The report identifies several critical trends affecting the competitive position of the domestic automobile industry. These trends include a major shift in demand toward smaller vehicles; the growing importance of automotive trade; rising import competition; and widespread government use of trade restrictions to manage the adjustment burden in auto producing nations undergoing rapid structural change. The challenges facing the U.S. auto industry are great, but the prospects for its full recovery and long-term competitive success are currently much greater than most observers anticipated even two years ago. Massive industry investment in new products, plant and equipment have resulted in an entirely new line-up of advanced products, substantial productivity gains and higher vehicle quality. These achievements, plus increased sales volume and the Japanese restraint on auto exports to the United States, have enabled U.S. producers to return to profitability, retire debt and rebuild working capital.


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