A:

Global competition resulted in less market share for U.S. car manufacturers and threatened company profits as more foreign brands entered the U.S. market. The total market share of General Motors fell from 28.2% in 2000 to 17.6% by 2014. The other two of the Big Three car manufacturers also lost U.S. market share during this same period. Ford fell from 24.1% to 14.7%. Fiat-owned Chrysler now holds only 12.7% after having 15.7% of the market in 2000.

High labor costs, product lines that emphasized large vehicles with significant gasoline use and a looming global recession caused a crash in U.S. automaker profitability in 2008. American car manufacturers were struggling to compete against better, more efficiently manufactured products from overseas companies. As of 2015, Toyota earns more than GM, Ford and Chevrolet combined.

Lower per-car costs have allowed foreign manufacturers to gain larger portions of the U.S. market. Decades of market control by U.S. manufacturers caused the major automakers to invest heavily in meeting labor union demands. U.S. auto workers saw higher wages and better benefits, while the profitability of U.S. companies remained largely unfazed by high labor costs.

Demand for American cars remained strong. Sales of American cars were around 16.5 million in 2007. A global recession brought this figure down to 10 million in 2009 and significantly reduced Big Three profitability.

U.S. automakers took drastic measures to cut operating costs. They reduced their workforce by more than 40%, eliminated brands such as Saturn and restructured employee compensation to create more efficient operations. Many U.S.-based factories were closed or moved to states with lower labor costs.

After restructuring during the 2008 recession, U.S. automakers improved profitability and became healthier companies. They began creating more advanced cars, hiring more employees in the United States and abroad, and began to provide returns to investors once again. Increasing foreign competition continues to push U.S. automakers to look for supply chain improvements and market more heavily to American consumers. Company budgets increasingly fund advertising campaigns aimed at U.S. consumers, and automakers continue to develop more advanced product features. Profits per car often remain lower for U.S. automakers, even as costs are cut.

Foreign automakers benefit from favorable currency valuations that create lower sticker prices for consumers than U.S. cars offer. This added incentive may draw U.S. consumer spending away from American cars when the U.S. economy is strong, as the value of the U.S. dollar increases in relation to foreign currencies. Some foreign governments may decide to encourage U.S. purchases of their exports by using currency manipulation strategies. U.S. car manufacturers have gradually become profitable again, but they must continue to lower their operational costs and increase profits to remain competitive in the U.S. market.

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