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Cost reduction, quality improvement, and regulatory compliance are well-recognized competitive issues. Companies must excel along each of these fronts while operating in an environment of rapid and multi-faceted change, limited financial and human capital, and increasing product development time pressure. In addition, consumers are demanding automobiles that provide greater performance, function, and comfort while emitting lower emissions, consuming fewer gallons of gasoline, injuring fewer humans, and requiring fewer dollars to build and purchase. A solution to these seemingly conflicting objectives is to take a systems view of the product and industry. This paper explores the material decision process so that manufacturers, component suppliers, and material providers may better understand the interlocking web of compromises that shape the pursuit of value-added alternatives and avoidance of unprofitable compromises.

Product life cycle theory suggests that there are four major stages in the international movement of production, markets, technology, and capital: market and product dominance by one country; export dominance by that country as world markets develop; development of multiple world markets and production sites; and, finally, a loss of dominance by that one single producing country. Many would argue that the U.S. automotive industry in now in the fourth stage of the product life cycle. World economic development, combined with product and process technology transfer, has produced effective competitors to the once dominant U.S. producers. These competitors challenge the Big Three through exports and/or U.S. production. Japanese and European auto manufacturers' and suppliers' investment in U.S. production capacity has created serious problems, as well as opportunities, for the traditional U.S. auto industry.

The popular image of the Japanese model of supplier relations emphasizes the role of trust. Reliance is a better description of the key attribute of the relationship. The manufacturers and suppliers dependency upon each other fosters reliance, and many other positive aspects of these relations. But it also produces a power imbalance in the relationship, and that is a source of many of the relationship's positive outcomes. It is unclear whether Japanese style relationships hinder or facilitate effective innovation, although they appear likely to facilitate diffusion, perhaps especially in process developments. However, the very different business conditions facing today's U.S. auto industry from those that faced Japan in the 1950s and 1960s mitigate against our successful adoption of the entire model. U.S. efforts should perhaps focus more on adapting relevant elements of the Japanese model rather than adopting the full model as we understand it.

Every fact of the world's automotive industry in undergoing fundamental change. This transformation is being prompted by a wide range of forces but is primarily associated with the increase in the international competition and rapid advances in technology. The world automotive market is growing far more slowly than production capacity. New entrants from countries such as Korea and Yugoslavia are further adding to the competitive pressures. Furthermore, rapid changes in both product and process technology and the engineering process arc causing a shift in the way vehicles are designed, developed, and produced. Consumers are increasing their demands for affordable, high quality vehicles with features designed to meet a variety of expectations. World class cost and quality are rapidly becoming tin- price of admission to the competition but, in themselves will not assure long term success.