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Crunch time is coming. Whether or not GM can hobble through the third quarter intact, whether or not Ford can find a way forward, whether or not DCX will end up RIP, it’s clear that old Detroit is dead. Big unions, big plants, big markets, big dealers– 50’s-style automaking is headed for extinction. While TTAC will continue to chronicle this slow motion pile-up, I’d like you to cast your collective eyes to the future. What will the American automotive market look like after the reverse Big Bang? Will a range of boutique brands offer a limited lineup (e.g. Corvette, Saab, Cadillac)? Will cars be sold via Internet, creating mass customization? You tell me and then we’ll all know.
59 Comments on “QOTW: Post Apocalyptic Prognostications Please...”
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I think there will be a consolidation. I think there will be less badge engineering. If the big automakers survive, look for a much more limited lineup within the next 5 years.
With detriot out of the picture, thats one less player to hamstring the production, and actual selling of fully electric cars (think Tesla).
Where-ever the electricity is coming from, its got to be better than pouring explosive, carcinogenic, liquid into a tub and hauling it around under the seats of our cars.
The king is dead, long live the king!
In a perfect future, I’d think there will be more customization of your car and then the ability to track it every step of production – from the raw materials to it traveling down the line being built. Perhaps you’d even be able to view a live camera feed dedicated to your car so you could actually see the robots (and maybe people) building your car.
Desire: I would like to see a much slimmer GM and Ford after they have slashed their car-ignorant management as well as their over-constricting union work rules and pay. I want cars to compete with the Honda Accord and Toyota Camry both on engineering and quality, not just on give-away pricing. I want entire lines of cars from GM as good (in comparison to their market competition) as the Corvette Z-06 and from Ford as good as the Ford GT.
Prediction: Same old GM and Ford limping along selling 1980’s technology for Walmart prices to an ever dwindling customer base who has no clue.
I see Honda and Toyota giving massive discounts, and layoffs because imported Chinese cars are undermining the ‘domestic market’ just like GM died years before.
I predict as globalization of automobiles continues, homogenization will be the result. In effect, we will have fewer choices as everything becomes more and more the same.
The barrier to entry from government regulation and the huge capital needed to start the manufacturing of automobiles will preclude few new entrants.
Look at the newest crap coming out – all pretty much the same.
Detroit is going nowhere… Trouble has happened before in the past and it will happen again… and again.
Aren’t we up to like the mid 80’s on the GM “death watchâ€? I can’t wait for GM Death Watch 1,378.
Definately no more GMs. I actually think Chevy will be around along with Ford but the other brands are dead men walking.
It’s interesting to see buick and mercury topping the quality surveys but that has more to do with the demographics of the drivers.
I think a great slimming of GM and Ford. Any of the following brands will be dead or sold off (saab, saturn, hummer, buick, pontiac, jaguar, land rover, mercury and lincoln). Some may survive as smaller, specialized brands like Subaru.
Ford will be Ford/Volvo/Mazda.
GM will be Chevrolet/GMC/Cadillac.
Toyota and Honda will continue to dominate. Brands with access to European diesel technology (and hybrids) will thrive. Koreans will continue to grow.
Every brand will unite to block Chinese entry into the US market.
Many Ford and GM dealers will disappear as a result of being able to make no money. Manufacturers will finally figure out that they can skip the dealer altogether in sales and you will be able to do everything on the Internet. Dealers will serve as places to test drive, service and buy parts. Everyone will begin buying cars completely on-line, cars will be clearly priced and fully customizable.
K.
It’s interesting to see buick and mercury topping the quality surveys but that has more to do with the demographics of the drivers.
Why is this hard to believe? Trust me I worked in a dealer, old people have nothing to do all day (retired) but to complain about stuff.
Why have car salesmen & dealerships at all?
Eliminate the sales force. Turn certain % of dealerships into test-drive centers where buyers can test drive the cars. Close the others. Have 3-5 (whatever makes financial sense) standard configurations, but allow for addition/subtraction of features. All cars ordered via net, and the buyer can track the progress of his/her car. Cars delivered to holding centers/former dealerships where they are prepped and the buyer drives off.
