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dc.contributor.advisorHussen, Ahmed
dc.contributor.authorAlig, Joanne T.
dc.descriptionv, 39 p.en_US
dc.description.abstractEssex Specialty Products (ESP), a subsidiary of Dow Chemical, supplies various sealers, adhesives, and glass bonding products to automotive manufacturers. Although ESP sells some products to other industrial companies, the main focus of sales remains the Big Three, the traditional domestic auto makers which include GM, Chrysler and Ford. Each of ESP's products falls into one of three main divisions; glass bonding systems, sealer systems, or structural adhesives. Presently, ESP's market share for each division ranges from 85 - 95%. An analysis of the nature and scope of possible future sales for ESP requires and analysis of the nature and scope of possible future North American automotive production and sales. As a supplier, Essex relies on estimates of manufacture production. These in turn depend upon the outlook for car sales, and thus consumer demand. While employed by ESP, much of my job entailed the implementation of a PC based automotive forecasting system. In the auto industry, much emphasis is placed on predicting future production and sales which are both highly dependent upon consumer demand. This paper attempts to analyze that demand in the domestic automobile market with particular focus on the consumer's ability and willingness to buy. In addition, this paper examines the effect of foreign companies producing in North America on North American production and suppliers. Macroeconomic factors affect the consumer's ability to buy. Because the demand for automobiles is income elastic consumer demand changes as the level of consumer disposable and expected income rises and falls. Consumer expectations, especially about the possibilities of a recession in the economy will influence the amount of income the consumer chooses to spend. Consumption of durable goods, including automobiles, is interest elastic and policies implemented by the Federal Reserve influence the financial ability of consumers to purchase automobiles. The Federal Reserve raised interest rates in 1988 and early 1989 as a result of tight monetary policy and the attempt to ease inflation and demand for durable goods fell. In the latter half of 1989 interest rates were lowered to help fight recession and to stimulate consumption of durable goods. The Fed's policy now seems to be that of fighting inflation by maintaining the present interest rate and hoping that the economy does not slip into a recession. Finally, demographics, the size and nature of the population can change aggregate demand for new cars. Macroeconomic conditions influence the ability to purchase a new car but manufacturers can adopt the means for enhancing the willingness of the consumer to buy. Automakers accumulated large inventories during the fourth quarter of 1989 due to slow sales. To rid themselves of the burden of excess inventories, incentives were offered by both dealers and manufacturers. However, even when cars seem to be selling well, manufacturers must keep the consumer happy. Lowering prices would be the best way to do this. Because the domestic auto market operates as an oligopolistic market prices tend to stick, especially downward. Thus, producers must focus on the efficient use of technology to produce better-quality cars in terms of durability and style. Technological improvements made by traditional domestic manufacturers in the North American market serve to enhance domestic production and sales. These improvements allow domestic manufacturers to compete with the more efficient foreign auto makers who have begun to produce in North America in the last five years. In many instances though, the Big Three seem to take an "if you can't beat 'em, join 'em" attitude and have begun to form joint venture agreements with transplant companies. These joint ventures often prove the most profitable means of taking advantage of promising market niches (Motor Industry Survey, p. 21). As mentioned above, the analysis of the North American vehicle market aims to provide insight into the possible future market for ESP sales. As a supplier, Essex must alter sales tactics in order to compete in a globalized market. Frequently, the foreign manufacturers prefer to import parts from their home country, claiming those parts have better quality. Forecasters predict that the share of transplant production will increase from 11% in 1988 to 22% by 1991. Suppliers must begin selling to transplants now or risk losing market share. To help them predict future sales, ESP recently purchased a computer software forecasting system. This system will enable them to use automobile production forecasts in conjunction with estimates of ESP product usage to predict future sales. Valuable information as to the composition of sales (i.e. who the product is sold to) can be obtained and used to shift the focus of sales. As a co-op student for Essex I became involved with the implementation of this forecasting system. My work at ESP's marketing and sales office enabled me to learn first-hand about the impacts of the globalization of the North American automotive industry and opened doors to possible future career paths.en_US
dc.relation.ispartofKalamazoo College Economics and Business Senior Individualized Projects Collection
dc.relation.ispartofseriesSenior Individualized Projects. Economics and Business.;
dc.rightsU.S. copyright laws protect this material. Commercial use or distribution of this material is not permitted without prior written permission of the copyright holder.
dc.titleA Study of Consumer Demand in the North American Automobile Industry: Impact upon Production, Sales and Suppliers in the Industryen_US
KCollege.Access.ContactIf you are not a current Kalamazoo College student, faculty, or staff member, email to request access to this thesis.

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  • Economics and Business Senior Individualized Projects [1145]
    This collection includes Senior Individualized Projects (SIP's) completed in the Economics and Business Department. Abstracts are generally available to the public, but PDF files are available only to current Kalamazoo College students, faculty, and staff.

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