher wages they were forced to pay their unionized workers, including greater salaries, benefits, healthcare, and pensions. In return for labor peace, the automakers had granted concessions to their unions that resulted in uncompetitive cost structures and significant legacy costs, when compared to foreign automakers running non–unionized manufacturing operations on U.S. soil.

In 2008, the situation turned critical, as the global financial crisis and the related credit crunch placed pressure on the prices of raw materials. The Big Three faced criticism for their lineups, which were seen to be irresponsible in light of

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rising fuel prices. Consumers felt that they could purchase higher–quality, smaller, more fuel–efficient vehicles from foreign automakers, rather than the more poorly– built, largely truck–based vehicles offered by Ford, GM, and Chrysler. The American companies had neglected development of passenger cars and instead focused on light trucks due to better profit margins, in order to offset their higher labor costs, falling considerably behind in these market segments to Japanese and European automakers. Many of the vehicles perceived to be foreign were actually

С« transplants», foreign cars manufactured or assembled in the United States, at lower cost than true imports.

As of 2009, vehicle companies worldwide have been hit hard by the global economic slowdown. Car companies from Asia, Europe, North America, and

и Hyundai hasбimplemented a strategy where customers who have lost their jobs may

elsewhere have been forced to implement creative marketing strategies to entice reluctant consumers to purchase vehicles, with many firms experiencing double– digit percentage sales declines. Major manufacturers, including the Big Three and Toyota, are offering substantial discounts across their lineups. Korean automaker

return a new–car purchase for a refund.

Most experts agree that the crisis occurred largely as a result of the poor business practices of the United States' Big Three automakers, in light of the fact

that Asian companies manufacturing automobiles in the U.S. have faced lesser

operating loss since Аthe post–World War II era, giving credibility to arguments made by the Detroit automakers that the auto industry suffered due to the larger

consequences. A December 22, 2008 New York Times article stated, « For the

most part, the so–called auto transplants – foreign–owned car companies with

major operations in the United States – have deep pockets and ample credit, and

they are not facing potential bankruptcy like General Motors and Chrysler».

However, in December 2008, Toyota Motor Corp. stated that it would post its first

global financial crisis, and not mismanagement on their part. While Michigan lost 83,000 Big Three auto manufacturing jobs between 1993 and 2008, more than

91,000 new auto manufacturing jobs were created in Alabama, Tennessee,

their overhead, due in part to the large number ofИpensioned retirees and the nature of the U.S. tax structure. In return for labor peace, the automakers had granted concessions to their unions that resulted in uncompetitive cost structures and significant legacy costs, when compared to foreign automakers running non– unionized manufacturing operations on U.S. soil. A « Jobs Bank» was negotiated with the UAW union in 1984, and in 2005 it paid 12,000 workers to show up daily and stay for their full shift, even though there was no work for them to do.

Japan. The Toyota Prius is one of Toyota's Hybrid Fuel efficient vehicles which are in short supply. With high gas prices and a weak US economy in the summer of 2008, Toyota reported a double–digit decline in sales for the month of June, similar to figures reported by the Detroit Big Three. For Toyota, these were attributed mainly to slow sales of its Tundra pickup, as well as shortages of its

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fuel–efficient vehicles such as the Prius, Corolla and Yaris. In response, the company has announced plans to idle its truck plants, while shifting production at other facilities to manufacture in–demand vehicles. On December 22, 2008, Toyota declared that it expected the first time loss in 70 years in its core vehicle–making business. Loss of $1.7 billion, in its group operating revenue, would be its first operating loss since 1938 (Company was founded in 1937). Toyota saw its sales drop 33.9 percent and Honda Motor by 31.6 percent.

СOn 5 December 2008 Honda Motor Company announced that it would be exiting Formula One race with immediate effect due to the 2008 economic crisis and are looking to sell the team. Honda has predicted that there may be reductions among part–time and contract staff. Upper management bonuses would also be иreassessed and directors in the company will take a 10 percent pay cut effective January 2009.

Nissan, another leading Japanese car manufacturer, announced that it also would be slashing production and will reduce its output by 80,000 vehicles in the first few monthsбof 2009.

In December 2008, Suzuki Motor Corporation, Japan's second biggest car manufacturer, announced that it will cut production in Japan by about 30,000 units due to falling demand. The company is expected to face its first profit drop in eight years for financial year ending in March 2009.

