Transport Manufacturing: Background

Industry Composition:

These days, nearly everything a consumer buys comes from elsewhere, often from a great distance; thus the transport manufacturing industry is inextricably incorporated into our lives. The secret to Rome’s success was their road system, which enabled easy transport; similarly, without our now extensive transport infrastructure, as well as the machines which run on them, economies nationally and globally would collapse. Any company involved in the manufacture of commercial vehicles (automobiles, aircrafts, boats, or trains) or parts for these vehicles, is part of the transport manufacturing industry. Construction companies whose business is the manufacture of infrastructure, the systems on which vehicles travel as well as the terminals, ports, or stations at the end, are also considered part of this industry, although in regards to trends and performance they are like any other construction company. Companies involved in the design stage of these services fall under civil engineering and are included as part of our Business Services industry.

History:

The industry has undergone many changes since its inception. Horses have been replaced by automobiles of every kind; leading to an increased capacity and decreased need for cleanup, which was appreciated by all. Watercraft, which were originally carved out of tree trunks, evolved first into steam engines and finally into modern ships of every size, from cruise ships to speedboats. Steam engines, an important mode of transport for both goods and people, have been converted into diesel or electric powered locomotives. The development of these modern methods of transport has shaped the world we see today.

Leaders:

The production of the automobile is an industry segment that is very important to the individual consumer. Toyota and General Motors are on the leading edge of automobile production, followed by Daimler AG, Chrysler Holdings LLC, and Ford. Toyota has succeeded in providing quality vehicles in every price and fuel economy bracket, and is the leading developer of hybrids. Also, whereas companies such as Ford and Daimler AG, and Chrysler Holdings LLC have had to close domestic plants to cut costs, Toyota is doing the opposite. In fact, many companies have moved operations to the Southeast United States, reducing imports to the U.S. and the associated costs, and increasing domestic production. Leaders in supplying these companies with auto parts include companies such as Lear, Dana, Delphi, and ArvinMeritor. In the aircraft segment, Boeing and Airbus lead the pack.

Trends:

In the struggle to come out on top, manufacturers have begun to focus on the research and development of products which are more energy efficient and more eco-friendly, such as reduced emissions engines or hybrid/alternative energy vehicles. While this mainly applies to the automobile manufacturing segment, Boeing has also taken steps in this direction. Auto companies have also started to incorporate Toyota’s “lean manufacturing” policy, reducing cycle time and waste by developing a better process rather than trying to push more through an inefficient one. Another recent strategy in automobile manufacturing is incorporating add-ons such as GPS navigation, iPod docking, or satellite radio.

Major Issues:

Pollution has become a big issue in the transport manufacturing industry; most of the world’s petroleum is burned by this industry, leading to high levels of carbon dioxide and other greenhouse gas emissions. In 2006, automobiles were officially singled out as a primary source of adverse health effects due to air and noise pollution. Land and water pollution are an issue as well, with toxic runoff polluting ecosystems and water sources, and road systems infringing more and more on natural habitats. On the manufacturer side, the price of inputs such as steel or plastics has increased due to increased global demand—cutting into profit margins. The U.S. industry is also being plagued with rising retiree benefit costs, or “legacy costs,” which are typically less of a drain for overseas companies. Lastly, volatile gas prices have weakened for the industry demand, not only reducing sales, but also creating problems of excess capacity across the industry, from design to manufacture to sales.

Future Outlook:

There health of the transport manufacturing depends on the sector in question. Auto manufacturers in the United States are currently facing serious obstacles, making it difficult realize a profit, while overseas manufacturers are mostly doing well and able to grow. The suppliers to these companies are also experiencing differing levels of success depending on the market they serve. As for commercial aircraft manufacturing, this sector is positioned for growth as air travel worldwide is expected to see double the number of passengers currently in the skies, by 2025. While an economic downturn in some areas of the world is affecting sales, expansion in areas such as Asia is making up the difference. Fortunately, this is likewise true for the auto market. The increased buying power of emerging markets such as Eastern Europe, India, and especially China represents an enormous opportunity for growth in the next decade.