The situation on the US automobile market doesn't seem to be promising - American carmakers' market share is already less than 50%. It's hard to believe that just few decades back the Big Three (General Motors, Ford and Chrysler) had more than 70% of the market.
Can the Big Three really compete with foreign producers? I don't think so...
The main reason why is the fact that the US companies are burdened with huge amounts of health-care costs and pension obligations of thousands of retirees.
By 2007 GM had more than $60 billion of obligations, which is around $1,500 on a per-vehicle basis. That year UAW agreed to a partial reduction of social obligations for GM (from $61 billion to $46 billion) and Ford (approximately $5 billion reduction). But even with those reductions the US carmakers can hardly compete with foreign auto companies, which are based in countries that have national health-care systems.
It all proves that health care is still one of the biggest issues in the US, the solution has to be found if the government wants to keep the business running and wants to increase competiveness of the US companies.
Comparative advantage in a particular industry can be created through the mobilization of resources: labor, technology, capital; and government can be actively involved in creating such industrial policies, which could promote and boost dynamic comparative advantage (Carbaugh R. 2009).
Thus, it is obvious that industrial strategy in the US automobile industry needs to be reconsidered.
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