Of course this would probably hit the crappy cars hardest, since there would be no salesman to convince them to buy a turd.
UAW —> RIP .. it was nice knowing ya!
no it wasnt
There will be fewer “middle-ground” cars. I see cars in the future as either being “all passion” or “all tool.” Pure-bred, high-end, luxury automobiles nearly 100% customized costing extravagant sums on one side. Cheaper, economical, and generic vehicles for a reasonably small sum on the other. As an American, I see the European car market already heading this direction, and I feel that there isn’t any reason the American car market won’t head this way soon.
I really hope this isn’t the future, but I really see less and less people passionate about cars in general any more.
Ford and GM continue on their path of corporate ignorance and investor cronyism until they get out of the manufacturing business altogether. They’ll realize that they’re better bean-counters than car builders, offer retirement packages to their aging workforce, and shut down their domestic lines one-by-one through attrition.
They manufacture through all their profitable foreign subsidiaries (Mazda, Volvo, SAAB), while GM uses what remains of Daewoo to build Chevys, and Ford acquires some Chinese plants to export the blue oval to our shores. DCX trundles along, by that time, their perceived quality will be equal to Toyota and Honda (thanks to Merc).
Only Corvettes, Cadillacs, Lincolns and a few pick-ups are assembled domestically (SUVs went the way of the dodo). Maybe once in awhile they’ll churn out the odd Mercury, Pontiac or Buick for nostalgia’s sake, from the same assembly line as the Caddys and Lincs.
Other North American manufacturing sectors realized this decades ago. How many of your home appliances, clothes and furnishings are made domestically?
yalej:
Exactly what I think. I only need the salesman to hand me the keys and say yes to my price and trade-in. If it’s done via no-haggle then the prices have to come way down. The no-haggle price should be invoice or below before any incentives.
And offer some customization; just take a look at Mini, the level of customization is amazing. I’d wait four months for a new car to be delivered if I could customize it like that. How hard is it to offer Blue, red, brown or even green seats beyond the normal black and gray? Just make those only available if you order it.
I think after all is said and done you will have Chevy/Saturn/Cadillac and Ford/Volvo/Mazda with non-union workers and the ability to turn designs faster and actually be able to compete with Toyota and Honda (not in volume).
I don’t care what anyone says the Solstice/Sky, Enclave, Camaro and even the G6 are very nice looking cars. So the talent is there they just need to focus on design and quality and strangle the bean counters.
I like yalej’s idea about the test drive centers. GM did a national test drive program where you could drive all of their models on closed courses along wiht their competitrs and it was great. The funny thing was, everybody was in line for the BMW 5 series and not the Buick
I think in general GMC and Ford need to reduce brands and consilidate some their models. What is the real difference between a GMC Sierra and a Chevy Silverado??
I dont really care that much about tracking the procgess of my car, I would juct like the American automakers provide cars that make me want to buy them. Their designs, interiors, are just not that inspiring. Maybe the big boys need to trim some executives as well.
I see a patern of Domestic manufacturers basing the success of a new platform on the success of a new class of vehicle (i.e. Dodge Calibre, Chrysler Pacifica, Ford 500 (Full-size FWD = new to them), etc). Where foreign automakers do the opposite, they design a new platform for an existing sales success (Toyota Camry & Corolla) and make new niche vehicles off this chassis (Toyota Matrix, Highlander, Lexus ES, RX).
The difference is the R&D costs for the new chassis are recouped on the backs of the proven models. Any thrust into a new niche, while risky, is much less risky when there is only the incrimental cost to adapt, rather then develope from the ground up.
The domestics will figure this own by trial and error and eventually push out more models that stick around for multiple generations. Or they’ll die…
TW: on the contrary, we’re entering the golden age of the semi-premium car. The market is pushing cars that were previously boring but reliable basic transporation into larger, more luxurious, and more powerful vehicles. Honda and Toyota have ceded the low end of the market to the Koreans. Volkswagen’s sales are booming, as are Subaru’s.