Reported in BloombergАon Dec 23, 2008, that Mitsubishi Motors is to widen production cuts on falling demand. The Japanese maker of Outlander sport–utility vehicles, will scrap the night shifts at two domestic factories as the deepening global recession saps auto demand. The carmaker will halt the night shift at its Mizushima plant, excluding the minicar line. Nighttime work at the Okazaki factory will stop from Feb. 2. TheДcuts are part of Mitsubishi's move to reduce planned output by 110,000 vehicles in the year ending March because of tumbling sales in Japan, the U.S. and Europe. Japan's vehicle sales may fall to the lowest in 31 years in 2009, according to the country's automobile manufacturers association. Mitsubishi will also halt production of passenger cars on every Friday next month at the Mizushima factory in western Japan. The OkazakiИplant in central Japan will close every Saturday in January and for another five days.

Toyota recently announced on Dec 22, 2008, it expects to barely break even this year and slashes profit forecasts amid sales slump. The Japanese automaker, often held up with Honda as a success story for the rest of the auto industry to follow, said it expects a slim profit margin of US$555 million for the year ending in March 2009. Toyota had originally been projecting a massive profit of $13.9 billion for that period. Their sales in the United States were down 34 per cent last month and were down 34 per cent in Europe as well. They are expecting a loss which would be the equivalent of about $2 billion (CDN)». Toyota President Katsuaki Watanabe said the impact on the company from the struggling global economy has been « faster, wider and deeper than expected». « The change that has hit the world economy is of a critical scale that comes once in a hundred years», Watanabe said, speaking in Nagoya. Facing its first loss in nearly sixty years, Toyota is seeking loans from the Japanese government.

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United States. The crisis in the United States is mainly defined by the government bailouts of both General Motors and Chrysler, while Ford secured a line of credit in case they require a bridging loan in the near future. Car sales declined in the United States, affecting both US based and foreign car manufacturers. The bridging loans lead to greater scrutiny of the US automotive industry in addition to criticism of their product range, product quality, high labor wages, job bank programs, and healthcare and retirement benefits.

СIn the United States, if a company declares bankruptcy, then they can go to a bankruptcy judge, who will then decide what is in that company's best interest. The judge will look at all of the company's different aspects and from that they will create a leaner and stronger company. GM, Chrysler, and Ford are all in trouble иbecause they have not correctly managed their company's products, time, and money. With the bailout plan President Obama and his administration currently have available it will ensure that there is restructuring of the companies. They have planned for GM to be funded for 60 days during which they must come up with a sturdy planбfor restructuring and the CEO also must resign. The plan that has been established for Chrysler is that they have 30 days to partner with Italian automaker, Fiat, and then they will receive $6 billion in loans.

While the «Big Three» U.S. market share declined from 70% in 1998 to 53% in 2008, global volume increased particularly in Asia and Europe. The U.S. auto industry was profitableАin every year since 1955, except those years following U.S. recessions and involvement in wars. U.S. auto industry profits suffered from 1971–73 during the Vietnam War, during the recession in the late 1970s which impacted auto industry profits from 1981–83, during and after the Gulf War when industry profits declined from 1991–93, and during the Iraq War from 2001–03 and 2006–09. During these periods Дthe companies incurred much legacy debt.

Facing financial losses, the Big Three have idled many factories and drastically reduced employment levels. GM spun off many of its employees in certain divisions into independent companies, including American Axle in 1994 and Delphi in 1999. Ford spun off Visteon in 2000. The spin–offs and other parts makers have shared Detroit's downturns, as have Иthe U.S.–owned plants in Canada. Altogether the parts makers employ 416,000 people in the U.S. and Canada. General Motors alone is estimated to have lost $51 billion in the three years before the 2008 financial crisis began. GM is set to reacquire factories from its Delphi subsidiary during its restructing.

The Big Three assembly plants are unionized (United Auto Workers and Canadian Auto Workers), which due to the number of retirees results in higher health care costs and benefit costs than more recently formed non–union foreign transplants. The 2005 Harbour Report estimated that Toyota's lead in benefits cost advantage amounted to $350 US to $500 US per vehicle over North American manufacturers. The UAW agreed to a two–tier wage in recent 2007 negotiations, something which the CAW has so far refused. Jared Bernstein, the chief economist of Vice President Joe Biden, noted in an interview with WWJ–AM in Detroit that most of the 2007 contract concessions apply only to new hires, while older workers « still benefit from contracts that were signed a long time ago». However, only

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30% of parts used by the Big Three employ union labor, with 70% sourced from non–union labor.

