As the 1980s drew to a close, however, the volatile U.S. economy slipped back into recession. Consumers suddenly found themselves with little money to spend on new cars. Foreign competitors fiercely promoted their compact, fuel efficient, cost effective cars. Consequently, many American consumers began to embrace imports, leaving the Big Three Chrysler, Ford, and General Motors behind. Between 1989 and 1991 Japanese manufacturers had a firm grasp on a quarter of the American car and truck market. It seemed as if die glory days of the U.S. auto industry were gone forever.
During the first part of the 1990s the American auto industry began a long, painful recovery. The Big Three recovered by making major changes in the way they operated, including building vehicles that were more fuel efficient, reducing manufacturing costs, and developing new technologies. The improving economy and the advanced age of cars already on the road created an environment that was receptive to these changes. By 1992 the auto industry was on the rebound.
In 1993 the Big Three had about 50 plants across the country, providing jobs to more than 700,000 workers. In addition, nearly 1 million workers were employed by industry suppliers, and another 50,000 had jobs at dealerships. American auto manufacturers busily churned out cars that sold on average for $18,500, up from $11,450 in 1984.
Autoworkers are some of the nation's best paid employees, earning as much as $50 per hour (including benefits). The development of new technologies and the industry's efforts to reduce costs has had a direct effect on the job security and duties of autoworkers. For example, Ford's workforce dropped from almost 364,000 in 1997 to 347,000 in 1998. Although this was due in large part to technological developments and cost reductions, it was also the result of fundamental production changes in the industry.
Education is also an emerging factor for the automobile worker. At Ford, for example, about 80 percent of its hourly employees have traditionally been high school graduates. Today's assembly line workers, however, must identify and solve problems and participate in the development of new production methods. Consequently, Ford is hiring more employees with high school diplomas and college experience. Over the next decade about a quarter of a million automobile workers will be reaching retirement age. As a result, many new jobs probably will become available to young job seekers.
Technological Revolution
The automotive industry is experiencing a technological revolution in a variety of critical areas. By streamlining production methods, participating in joint research ventures, and harnessing technology originally intended for use in other areas, manufacturers are producing vehicles that are safer, more durable, and more cost effective than ever before.
U.S. automakers are developing ways to reduce vehicle emissions, improve fuel economy, and create environmentally sound production and recycling methods. With government assistance, the Big Three have embarked on a joint effort to develop a "super car" that can travel 80 miles on a single gallon of gas. Manufacturers are also rethinking the materials from which automobiles are constructed. They are experimenting with composite materials that are much lighter than steel and easier to recycle than conventional materials.
Aerospace technology is finding its way into the automotive business in a variety of ways. Vehicles of the future will be equipped with night vision capabilities, adaptive cruise control, and radar systems that detect objects around the vehicle. Manufacturers are also developing systems that use radio frequencies instead of keys to unlock car doors.
Innovative Techniques
The industry is experimenting with dynamic, revolutionary approaches to vehicle production. One such method is called agile manufacturing, in which suppliers, customers, and automobile companies work together to build vehicles. In agile manufacturing the customer "designs" a vehicle from a list of preset options. This information is then given to the supplier and manufacturer who "custom build" the car.
Automotive Parts and Dealerships
The U.S. automotive parts industry currently employs more than 600,000 workers. Industry workers manufacture everything from carburetors and pistons to the specialized electrical equipment that controls the automobile.
The forecast for the automotive parts industry is mixed. Industry restructuring and foreign competition will put pressure on American companies. Many small suppliers will go out of business during the next decade as larger companies expand. The future of the auto parts industry is clearly overseas. Recent trade agreements are providing American parts companies with unprecedented access to global markets.
The forecast for automobile dealerships is similar. About 150 dealerships are expected to close. To survive, dealerships will turn increasingly to more sophisticated technology. Improved automobile quality has reduced the need for frequent dealer service, but more complex electronics technology requires that dealers maintain highly skilled personnel for diagnostic servicing.