Cars are also becoming more integrated into the calculated projection of consumer identity. Hybrids reflect a growing trend of car-as-lifestyle-accessory. Asking a Prius owner if they’re passionate about their car misses the point. To the hybrid driver, their car is a reflection of their values. It is a tool for expressing what they care about. Driving a Prius or a Hummer declares which tribe you belong to.
Survival of the fittest. Market size (cars sold per year) is going to stop growing soon. There are too many cars already. Attrition will occur with lazy car manufacturers till they are pared down to size at which they can survive and adapt.
The automotive industry will follow in steps of the housing industry. To buy new you have to compromise a lot or have to be very rich. Most people will have to purchase used cars.
If Walmart steps into the Ethanol distribution business, it will a green light for green fuels. Brazil and India will have more exports of bio fuel than the Middle East.
China will keep growing in a covert manner. How many years can you regulate a market without users complaining? We shall see.
However unlikely, I hope the market will splinter when gas prices surge beyond those of other alternatives. With the many potential solutions available, botique companies could be at the forefront.
adya, Interesting point on the Ethanol.
It plays to what I was thinking – someone is going to come out and be the ‘dell’ of the auto industry – they’re going to trim ALL the fat, build (kinda) to order, and have a totally different business model than any of the other auto manufacturers.
I want to see a diesel and bio-diesel movement in the worst way…but I don’t think it will happen.
I think we’ll see a condensing for both GM and Ford – a few marques will be shed (mercury, buick, ‘gmc’), and they’ll restructure their remaining brands to compete more directly with other companies rather themselves via badges. Whoever said above “what’s the diff between a Silverado and Sierra anyways?” absolutely NAILED IT. A quick flick of the badge will have to become a thing of the past – their business model can no longer hold it. But, pushing that badge further up, and offering, say, a performance modeled version (Chevy to Pontiac) and then a Lux version (Pontiac to Caddy), is the way to go.
Complacent CEOs piss me off…as soon as you get comfy, you know you’re being surpassed, and to sit there and watch it happen should mean your job is now looking for a new job, not sitting still and running a once proud juggernaut of a comapny into the ground.
I would really like to see Ford hook up with Honda.
Anyone who thinks they can confidently predict what will happen has been eating hubris for breakfast.
The more interesting question is what would we like to see happen. My hope is that Detroit’s troubles result in the partial deconsolidation of the American auto industry. It’s time to debunk the notion that you’ve got to get really big or get out. I suspect that simply isn’t true anymore — perhaps a smaller company might need alliances of varying types, but it can actually be a disadvantage to be absorbed by a leading player.
So at GM, my hope is that it is broken up into at least two smaller companies. GM’s enormous bureaucracy is the biggest stumbling block to innovation. The problem isn’t merely the current top management, but the entire structure and culture of the company. The deck needs to be thoroughly reshuffled.
That doesn’t necessarily mean that all current GM leaders should be put out to pasture. Lutz has talent; I just don’t think he is forward thinking enough to be determining the fate of the entire GM empire (he’s too “old school” in his thinking, e.g., putting so much emphasis on traditional sports cars as image boosters).
It’s a no brainer that Ford needs to offload Jaquar, Land Rover and Aston Martin. I’d go a step further and suggest that Volvo would be better off if it went independent. Particularly under Ford, Volvo has largely lost its uniqueness. In the absence of Japanese-level quality, that is a potentially deadly turn of events.
Ford could easily get by with only Mazda and Lincoln (Mercury is moribund) if the North American operations stopped assuming that Americans are too dumb to appreciate its European and Australian products.
I suppose Chrysler’s “merger” with Daimler has stabilized the company somewhat, but has the cost been worth it? I dunno — with visionary management couldn’t Chrysler achieve equal or greater efficiencies of scale with alliances?
My main wish is that industry managers — and the pundits who beat up on them — would put away their “GM envy.” The road to success is no longer being the biggest, and having the most brands sold in the most countries.
For those who think dealers will disappear, some questions:
If dealers go away where do buyers go for warranty work and other repairs?
Can a warranty/repair service center remain economically viable without also selling new and used cars? And if they’re getting paid by a 3rd party (i.e. the manufacturer) for warranty work, what is their incentive to do a decent job? After all, they get paid the same whether you’re happy or not.
