ABSTRACT
The auto industry fits in neatly with the new trade model within the global economy. Its market structure is characterized as a differentiated oligopoly with non-price competition and price collusion. Non-price competition is mainly along the level of expenditures in advertising and R&D, and the number of dealership franchises. The troubles for the United States auto industry began in the 1970s, when OPEC raised the price of oil and foreign companies with smaller and fuel efficient cars became more attractive. A study of the world automobile industry reached the conclusion that the firms should follow a two-stage approach—first globalize, and afterward regionalize. The state of the efforts to globalize and regionalize is not without drawbacks. It created more low paying jobs in the industry. Jobs have moved from assembly plants that are more streamlined, to supplier plants, expanding the assembler-supplier wage gap from $24.25 to $17.91 in 2000, respectively.
