?Read the following extract from an article about Over-Capacity in the Car Business. ?For each question 15—20, mark one letter (A, B, C, or D) on your Answer Sheet for the answer you choose. Since the days of Henry Ford's dominance of the car market in the 1920s up to the present day, the car industry has continued to grow. Some companies, such as British Leyland, failed to survive the turbulent business world of the 1970s despite being government-owned. During the 1960s and 1970s, as growth in profit became more difficult to achieve due to increased competition, mainly from the Japanese, the industry turned to efficient production methods in order to create a competitive advantage. However, once all the major players in the industry had become as efficient as possible, developing a cost advantage was more difficult to achieve. In addition, car companies from Asia, such as Daewoo, Samsung and Kia, have developed cheaper, more affordable alternatives for the discerning western buyers. Such car companies are part-funded by their respective governments but enjoy considerably lower labor costs. Increasing productive capacity has led to car companies aiming to use economies of scale as the main way of reducing cost, although this has unfortunately led to businesses having surplus capacity. This spare capacity occurs when the industry as a whole expands ahead of, or in anticipation of, a growth in customer demand. Such growth in capacity has meant that supply outstrips demand by some 30%, i.e., car companies could cut back on their capacity levels by 30%, and still meet all customer demands. The result has been a series of joint agreements and mergers between car companies, with a view to either using capacity, or losing capacity altogether by selling off parts of a business. The other problem is the high cost of developing new vehicles: the standard response to the high cost is to either rejuvenate or re-launch old vehicles with new technology. But there are enough companies developing new models that any business, which does not, stands to lose out. The main fear in the car industry is over-capacity—experts predict that by 2001, the industry may produce 23 million cars more than it can sell! In 1998 there was a spate of company mergers—e.g. In January 1999, Ford paid ￡4 billion for Volvo's car division Volvo claimed that it needed economies of scale, allowing it to focus on buses, engines and aerospace and to acquire shares in two major truck-making businesses. Ford intended to distribute Volvos with its own cars and hoped to use Volvo's reputation for technological excellence to develop new cars, using common research platforms to save money. Renault, on the other hand, announced a joint agreement with Nissan, the debt-ridden Japanese company, to purchase a 37% stake. For Renault, the problem was not over-capacity, but rather the lack of product range. Renault was 44% owned by the French government, which obviously wanted to protect one of its major companies and wealth creators. However, Renault had concentrated its major marketing effort on domestic demand in France as the domestic market fell, profit tumbled. The expiry in 1999 of the 'gentlemen's agreement' which limited car sales from Japan was probably the main reason for teaming up with Nissan. Nissan, however, had borrowed approximately ￡15 billion in order to expand its productive capacity and had lost money in six of the last seven years. One estimate put 1998's losses at nearly ￡1 billion. The cost savings for both companies are not likely to occur until 2002, resulting mainly from purchasing economies of scale. Renault seems to have got caught between the large manufacturers who achieve economies of scale and the smaller specialist manufacturers. During the 1960s and 1970s, in order to create a competitive advantage, the car industry turned to