If the dealer morphs into a “test drive center” and people buy new cars on line, where do used cars get sold? I bought my last 4 used cars from a new car dealer, BTW, they were all trade-ins. Do the trade-ins go to specialty dealers that only sell used cars?
And as for the concept of “test drive centers”, how do they make money? Are they being supported by the manufacturer? Does anyone else see a problem with this? What about people who live in small or isolated towns (which nowadays might have one or two big dealers that sell all of that company’s brands)? Will the manufacturer support a test drive center in their town or will they have to go to the big city several hours away?
As much of a PITA and a drain on resources as car dealers are, I don’t see them going away any time soon, at least not until the above issues (and probably a bunch more I haven’t considered) are resolved.
Martin Albright:
Look at the used car superstores, i.e. Carmax, etc., for what happens to used cars, hell for all cars in the future…
I had a very good experience using Auto Nation (when I lived in the Southeast US). I got a good deal, the service was good, and they treated me well. In the part of the midwest where I live now, there are no Auto Nations or Carmaxes, so I rely on Mom and Pop or ‘bastard child\'(of local new car dealers) used car dealerships, which plainly suck.
Due to restrictive laws in every state, internet purchasing of a new car cannot be accomplished, which is one huge hurdle to overcome. Talk about entrenched! It will be waaay easier to dissolve the UAW than to change this setup…
But the superstores act like a dealer and perform many of the dealer functions. But since they’re not locked into one (or a couple) of manufacturers, I believe they would be a more complete car shopping experience than a traditional dealer.
my dad used carsdirect.com to buy his civic. they made the price, negotiating, trade, etc. All dad had to do was drive in, sign the paper, and drive off. happiest purchase he ever made, never having to deal with the sales.
Detroit is incapable of doing what is necessary. At some point, the situation will become sufficiently dire that the vultures..err M&A people will step in and take over. The fate of Detroit will then become a question of produces the greatest value. The answer will probably be as a going concern because the valuable subs have already been sold off. The good news is that takeover artists will make the hard choices such closing GM brands, the bad news is that these will be overpaid bean counters, not car people. These people will cut costs and set Detroit up for sale to the highest bidder.
As for the future, I expect a smaller manufacturer to experiment with something radical like custom ordering which Dell has used so successfully. The way this is likely to play out is that “dealerships” will probably be owned by the manufacturer and will be mainly order takers. The only cars on the “lot” will be test drive cars. Successfuly pulling this off will require a mininum number of platforms that can be made in a minimum number of plants. But my bet is someone will finally try it, probably a new manufacturer entering the US market will little or no distribution network.
Yeah, but Dell has horrible support…so i would wonder about service reps not being ‘into’ the work, as previously mentioned.
What would help everyone out is one set of regulations for the whole world. no need to develop the same car for two or 3 places. would be a major cost saver.
GM and Ford will both be about the size of DCX or VW. Still sizable, but not there current bloated self’s.
Toyota is going to peak with in the next 10 years as to keep from repeating GMs mistakes. They will be the leader in the industry followed by Honda.
The Chinese cars will be cheap, (think Kia 10years ago) but i doubt they will be a big problem for the well established brands. They deff wont be able to sell anything in the luxury or sporty groups.
VWAG will get a big jump once diesels catch on since they are years and years ahead of everyone else.
SUVs wont be bigger then the current explorer and most ppl wont even bother with them.
Only the ppl that NEED a truck will by them.
Hybrid and Electric will die and diesel will be the new thing. Especially if there is a world wide set of regulations.
Customization will be big. Custom colors, wheels, body parts. LOTS of engine choices.
i dunno about the custom trend upcoming. We can’t even get them to offer colors (as previously discussed). How are they going to make such a monumental change to total customization. I couldn’t even get Chevy to talk about a custom order…only, ‘whats on the lot’!
>>Brazil and India will have more exports of bio fuel than the Middle East.
India??? One of the world’s most overpopulated countries, which is mining water from the water table for the crops they currently produce. If they were able to produce any biofuel, they’d use it up in their own vehicles.
Here’s a possible solution. Eliminate all cross-branding and subsidiaries.