Delphi, which was spun off from GM in 1999, filed for Chapter 11 bankruptcy after the UAW refused to cut their wages and GM is expected to be liable for a $7 billion shortfall. In order to improve profits, the Detroit automakers made agreements with unions to reduce wages while making pension and health care commitments. GM, for instance, at one time picked up the entire cost of

Сfunding health insurance premiums of its employees, their survivors and GM retirees, as the US did not have a universal health care system. With most of these plans chronically underfunded in the late 1990s, the companies have tried to provide retirement packages to older workers, and made agreements with the иUAW to transfer pension obligations to an independent trust. Nonetheless, non– unionized Japanese automakers, with their younger American workforces (and far fewer American retirees) will continue to enjoy a cost advantage.

Despite the history of their marques, many long running cars have been discontinuedбor relegated to fleet sales, as GM, Ford and DaimlerChrysler shifted away resources from midsize and compact cars to lead the «SUV Craze». Since the late 1990s, over half of their profits have come from light trucks and SUVs, while they often could not break even on compact cars unless the buyer chose options. Ron Harbour, in releasing the Oliver Wyman’s 2008 Harbour Report, stated that many small «econoboxes»Аof the past acted as loss leaders, but were designed to bring customers to the brand in the hopes they would stay loyal and move up to more profitable models. The report estimated that an automaker needed to sell ten small cars to make the same profit as one big vehicle, and that they had to produce small and mid–size cars profitably to succeed, something that the Detroit three have not yet done. SUV sales peakedДin 1999 but have not returned to that level ever since, due to higher gas prices.

In the case of Chrysler Corporation, compact and midsized vehicles such as the Dodge Neon, Dodge Stratus and Chrysler Cirrus were produced profitably during the 1990s concurrently with more profitable larger vehicles. However, following the DaimlerChrysler merger in 1998,Иthere was a major cost–cutting operation at the company. The result was the lowering of benchmarked standards for Chrysler to aim at. This directly led to the following in Chrysler's case. There was realignment of the Chrysler Group model range with those of GM and Ford (i.e. a skew towards larger vehicles).

The Detroit Big Three had been slower to bring new vehicles to the market compared with foreign competitors. The Big Three have battled initial quality perceptions in spite of reports showing improvements.

Falling sales and market share have resulted in the Big Three's plants operating below capacity (GM's plants were at 85% in November 2005, well below the plants of its Asian competitors), leading to production cuts, plant idlings and layoffs. They have been relying heavily on considerable incentives and subsidized leases to sell vehicles. which was crucial to keeping the plants running, which in turn drove a significant portion of the Michigan economy. These promotional strategies, including rebates, employee pricing and 0% financing, have boosted

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sales but have also cut into profits. Promotions may drain the automaker's cash reserves in the near term while in the long run the company. Automakers have since been trying to scale back on incentives, while cutting production. The subprime mortgage crisis and high oil prices in 2008 resulting in the plummeting popularity of best–selling trucks and SUVs, perhaps forcing automakers to continue offering heavy incentives to help clear excess inventory.

In 2008, with high oil prices and a declining US economy due to the Сsubprime mortgage crisis, the Big Three are rethinking their strategy, idling or converting light truck plants to make small cars. Due to the declining residual value of their vehicles, Chrysler and GM have stopped offering leases on the

majority of their vehicles.

иCongress, supported by President Barack Obama have called for a «bridge loan» to assist the Big Three. On October 13, 2008, Obama said that he wanted Congress to double its guaranteed loans to the U.S. automobile industry from $25 billion to $50 billion.

On September 30, 2008, the first automaker loan package, for $25 billion, was signed into law. The bill sets aside $7.5 billion in taxpayer funds needed to guarantee $25 billion in low–interest loans to help US automakers produce more fuel–efficient cars and trucks. The crisis has led to forecasts of massive

unemployment and economic recession if not contained, and Democrats in

On June 2, GM Motors announced the sale of the Hummer brand of off–road

Language practice

1. Examine the phrases and try to translate it.

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2. Match these phrases with the definitions given below: a) try to seduce someone;

b) pressure someone to do something; c) use abilities.

3. Fill in the gaps in the sentences.

Writing

1. According to the text «Automotive industry crisis of 2008–2009» fill in the structure and discuss who has suffered the most.

2.Using phrases and word structures fromИsection «Language practice» write your own report «Automobile production in Russia».

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