C.A.R. Management Briefing Seminars - Casesa Interview

By Martha Hindes
Special Event Editor
The Auto Channel
Detroit Bureau

TRAVERSE CITY, MICHIGAN -- "Where the money comes from doesn't matter so much," said auto analyst John Casesa, managing partner of Casesa Shapiro Group. What it takes, he added, are investors with deep pockets that can ride out the hills and valleys that traditionally plague the industry.

Casesa, who broadcast his remarks to those attending the five-day Management Briefing Seminar here, was answering a question from the audience whether there should be concerns about private equity coming from such places as China.

He said the American industry, or "Detroit" -- referring to the traditional Big Three auto companies, General Motors, Ford and newly privately-owned Chrysler -- is in the middle of a three-stage recovery effort from the long-entrenched "legacy" model those companies have followed for decades. He said the path to a new business model includes resizIng, restructuring and reinvesting.

Resizing includes downsizing and the inevitable elimination of jobs. Divestitures buy time when there's a "hiccup" in the credit industry, he said.

Restructuring includes creating a solid foundation for the future. American-based companies should follow the lead of such auto makers as Toyota that has a single platform for all Corolla autos sold worldwide for example, rather than an overabundance of platforms and brands as found at Detroit auto makers, or Honda with more flexible work rules at its Ohio facilities.

Casesa said the priivate equity investors needed for reinvesting are more able to take risks than public shareholders could.

Restructuring, the most difficult of the three, is where the American industry is right now, said Casesa. "(Detroit) is in the middle of the transformation."