Ford should simply be Ford. No more Mercury, Lincoln, etc? If necessary, bring back the SVT division. But make these cars special (a la Mercedes’s AMG. Bimmer’s M, and Audi’s RS, not S.)
Ford can keep Mazda, as not many people think they’re the same anyway. But it should only keep either Volvo or Jag, but not both.
GM should be Chevy, GMC (or Hummer), and Caddy. Caddy is for lux, and GMC/Hummer for SUVs. Keep Saturn for economy cars. But get rid of the butt-ugly Saab, Olds, Pontiac, etc.
Then, focus on making quality cars. Is that too much to ask?
Detroit is like the drunken wife-beater who hasn’t come to terms with his (and to be politically correct/unisexual) or her issues until confronted with his/her own mortality in that proverbial come to jesus moment. That moment when the can of mace is dispensed into your moustached visage, when the sound of fist of kidneys precedes the clamping of the darbies and the head first push into the paddy wagon.
At that moment…you have a fork in the road. Do you
a.) Recognize that all automotive goodness comes from finding your customer and delivering what they want in a product and staying true to your promise (to harken back to my previous paragraph, going to AA and dealing with your anger issues)
b.) Blaming someone else (the UAW, health care, import/export imbalances, misguided American youth, the educational system and the trilateral commission and the free masons) while extracting the maximum retirement benefits and bonuses before retiring to your million dollar condo in a gated golf course development in Naples, FL. In other words, the band played as the cold icy Atlantic enveloped the Titanic.
Ford: Not quite coming to terms with the fact that the pickup/SUV market is moribund. More cuts…more cuts…maybe they are the correct partner for Nissan? Or Nissan can take some PAG brands off their hands to give them cash to fix their product issues
GM: Actually…doing better than Ford…but the fat is still in the fire. Let’s see how the new Saturn cars/SUVs do…product is still king. We know the bean counters can move the beans at GM. No one removed stuffing from bench seats to make an extra $.20/Chevy better than GM.
Chrysler Group/DCX: Product is better…but…yikes…very truck and SUV dependent as well. And if quality on the their new cars isn’t up to snuff…they will also meet the hooded guy with the sickle, no matter how good the styling and powertrains are…because our friends across the Pacific do not rest on their laurels
As regards just in time/direct purchase…don’t forget that dealers control the franchising system via state legislatures/lawmakers. If it is to be, it will be in partnership with an aggressive, forward thinking OEM. We, at MotorAlley will be doing something akin to this, I hope, soon. Stay tuned!
Oh, one other thing…
The biggest problem at Ford, GM and Chrysler Group (less so at Chrysler Group for sure) is the sense of “safety.” I hope it’s gone…if so, they have a chance…there was a whole entitlement culture at the companies…and especially, the Unions. This is America…you work hard and smart, good things will happen. You sort of work hard sometimes, if it gets you a promotion to the next white collar band, but you don’t really care about doing the right thing because that won’t get you the promotion, or the Union says you don’t have to worry about the product, just your job…bad stuff happens.
yournamehere: a worldwide harmonized safety and emissions standard would be a huge benefit. Smaller companies could thrive because they would need fewer engineering resources to tackle several markets.
Unfortunately, the safety standards are far too politicized for this to happen, at least not in our lifetime. Some of these standards are specifically developed as a non-tariff trade barrier, meant to make it more difficult for foreign competition to compete. Then again, if the EU can do it, there may be hope yet. The fact, however, that Canada and the US can’t even work from the same standard doesn’t bode well. Hell, California and the other 49 states can’t agree on emissions standards.
I think mass customization will make a comeback, especially as automakers increase their use of lean manufacturing. Done correctly, it can be reasonably simple to execute. It is the implementation of the required systems that will be very difficult. Even Toyota, the pioneers of lean manufacturing, don’t do it. Again, this is partly due to different standards all over the world. If one plant could supply the world markets with the same platform, the investment in mass customization would be easily recovered.
The corporate disasters that are GM and Ford have become so messed up that the only way out, IMO, is to press the proverbial reset button.