Some dealerships are extending technology to include customer sendee by using interactive equipment in their showrooms. These systems include CDRO Mbased full motion interactive video and audio, which assist a salesperson in selling a car to a prospective customer through a series of helpful menus. Some dealers may also use the system to assess the abilities of job applicants. Future innovations include automobile simulators that will enable customers to "test drive" a car without leaving the showroom.
Mass Transit
The 1970s were lucrative years for the mass transit industry. As an energy crisis gripped the nation, many consumers turned to buses, trolleys, railroads, and subways. Consequently, the federal government invested billions of dollars in the nation's transportation systems. As a result, cities across the nation built new subway systems or refurbished existing ones.
During the 1980s, however, since the national economy became stronger, the federal government sharply cut mass transit subsidies. Many cities were forced to abandon efforts to upgrade their systems. Throughout the early 1990s many cities had to spend their own funds to improve mass transit service. As a result, many have been forced to reduce operations, forgo repairs, and raise fares.
Although long distance buses continue to operate across the country at affordable prices, many riders prefer to travel by plane or passenger rail. Amtrak, the nation's largest passenger railroad, operates more than 200 intercity passenger trails per day. In 1993 Amtrak reaped about $1.4 billion in profits. However, the company receives hundreds of millions of dollars in government subsidies each year to cover operating costs. As Congress debates the viability of continued subsidies, Amtrak has already begun to cut service. It has even discontinued some of its more popular routes.
Nevertheless, industry observers expect Amtrak's ridership to increase over the next few years, as the company focuses on decreasing its dependence on government subsidies. Workers are striving to increase performance time by improving tracks and equipment and by developing high speed trains. Two types of high speed rail are being developed: steel wheel on steel rail and maglev (magneticlevitation). Future trains may transport passengers at 200 miles per hour.
The Airline Industry
As World War II drew to a close, the Allies met in Chicago to plan the future of civil aviation. Their main goal was to develop a standardized system of rules, regulations, and practices that would enable pilots and other industry workers to communicate with one another and to travel safely on the international highway of the sky. They created a structure that flourished and grew into a multi-billion dollar global industry.
Trouble in the Skies
In 1995 U.S. commercial aircraft carried almost 550,000 passengers. By the year 2008 this number rose to 925,000. The industry generates $230 billion in annual revenues and provides jobs to 1.5 million people worldwide. The past few decades, however, have not been easy for the airline industry, especially in the United States.
The U.S. airline industry was deregulated in 1978. As a result of the competition that followed, many companies went bankrupt. Some faded into oblivion, whereas others were absorbed by other airlines. By the mid1980s a period of industry wide consolidation was under way.
In 1991 the industry was still in deep trouble, as U.S. airlines lost a staggering $3.3 billion. To lure customers, they engaged in "fare wars," offering dramatic discounts on ticket prices. The reduced ticket prices were a boon to consumers but not to the industry. It was not until 1993, when the economy was in recovery and consumers were turning their droughts once again to travel, that the airlines began to regain some measure of stability. However, the airlines were still struggling to make ends meet. To recover, they developed a plan.
First, many airlines downsized their operations, reducing or freezing new aircraft orders. Second, many companies sought to reduce labor costs by negotiating new union contracts. After implementing these changes, the industry showed slight signs of recovery, but the sluggish worldwide economy prevented any significant growth. Many companies found themselves radically altering their business practices. Some of the newer airlines carved out small market niches.
Today the industry still labors under shadows of uncertainty and apprehension because industry analysts are divided over what the future will hold. Generally, most observers expect modest longterm growth in domestic air travel and slightly better growth in international travel. Factors expected to affect the industry include the health of the nation's economy, fuel prices, new technologies, and government regulations.
New Technology
Technology has had an impact on all areas of the airline industry, from security systems at airports to the materials used in airplane construction. Military planes are now required by law to have sophisticated navigational equipment. The government is trying to make the same rules mandatory for commercial aircraft. In addition, ground traffic control technology is being improved to prevent midair and other types of aircraft collisions.
Some other changes taking place are in the area of air navigation. Satellite communication and new air traffic technology will soon make the tracking of planes over the world's oceans much safer.
