STRATEGY ANALYTICS: Crisis Management Hits Auto Industry

BOSTON--The Strategy Analytics report, “Credit Crunch: Crisis Management Hits Auto Industry,” reports on how key auto industry players are responding in order to survive the downturn that has severely depressed new vehicle sales.

The auto industry has suffered more than many other sectors. Low consumer confidence has hit new car sales badly, made worse by a growing inventory of competing used cars. As a result, auto makers have had to cut costs resulting in large-scale factory closings, work stoppages as well as job and wage cuts and investment delays are typical management actions. The ensuing reduced orders to suppliers are having similar effects in the tier 1 and tier 2 supply chains.

There is a surprising positive side to this scenario, according to the author of this Insight, Kevin Mak, Industry Analyst of the Strategy Analytics Automotive Electronics Service. “The underlying fundamentals of the auto electronics industry have never looked better. OEMs will have to meet tough forthcoming mandates in emissions and safety, plus competitive demands and customer expectations will all drive up electronic penetration rates. Therefore, cut backs in R&D spending would be unwise.”

Mak adds, “Although some car makers are rushing to get hold of government bailout funds, it is not a panacea for a truly failing business. It is clear that auto businesses can only survive if they are prepared to be structured to operate efficiently, and if they continue to innovate in growth areas, partnering with other players to share cost and risk. Not only will this enable survival, it will help these companies thrive in a future, competitor-depleted market.”

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