Foreign Direct Investment in the U.S. Automobile Industry

GAO discussed the impact of Japanese direct investment on the U.S. automobile industry. GAO noted that Japanese automobile companies' assembly plants, known as transplants: (1) could increase or decrease employment, depending on whether their production supplanted traditional U.S. companies' production or displaced imports; (2) used fewer suppliers than domestic manufacturers and retained them for entire production runs; (3) have benefited from state and local industrial subsidies; (4) may be more influenced by business considerations than by community and worker interests in making production and investment decisions; (5) obtained fewer technology transfer benefits than U.S. manufacturers; and (6) managed their operations differently from domestic firms, emphasizing a commitment to total quality control, increased importance of parts and components suppliers, timely delivery of parts, a more effective information flow, more efficient labor management, and greater management accessibility. GAO believes that U.S. manufacturers are responding to the increased competition from transplants and their demonstrated success by changing some aspects of their management and production systems and standards.