The Rail Freight Industry
In 1980 Congress passed the Staggers Rail Act, which partially deregulated the railroads. This act enabled carriers to control the scheduling of their own trains, set their own rates, and adjust sendee to meet customer needs. Since deregulation, railroad productivity has increased at a faster rate than that of any other industry. Between 1983 and 1992 freight volume almost doubled, as profits rose steadily. In 1998 the industry generated nearly $36 billion in revenue. Today trains carry 8 percent of the total U.S. commercial freight. Materials shipped include motor vehicles, chemicals, grain, and coal, which is the largest commodity.
Deregulation has also paid off for the customer. Since the adoption of the Staggers Rail Act, freight rates have dropped about 1.5 percent each year. However, the years following deregulation have not proven to be profitable ones for many railroad workers. Railroad employment plunged from nearly 400,000 in 1983 to fewer than 232,000 in 1996. As new technology has become available, railroads have reduced the sizes of their train crews. Only a few years ago a standard freight train would have had a crew of four. Today most freight trains have a crew of only two or three. By reducing their train crews, railroads generate more profits because wages and other laborrelated expenses are the largest part of their operating costs.
Intermodal Freight
Intermodal freight is revolutionizing the way freight trains operate. Traditionally, a single train is made up of cars carrying freight slated for different destinations. The train is brought to a yard where it is divided, by car, onto different tracks that are classified by destination. Then the cars on each track are reassembled into outbound trains. This method is costly and timeconsuming.
Intermodal freight employs a completely different strategy. Truckers drive their freight to a train yard, where the trailers are loaded directly onto flatcars (a type of rail car). This method saves train crews the task of disassembling and reassembling trains. Between 1980 and 1996 this type of traffic grew by 167 percent.
The Future of Rail Freight
Industry observers expect growth in the rail freight industry to be moderate through 2006. The health of the industry depends on the health of industries served by rail. These industries include steel, automobiles, paper, construction, and agriculture.
The Transportation Industry: An Overview
Railways as a form of transportation was imported from Great Britain. By the middle of the century, railroad tracks crisscrossed the North American landscape.
The railroad had a profound effect on the development of industry in the United States. For the first time in the nation's history, large quantities of goods could be transported across long distances. Urban centers sprang up throughout the country, providing jobs and new homes for many people. The railroad also had a dramatic effect on the political process. By the end of the 19th century, politicians were embarking on "whistlestop" tours, in which they traveled the countryside by train, visiting small towns and communities to garner votes.
At the end of the 19th century, the invention of the automobile paved the way for yet another transportation based social revolution in the United States. Henry Ford developed the First assembly line production method, and by 1913 his company was churning out automobiles that most Americans could afford. The Ford Model T sold 15 million units between 1908 and 1913, and over the next two decades automobile manufacturing became the country's largest industry.
In 1903, while Henry Ford was developing his Model T, another revolution was taking place above the sand dunes in Kitty Hawk, North Carolina. Wilbur and Orvillc Wright were launching the age of air travel. After World War I ended, small airline companies began operating passenger lines. After a precarious start, air travel became safe and reliable.
Today the transportation industry is complex and turbulent. Changes such as deregulation have led many companies to alter their operating practices and modify their objectives. New technologies also are changing the nature of the industry. In some cases, such as intermodal transport (in which trailers are loaded onto flatbed rail cars and carried hundreds of miles); technology has blurred the traditional distinctions between industries. As a result, the future of the U.S. transportation industry is hard to predict. As the Information Superhighway continues to evolve, the transportation industry will undoubtedly be an area of great change and new opportunity.
The Trucking Industry
In the early 1980s the federal government deregulated the massive trucking industry, enabling many trucking companies to set their own rates and thereby compete with one another. This deregulation set the stage for a period of fierce competition, in which thousands of small trucking companies went bankrupt or were absorbed by the industry's giants. During the early 1990s, as a national recession gripped the economy, industries across the country experienced a drop in demand for their goods. The trucking industry, which draws much of its revenue from shipping such goods, also suffered. It was no: until late 1993, when the nation's economic recovery was in full swing that the trucking industry was once again on firm ground. Today, trucking is by far the largest provider of total U.S. freight service in terms of revenue. In 1995 alone the industry generated more than $340 billion, accounting for more than 78 percent of the U.S. freight market.
