The history of the U.S. automobile industry can be divided into distinct eras: the emergence of Ford Motor Company as a dominant producer in the early 1900s; the shift of dominance to General Motors in the 1920s; and the rise of foreign competition since the 1970s.
Foreign producers have become effective rivals of the Big Three (GM, Ford, and Chrysler), which used to be insulated from competitive pressures on their costs and product quality. The result has been a steady decrease in the Big Three's share of the U.S. automobile market from more than 70 percent in 1999 to about 45 percent in 2016. For decades, the competitive threat of foreign companies was greatest in the small-car segment of the U.S. market. Now, the Big Three also face stiff competition on the lucrative turf of pickup trucks, minivans, and sport utility vehicles.
Several factors have detracted from the cost competitiveness of the Big Three in recent years. First, the Big Three have been saddled with large pension obligations and health care costs for their workers, negotiated by the United Auto Workers (UAW) and the Big Three when times were better for these firms. These benefit costs are higher than for American workers of nonunionized Toyota and Honda, with their younger workforces and fewer retirees. Relatively high wages represented another cost disadvantage of the Big Three. Moreover, Toyota and Honda have been widely viewed as the most efficient producers of automobiles in the world. As global competition intensified and the U.S. economy fell into the Great Recession of 2007-2009, the Big Three's sales, market share, and profitability deteriorated. In 2009, GM and Chrysler declared bankruptcy. Therefore, the UAW agreed to a series of concessions to preserve the jobs of their members. They accepted higher premiums and copayments for health care, and they set up a second-tier wage for entry-level workers at about half the wage for current workers. UAW workers also agreed to suspend bonuses and cost of living increases. These adjustments brought the pay of Big Three production workers closer to that of their Japanese competitors.
However, auto workers in the United States are paid much higher wages and benefits than auto workers in China, India, and South America.
Competition from foreign parts makers has also stressed the U.S. auto industry. U.S. auto manufacturers used to produce nearly all of the roughly 15,000 parts in the typical motor vehicle. Today, they purchase about 70 percent of the value added from independent parts suppliers, many of which are located in foreign countries. For example, as of 2017, the United States imported about $140 billion in car parts, equivalent to some $12,000 of foreign content in each American light vehicle manufactured. The inflow of low-cost foreign parts resulted in job losses for American parts workers and placed downward pressure on the wages of those Americans who continued to produce parts. As competition in the U.S. auto market has become truly international, it is highly unlikely that the Big Three will ever regain the dominance that once allowed them to dictate which vehicles Americans bought and at what prices. Toyota and Honda will likely remain as major threats to their financial stability.

What do you think? Is it the responsibility of the U.S. government to provide tariff protection for American auto producers?