The automotive industry is a highly competitive industry with many manufacturers fighting for a share of the large market. Historically the industry has had production capacity that far exceeded the demand provided by the automotive market. The large manufacturing facilities in which companies operate have high fixed costs that must be managed successfully if the company wishes to make a profit. The automotive industry often finds it difficult to survive in difficult economic conditions due to the high fixed costs of operating its facilities. Manufacturers are forced to lay off workers as fixed costs to pay employees continue while demand for their vehicles declines. Automakers were forced to lay off employees and eventually close plants as the economy took a hit from the recent recession. An example of this can be found when GM was closing plants in an attempt to reduce fixed costs per vehicle in an effort to survive. Automotive manufacturers must successfully manage fixed and variable costs to remain competitive in this challenging industry. Fixed costs incurred by an automotive company may include rent, insurance, and equipment leasing. These costs often seem set in stone and trying to reduce them seems difficult. Automotive companies lease the plants where their vehicles are produced from industrial real estate companies. Renting these facilities from real estate companies represents a very expensive fixed cost that the company must pay every month or year. One way automakers can minimize fixed costs is to renegotiate the lease. Companies that rent facilities from businesses have bargaining power…half the paper…increasing revenue due to increased sales and the small cost of performing oil changes on cars is tiny in comparison. For a company to maximize profit it is important to reduce both variable and fixed costs while continuing to produce a high amount of output. This formula will lead companies along a path that, if successfully completed, will bring great success. While fixed costs may seem difficult to change, automakers can use their leverage from extended leases to negotiate lower prices from industrial real estate companies. The variable costs incurred by a company can also be reduced by leveraging the power of competition among suppliers to acquire components at the lowest prices. After costs have been minimized, it is up to management to create attractive purchasing programs and incentives to increase sales and revenues accordingly.