The trucking industry can be divided into those companies that are under the control of the Interstate Commerce Commission (ICC) and those that are not. Those not under the control of ICC engage in local and intercity trucking. Numbering more than 50,000, most ICC regulated carriers are very small, owning fewer than five trucks. However, there are a few industry giants that have hundreds, or even thousands, of trucks. Together they generate quite a bit of revenue. Nevertheless, many trucking companies have trouble turning profits, as expense especially labor costs reduce their income.
The Many Faces of Trucking
All U.S. trucking companies fall into one of three types of carriers: truckload (TL) carriers, less than truckload (LTL) carriers, and small package carriers. Truckload carriers are distinctive in a number of ways. First, each TL truck carries more than 10,000 pounds of goods. TL carriers usually carry a full truckload of goods from a single customer to a single destination. Hauled goods include raw materials, such as coal and copper, as well as finished goods, such as television sets. TL carriers are the fastest growing segment of the trucking industry.
Less than truckload carriers haul goods weighing less than 10,000 pounds. An LTL carrier usually picks up goods from a number of senders located within the same area. Once the truck is loaded, the LTL carrier takes the shipment to a terminal facility, where the goods are sorted by destination. The goods marked for a particular geographic area are then loaded onto another trailer and driven to a destination terminal. There the goods are once again sorted and then placed on other trucks for local delivery.
The third type of carrier small package service includes companies such as UPS and FedEx. These companies specialize in picking up packages from consumers and businesses and then delivering them all over the country and the world. Most of these companies own their own trucks. Some also use planes and rail service. Small package carriers are similar to LTL carriers in many of the procedures they use, such as local pickup and delivery service.
The Impact of Technology
As technology has shaped the automotive industry, trucking companies also have found it necessary to modify their operations. For example, advances in the rail freight segment of the industry have made it less feasible to use trucks as a primary means of shipping goods over long distances. In 1980 it was common for a truck haul to be greater than 1,000 miles. Now most carriers haul goods fewer than 500 miles. Trucking companies are also participating in more intermodal transport. In such operations the actual trucking consists of pickup and delivery of the goods on each end of the rail haul.
Many trucking companies use computers and satellites to track and direct the flow of goods transported on their carriers. Using a computerized database, company workers at a computer terminal can schedule pickups and deliveries, monitor truck locations, and record customer data. Workers can then beam this information by satellite to computer terminals in the trucks.
Safety Issues and Training
Because many truckers transport hazardous materials and others must maneuver trailers that are more than 40 feet long, safety procedures and worker training are important aspects of the trucking industry. Many workers receive training from their employers or through union involvement. Other workers receive training in vocational programs.
The Future of Trucking
In the years ahead the trucking industry is expected to continue its dominance of freight transport. However, profits will be slim as rising costs, especially labor, continue to plague the industry. For some TL truckers, labor costs account for 45 percent of operating expenses. For many LTL truckers, labor costs may account for as much as 70 percent of their total expenses.
The Water Transportation Industry
The water transportation industry in the United States has a long and honorable history. One of the initial acts passed by the first Congress was the Tariff Act of 1789, which encouraged trade, industry, and shipping. Water transport takes place on the world's oceans as well as on the nation's lakes, rivers, and canals. American companies populate the waters with tankers, barges, cargo ships, tugboats, and passenger ships.
Many American shipping companies have declared bankruptcy over the past few decades, despite federal subsidies to cover operating costs. The bulk of the losses are connected with deep sea shipping. The future of deep sea vessels flying the American flag is not particularly bright. As a result, most graduates of the U.S. Merchant Marine Academy join the U.S. Navy or take jobs on foreign owned deep sea vessels or tugboats.
The picture for the country's domestic shipping is somewhat better. American fleets that carry petroleum products, ore, steel, and other goods through the Great Lakes and other inland waterways should experience a period of slow but steady growth.
