Automotive - Business issues
The start of the recession was a car crash for automobile manufacturers.
Endemic structural and organisational issues escalated from challenging to critical status with the onset of a global financial and economic crisis.
In late 2008, the United States Congress found itself authorising a $25 billion bailout for Detroit's Big Three automakers after shares in General Motors had fallen by nearly 90% in the preceding year. Ford and Chrysler also wondered if they’d reached the end of the road1.
The UK fared little better.
In 2009, The Times reported UK car production slumping by almost 60% as a direct result of what was by then a rapidly deepening recession2.
As the automakers suffered, parts manufacturers and suppliers too cut costs and prices – margin which they would find difficult to regain when recovery ensued.
Whilst the outlook was gloomy in mature markets, emerging markets offered brighter prospects with the BRIC countries particularly vibrant.
In December 2008, for the first time ever there were more cars sold in China than in the United States3. This marked a highlight within a period of continuing rapid growth which had been gathering momentum since China joined the WTO in 2001, attracting the interest of global automobile and parts manufactures keen to secure market share4.
Manufacturers within mature markets are understandably looking to markets like this for future recovery and growth:
“May 2011 was the most successful May in Mercedes-Benz history, after the company chalked up 108,766 worldwide sales thanks in part to continued growth in Brazil, Russia, India and China5.”
Of course, economics isn’t the only driver for car manufacturers.
The industry’s impact on environmental change had attracted scrutiny and regulation, allied to concerns surrounding the sustainability of fossil fuel sources
Visible responses include an emphasis on building small and affordable cars – even from the traditionally “big is beautiful” automakers of the US – and continuing attempts to popularise electric vehicles (EVs).
However successful such initiatives may be, one thing is certain.
The road ahead for this industry is marked with transformation.
Flexibility and adaptability will be needed to complete the journey safely.
