Trends in the Automotive Industry

I’ve just returned from the Automotive News World Congress in Dearborn, Michigan, an annual gathering of several hundred high-level industry executives discussing their current and future states.

            It was a good opportunity to feel the pulse of this industry. I’ll be writing a variety of postings based on what I heard and learned there. I’d like to begin with my overall sense of where this industry stands, and where lean stands within the industry.

            It’s often useful to start with the big – in this case, global – picture. And globally, the auto industry is doing fine. Growth in many parts of the world, particularly China and India, is phenomenal, and the future in those areas is rosy if not downright glowing.

            The problem, of course, is North America (at least as far as the U.S. automakers are concerned). We all see the daily news reports on what is happening.

            My impression from the conference is that there is a greater sense of realism among industry executives. In similar conversations last year, auto executives seemed to view their problems as being just outside the door. That was probably naïve, but they are naïve no longer. Now everyone seems to accept that restructurings, mergers and acquisitions, bankruptcies and a thoroughly changed global marketplace are all facts of life today, and you better deal with them or plan on going out of business.

            No one seems worried about the survival of companies like GM and Ford, but everyone – including their own executives - seems to recognize that they will continue with smaller operations and smaller market share.

            The situation is worse when it comes to suppliers. Many major suppliers are in bankruptcy, the overall number of suppliers is dwindling rapidly, and the private equity funds are circling, ready to swoop in and snap up those struggling companies that may still contain some value. That situation is going to get worse before it gets better.

            But there are opportunities, and there are some positive signs. I learned that the U.S. automakers are making some real progress in adopting common platforms and common parts on a global basis, although they are still far behind the Japanese. Leaders are genuinely starting to understand what it means to be a global company.

            The latest buzzword seems to be innovation – not just the need to come up with exciting products that offer value to the consumer, but also the need to develop skills and processes that make it possible to be innovative in an ongoing, sustainable way. Not everyone will succeed at doing that, and it’s too early to say who will remain standing once the dust clears.

            I also sense a greater understanding and appreciation of lean. Virtually everyone has at least a basic understanding of what lean is all about and knows how valuable it can be. The number of companies actually implementing lean strategies – and doing so successfully – remains small, but awareness is reaching new levels.

            The current industry turmoil reflects true structural changes taking place. We are in a period that is exciting on the one hand, but also a time of brutal and bloody change. As several speakers pointed out, this is not a time for sissies.

            What’s your take on the current situation?