The brand consolidation ideas posted so far are pretty good. For GM, the GMC brand is pointless. Buick is half pointless since for the price of a new Buick you can get a slightly used Cadillac or a slightly smaller new Cadillac. Pontiac is half pointless because you can usually get the same car from Chevy with a performance upgrade. Whatever the point of Oldsmobile has been over the last 20 years or more I’ll never know. Saturn is only worth keeping around if they’re going to build original cars and not carry on with the trend of rebadging other GM stuff like they did with the Relay. Either keep it original or dump it since it won’t be a “different kind of car company” anymore.
With Ford the only reason to buy a Mercury that I’ve ever seen is because the Ford version is cussed ugly (ie Fusion), you’re too poor to buy a Lincoln, or Lincoln doesn’t make it in a luxury version (ie no Lincoln minivan). Why Jaguar and Volvo were ever added into the Ford fold is beyond me. Lincoln could have handled the luxury performance segment and it seems like Volvo just cannibalizes sales from the Ford and Mercury marques. Mazda seems to have a good thing going, though.
The biggest drag on the both of them is the legacy beauracracy and the union committments. Neither Toyota or Honda are hobbled by those issues (yet). Unfortunately, the only way I think GM and Ford could jettison those problems is to actually declare bankruptcy. When that happens, a whole mess of UAW pensioners might find their retirement plans in jeopardy.
I fear traditional car dealerships are with us to stay. Even if the way new cars were sold was completely revamped so all you did everything online and just went down to pick up the car there would still be income from the used cars and service. That’s where all the money is anyway.
I agree with durailer for the most part:
GM & Ford will realize they cannot make a profit in anything they actually manufacture and sell for under $25k. Therefore, they will engineer and build only large trucks, large SUV/CUV’s, and certain luxury and sports cars (Cadillac/Corvette).
Engineering, Design, and Production of the mass-market sedans, economy cars, and smaller SUV’s will be taken care of by foreign counterparts who don’t have unions to pay i.e. Mazda, Daewoo, etc.
It’s already happening…Daewoo is making the next VUE (to be made in Mexico or Korea), Holden is making the Camaro (that will be manufactured in Canada), and the Mazda 6 platform is being used by Ford for everything from the Edge (made in Canada), Fusion (Mexico), and these vehicles’ Lincoln and Mercury counterparts.
The actual American industry within the Big 3–not North American, but USA-American–will handle vehicles that can only be sold at very large profit margins. It is the only way they make money now, even.
It won’t be too long before foreign transplants like Toyota and Honda are making more cars within the 50 states than the domestics are. I bet it’s probably pretty close now, if not already surpassed. All the big 2.5’s biggest nameplates are made in Canada or Mexico already.
http://www.leftlanenews.com/2006/08/11/analyst-new-product-line-will-benefit-gm-in-2007/
IDK How many have read this annoucment. But it seems like SOMEONE somewhere inside the depths of GM MIGHT have the right idea.
I guess post-apocalyptic only applies to GM & Ford (North America) here…
I think, unless there is a huge, sustained price spike in gasoline, not much will change in how we do things. This morning I noticed (or didn’t notice) roughly the same number of SUV’s and pickups on the road as I have for the last 10 or so years. As much as I would like to see alt fuels take the lead until we truly develop a hydrogen economy or whatever is next, it looks to me like more of the same. The malaise will continue for the vast majority of us. We will adjust to the $3/gal gas as we did the prices that came before it.
For the current crop of automakers: the Chinese are coming! You’re out of your freakin’ mind if you think the other automakers will be successful in stopping the Chinese from entering the North American market. Someone will make much much money from aiding and abetting a Chinese entry in to the US (and the rest of North America). Are you listening, Malcolm Bricklin?
For the Chinese automakers: The Indians are coming! For the Indian automakers: The Turkish are coming! For the Turkish automakers: The Eastern Europeans are coming! What am I trying to prove by these last few lines? Our NA market will finally open up (with any luck) to a more pluralistic set of choices for us consumers. I would love to see more makes become available to us here in the states. The UK has a better selection than we do in the US.
