The Big Three are still in big trouble.

The end of the auto import curbs and the expected 25 percent increase of shipments from Japan forces a familiar question back into the national limelight: What is the future of the U.S. auto industry?

Despite record profits in 1983 and 1984, it does not appear that the revitalized Big Three will be able to restore their competitiveness as full-time, domestic producers by relying upon traditional competitive strategies and relationships with labor and government. Thus, the message for industry participants, public officials and the public at large is: don't misinterpret the current profitability of the Big Three.

This is not to say that U.S. automakers have failed to act decisively and with considerable effect during the past five years. General Motors, Ford and Chrysler have retired inefficient production capacity and are now automating their remaining facilities. All three have lowered their fixed costs by reducing the size of their work force and the degree of vertical integration. Since 1979, the number of new car sales required for the industry as a whole to break even has declined by one-third. They have also launched an unprecedented number of new car models. At the same time, they have recognized the inadequacy of past quality-control practices and the need for new approaches to remedy the situation.

In addition, the Big Three have managed to improve their labor relations and have made radical, pro-competition changes in the way that their business policies are formulated and implemented. Furthermore, the information- and policy-sharing that followed the innovative 1982 and 1984 labor contracts and that have been incorporated into GM's new Saturn Program demonstrate that many auto executives have developed a more realistic view of their enterprise as an assemblage of overlapping and competing interests, rather than as simply a management-dominated hierarchy.

Despite these advances, U.S. automakers remain uncompetitive in cost and quality in the small car business. They have not been able to recapture the share of the small car market lost to the Japanese. Of the 10.4 million cars sold in 1984, about 20 percent were classified as small cars, and the Japanese captured 46 percent of this market from their offshore production base.

To make matters worse, it is by no means clear that U.S. automakers can successfully defend the midsize car market from Japanese inroads at the bottom of the price range and European inroads at the top. About one fourth of the cars sold in 1984 fell into this segment. Offshore Japanese producers captured 26 percent of this segment, and another 5 percent was captured by Honda's U.S. assembly operation. Alhough U.S. automakers held on to a 61 percent share of the large market for midsize cars, new product announcements by Japanese automakers indicate they have a clear strategy for invading this segment further -- along with European automakers.

A detailed analysis just completed with the help of my colleagues Alan Webber and Davis Dyer shows that if current trends continue, U.S. automakers will either abandon or be forced to abandon most of the nation's small car capacity by 1990. Utilization of anticipated small car capacity will be a meager 15 percent. Only fuel economy regulations, which forbid U.S. automakers from counting new vehicles with less than 75 percent local manufacturing content in their corporate fuel economy averages, will keep U.S. automakers from totally abandoning the domestic production of small cars.

Our analysis also shows that if current trends continue, U.S. automakers will only utilize 60-65 percent of their anticipated midsize car manufacturing capacity in 1990. Finally, we see production employment at U.S. automakers, which declined from 700,000 in 1978 to 480,000 in 1983, declining an additional 110,000 jobs to 370,000 in 1990.

This scenario -- based on conservative assumptions with respect to industry sales, currently anticipated product programs, the expected distribution of imports and non-U.S. production capacity in 1990 and labor content per car by type of vehicle -- poses a great threat for U.S. automakers and the nation as a whole. If U.S. automakers cannot manufacture small cars profitably at home, they will eventually lose the capacity to compete profitably in the midsize market because many manufacturing processes are common to both segments. In addition, the advantages stemming from economies of scale in the domestic manufacture of such components as air compressors, fuel injection systems and transmissions -- all of which are common to many small and midsize models -- will be lost if the production of small cars continues to move offshore.

Finally, if U.S. automakers do end up importing significant portions of their product lines and major components from abroad, the zone of overlapping interests between management and labor, as well as many state and local government bodies, will shrink rather than expand. As a result, efforts to reduce domestic manufacturing costs and increase craftsmanship across all model lines through such innovative industrial governance processes as GM's Saturn Program and Ford's Mutual Growth Forums will be jeopardized.

What is required now, if we are to defend successfully the rest of our domestic automotive industry, is a careful reading of the lessons of the past five years. Managers, labor leaders and government officials must all accept the fact that globalization of the auto industry has pitted enterprise systems against enterprise systems, not solely domestic companies against foreign companies. They must also realize that some enterprise systems are more competitive than others, and that the competitiveness of our enterprise system can be improved by the following changes in attitudes, policies and institutional relationships:

Each of the key industrial actors must recognize its common interests in reducing the manufacturing costs and increasing the quality of U.S. automobiles.

Auto executives must be willing to share information and authority with their protion employees and to negotiate business policies that affect the common interests of management and labor.

Hourly employees and their representatives must accept shared responsibility with management for corporate performance and dare to break away from so-called "pattern bargaining" toward company-specific adaptations of the pattern.

Congress and relevant government agencies must be willing to grease the wheels of innovation and change through such activities as co-venturing job training and retraining programs with automakers and the UAW.

Management, labor and government must be willing to create and use policy-sharing forums at various levels in the industrial hierarchy for the purposes of discourse, decision- making and implementation.

In the U.S. auto industry today many of these changes are taking place in experiments involving management and labor, at the shop-floor, plant and company levels. These experiments need to be broadened and deepened. In addition, the management-government relationship needs to be rescued from the abstract debate over the role of the government in the economy.

With one out of six jobs directly and indirectly dependent upon auto production, this is not a dispensable industry for the United States. Furthermore, a retreat by the Big Three from U.S. shores is both intolerable and unnecessary. If we have the courage to continue to experiment with our system of industrial governance and to end the stale and irrelevant debate over industrial policy versus laissez-faire economics, there is still hope that the Big Three can successfully defend what remains of our domestic automotive manufacturing base.