The decline of Fordism was precipitated by a few distinct problems in the organizational model. What do you find to be the major problems in the Fordist model and in what ways did these same issues contribute to the near collapse of the US car industry in the early part of this century?
To simply summarize the decline of Fordism, the Fordist system was outcompeted by low wage and higher quality-producers. According to Appelbaum and Batt, newly industrialized countries (NICs) and less developed countries (LDCs) were able to manufacture products in the same manner, but at a considerably lower cost. (Jaffee, P.128) This forces Fordist firms to search for production sites with lower wage. Similarly, high quality producers such as Japan and Germany have imposed a challenge on the Fordist system, in which it emphasized on quantity over quality under the old “push production system.”
In addition to being outcompeted, the Fordist model relied on its rigid division of labor and highly specialized tasks to achieve massive production at low cost. However, such inflexible system makes the Fordist model difficult to adapt or shift into new market demands. As a result, the sunk cost geared toward a single product has prevented Fordist firms to produce a range of product to meet the diversity of consumers.
In the beginning of the century when oil crisis hits the U.S. automobile industry, people were discouraged to buy vehicles with low fuel efficiency. Ford, Chrysler, and General Motors which have overly invested in low fuel-economy vehicles, were inflexible and rigid in its ability to meet the demand of a changing market in a timely fashion. Therefore, the U.S. auto manufactories were forced to cut its profits and face a sale disaster.
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