Just like 30 years ago, no one could have predicted the series of circumstances that have lead GM and Ford in the US to their current status, I’m just pissing in the wind, too. But using recent history (and people’s greed) as a guide, this is my best guess for the post-apocalyptic prognostications. Once all of this pluralism sets in, there will be winners and losers. And just like our lack of Nostradamus-like vision about the domestics three decades ago, we will be surprised by who lives and dies.
Truth of it is, GM, Ford and DCX still have the reliability albatross around thier necks. Most of us former domestic owners have vivid memories of fixing small problems that cost big bucks.
The big 2.5 need to start offering better warrantees. A 5 year bumper-to-bumper and a 10 year powertrain will do a lot to calm reliability fears. Just make sure to allow the warrantee to transfer to 2nd or 3rd owners.
But the beancounters holler: “We can’t afford to pay for all those repairs!” Neither can your customers! That’s why they buy Hondas and Toyotas now.
Talk about spinning so much you could attach electrodes and power most of LA, a quote from the Daily Auto Insider today under the title ‘GM to Ramp down full size SUV output’ :
“Wagoner noted that GM’s share of the full-size SUV market has boomed. Depending on the type of model, GM now commands between 50% and 75% of various sub-segments of the full-size SUV market.”
So the good news is, they control half of a small part of a rapidly shrinking market segment.
Let’s not be so down on Ford and GM. GM and Ford will probably slip a few more points of marketshare and then stabilize (Ford may more and sooner and GM over the next few years). As they continue to downsize, they will be able to work out their new place in the market, which will probably be a slow and steady decrease in production and dealer base.
I imagine that when gas continues to move toward $4-5 a gallon, that the US will start looking a little bit more like the rest of the world in terms of (more efficient) engine choice. GM and DCX (and to a lesser degree, Ford) are able to use their European resources to provide these–the first to do it will find it to be a growth market. It may be the start of something good with Opel/Saturn.
Nevertheless, the US market will be frustratingly resistant to change and the auto companies will probably respond in kind.
I would dismiss that the tenets of this question are accurate…after all, the way cars are made and distributed now are more refined than they were in the 50s. Franchises will still be around–they work too well to go away. Parts are cheaper and better. Design is, well…I guess we have some stuff to figure out. However, all companies (even the Big 3 Japanese) have similar “50-year-old-style” dealerships and no one points this out.
Keep in mind that as the lower middle class is increasingly priced out of the old-world car market, we will see efforts to produce new cars that they can afford (Korean-brands and, eventually, Chinese brands). Heck, GM is already doing this!
The big question I am asking myself is: Will anyone will notice where vehicles are made or will people continue to remain ignorant?
I seriously doubt that GM will drop their brands. Instead, they talk about refining them. Even if they are left with a Buick brand that contains a single model, they will keep the brand–at least in the mid-term future.
I used to think that DCX was in a better position than GM or Ford. Oh, how I was wrong. I was willing to forgive the new Sebring its exterior ugliness in exchange for the high level of interior gadgetry. Then I discovered that both the base and the midlevel Sebring use rear drums instead of discs.
neilberg, the problem with your last statement is that, save for the Corvette, GM does not refine its fleet of cars. It keeps coming out with new models instead of refining the models it has. This has been an accusation leveled at GM by RF (and others) on this site.
The culture at Ford and GM is based on finding the next big hit, not refining your existing line. They are looking for 1-hit wonders. They do not appreciate that it takes time and money over the course of 2 to 3 refreshenings to make a hit.
I’m not going to say what has already been said… I agree with a lot of what has already been written. I say we will still have the name plates attached to cars made elsewhere. Maybe the trucks are still made here by a UAW dwindling away on life support from a beating that would make most any gang-banger all warm inside with pride.
Finally some geopolitical failure will lead to a MAD MAX type wasteland populated by the few and famished individuals who didn’t die in whatever end of the world contingency plan we followed to it’s logical conclusion.
The apocalypse is truly upon us! Only the cockroaches and UAW will survive. Sorry, those two really are interchangeable after all….
“Market size (cars sold per year) is going to stop growing soon.”
It may have already.
