C.A.R.S. Management Briefing Seminar - Day 2 Report

By Steve Purdy
Detroit Bureau
The Auto Channel

Traverse City MI August 9, 2006; We’re still trying to get a sense of what these industry experts think of the general state of the auto business today and how that will impact the cars we love. Like all groups of experts there are probably as many opinions as there are pundits. Here are a few of the tidbits we’re gleaning form the buzz here in Traverse City:

The auto industry in the US is doing quite well. In spite of the serious troubles at GM, Ford and to some degree Chrysler the overall US market is strong and getting better. So what if the Japanese transplants are eating the lunch of the domestic manufacturers. Our homegrown brands have made great strides in catching up but the competition has not remained still and have leapt ahead even further. Ten years ago our home industry was two laps behind and now maybe only a half lap back, but they’ve got to get faster. It’s a tough business.

While the automobile business has always been cyclical, this cycle with GM and Ford are way outside the norm. It signifies a dramatic change, and the industry will never be the same.

China is coming to the US and will be strong and smart. When? Soon. How? Carefully. They’ll be sure the product is competitive when it comes, unlike Japan’s first foray into the US market. Look at the history of the Japanese and Korean entry into the US market and you can make some significant comparisons. While one single Chinese car was shown at the Detroit Auto Show last year – and only during press week – there have been requests for space at next year’s Chicago show from no less than five Chinese car makers.

What about diesels? Will we see them in substantial number here? Well, astute industry observer, Bill Hampton, publisher of two insider newsletters, believes there will be a tipping point at which diesels will become trendy just like hybrids, and there won’t be nearly enough to satisfy demand. After all, more than 50% of all cars, from luxury to economy, in Europe are diesels. There’s a reason for that. Effeciency.

The magnitude of the restructuring at the majors is unprecedented. More dramatic changes are in process than there have ever been, and those changes are more fundamental. Over the next decade it is likely that the US industry will continue consolidation and market shares will stabilize.

No one will go bankrupt. Consolidation is not enough for GM and Ford. Both must restructure internally in terms of processes, supplier relations and business philosophy. Bill Hampton is worried about that. He thinks they may still be a bit too passive in their willingness to take the hard road.

The “jittery” oil market will continue to be a major factor in the automotive scene, of course, but the drama will be mitigate if the price rises slowly.

The theme of this conference is: The Future Auto World - Round or Flat? The future is not as orderly or predictable as the industry has been in the past, but it certainly is flattening, in the terms explored by Tomas Freedman in his popular book, The World is Flat.

“Crises beget urgency and creativity. Stress is a part of the deal,” says conference host and the auto business’ most respected pundit, David Cole. “2006 will go down in history as the greatest year of change ever in the auto industry.”

More insight tomorrow. Stay tuned to TheAutoChannel.