ANALYST PREACHES GLOBALIZATION, FLEXIBILITY AND (OF COURSE) LOWER COSTS: North American auto suppliers may want to brush up on their Chinese, Arabic and youthspeak if they want to compete in the future. And, of course, they'll need to keep lowering costs - even as they'll be asked to invest in overseas production, R&D and rapid-fire new model development.
Those were some of the keys thoughts shared by automotive analyst Michael Robinet at the October 20 meeting of ACG Western Michigan. Robinet is vice president of Global Forecast Services for CSM Worldwide, Inc., a leading forecasting service to the automotive industry, supporting more than 350 automotive suppliers with global market intelligence and forecasting services. With corporate offices in Detroit, CSM Worldwide covers the global automotive environment from Frankfurt, London, Paris, Tokyo, Shanghai, Lansing, Grand Rapids, São Paulo, Singapore, Budapest and Bangalore. Key concepts of his talk included:
GDP and Auto Sales Health
Mr. Robinet provided an in-depth overview of the vehicle production outlook both from both a global and national perspective. Within that framework, he identified opportunities that exist in the current mature market. He began his discussion by explaining the correlation between GDP and automotive sales. Auto sales are dependent on GDP, and, as a result, those nations that are reaping strong economic gains (U.S., Canada) are outpacing their developed neighbors (Japan, Western Europe). Of developing nations, this holds true as well; China and the thriving economies of Asia (except for Japan) are realizing gains.
Global Production and Sales
Vehicle manufacturers are looking at restructuring their footprint by probing outside traditional boundaries in order to grow. As Mr. Robinet stated, "It's all about metal and market share."
The U.S. is looking at Asia (e.g., China, Taiwan) and the Middle East (e.g., Iraq, Iran, India) as potential areas for expansion, while Japan is looking at North America. As new capacity is rationalized on a global basis, suppliers will be asked to adjust accordingly if they want to continue in partnerships with OEMs. Specifically, OEMs will ask suppliers to follow production in other parts of the world - a task that will require capital and diversification so that offshore projects are not solely dependent on a single automaker. A few OEMs were mentioned as being slated for major growth in the global marketplace. Korean automaker Hyundai is expected to lead that growth through 2009, with BMW and Honda trying to keep pace.. The big six (GM and affiliates, Toyota, Ford, Renault/Nissan, VW, DCX) are expected to lose a nominal amount of market share (75% to 73% by 2009) as a result.
Hot Cars in Hot Markets
Globally, SUVs are not the vehicle of choice; however, SUVs and pick-up production in North America are expected to remain stable. There is also a demand shift to taller unibody structures in small/compact and mid-size segments-especially in small crossover utility vehicles-within North America. This is where the vast growth is expected to occur in the coming years.
Outside of North America, however, demand for smaller, more utilitarian, and economical cars is high. High volume platforms outside of the U.S. clearly outpaces our domestically produced platforms (only one in 16 high-volume platforms abroad is produced in the U.S.!). Small platform production is not happening here in the U.S., and serious decisions are being made to co-locate resources-development, technology, marketing-in an effort to show a commitment to this global opportunity.
Future Models
Demand for the luxury car is coming back with a vengeance-a result of an aging Baby Boomer population. Big, highly-contented cars for wealthy Boomers is becoming an area of interest for automakers. Due to the small size of Generation X, they are being skipped over, with interest being focused on Gen Y. Why? Because by 2020, there will be over 120 million drivers under 20, and this group is expected to have discerning utilitarian tastes. The Scion is an example of what kind of car a Gen Y individual will be clamoring for.
Detroit is becoming a lean manufacturer with a focus on producing smarter. One of primary reasons for this is the popularity of utilizing a unibody base, which allows for more than one kind of vehicle to be made from that platform. This streamlined base will allow plants to produce more cost-effectively. For example, a single platform will allow an automaker to spin four vehicles off of that one base. As a result, models are expected to stabilize and vehicles per platform will rise significantly over the next few years.