US Light Vehicle Sales (millions)
1999: 16.9
2000: 17.3
2001: 17.1
2002: 16.9
2003: 16.6
2004: 16.8
2005: 16.9
source: Ward’s Automotive Yearbook
The projections for this year and next are 16.7 and 16.8 million respectively.
source: http://www.michigan.gov/documents/Orta_Consensus_58855_7.pdf
Ford and General Motors are obviously able to produce good cars. In foreign markets they actually compete with and often win over their competing classmates. They have good quality vehicles: modern and reliable power trains, solid chassis, stylish designs, offer great “bang for the buck” and have relatively economic maintenance. In these markets often the old guard Japanese and Korean automakers are considered alternatives to our “domestic” automakers.
In North America these same automakers mean nothing to the very people who might have bought them and been happy if it was 1968. We view them the same way we view our Medicare or government assistance programs. Once valued and protected, they now serve a more and more redundant purpose all the while taking more and more of our money. We have seen, for far too long and against our best hopes, the offer of something better which has turned out to be just what we feared or, even, possibly in the remotest parts of our minds, expected. Among other things – UAW to name a big one – this blind faith in our auto manufactures over the years has made way for their horse of the apocalypse. They are a socially stigmatized industry, they have had their hay-day, and they have become a catchword and metaphor for what’s wrong – maybe with our society in general. I think they know this, but can’t fix that image… by being the same old Detroit.
Why not let Detroit rust away and become the industry’s back (junk) yard?
The various foreign wings of our domestic automakers, except DCX, have got something that we don’t, maybe everything. I think Detroit knows it. In addition to using current foreign supplies in Korea, Europe…, I think the “Way Forward†is to move all manufacturing operations overseas where bourgeoning markets there (Asia, Latin America) sustain the cash flow necessary to build new production and shipping infrastructures. Then, once Detroit is completely out of the way; when Chapter 11 has dissolved all the mess from this apocalypse, reintroduce Chevrolet, Ford, GMC, Cadillac and maybe a few others back into the market in North America. Sell all the surplus – Volvo, Saab, etc… Offer quality, exciting automobiles, customization packages, online purchasing, personal delivery and good warranty and after warranty service. Do not sell to Hertz. Build a service network, not a dealer network. Make a car that people can be proud of. Actually compete with the competition.
In 5 years we could see the Phoenix rise from its ashes.
It’s difficult to predict but I’ll take my stab at it. I’m using the WAG method. (wild ass guess).
Certainly, there will be a drastic increase in internet sales of vehicles, customization, and a decrease in dealership sales. This will largely come from the internet savvy, middle to upper income, reasonably well educated. Although, certainly not exclusively. Likely the rest of the world will still need to see the car and be sold by a sales person. Accord vs. Camry. Murano vs. 330x. Focus vs. Cobalt. That’s the true benefit of a sales person (or pain depending on your point of view). Walking you through the vehicles, taking you out on test drives and thus helping you decide. The slim ball sales people of the past will eventually get forced out of the industry by a public seeking professionalism. At that point, I may go back to auto sales. (I’ll probably be retired by that point and would then love to go back “just as somethin to do”.) (I’m thinking like 30+ years)
Dealerships will still exist, I see them having to change more than they would prefer. Perhaps, the internet sales of vehicles will be similar to Snap on Tools where the postal code ordered from over the internet will give the nearest dealership some sort of commission from the parent company. The nearest dealership would be responsible for Pre Delivery Inspection and prepping for the customer to take ownership of the vehicle. I would not be surprised if they are given the chance to sell Protection Packages, insurances and other sorts of things. Depending on regulations in various states/provinces dealerships might become vehicle registries, and also attempt to sell Automobile insurance and other supplemental automobile items. Change or die.
Dealerships undoubtedly are going to consolidate and many will drop off the map. Some good sized buildings will be available in middle sized town America within the next decade. I predict that most dealerships will be clustered together ala Wal-Mart, Home Depot style “Commons”. I hear that this is fairly common already in some parts of the states where one person (or group) owns one of every dealership in the common. In economics they call it marginal propensity to consume.
Much like the roll out of Wal-Mart across the world “mom and pop” dealerships will go by the wayside. No more going to see Earl at Earls Ford. Now it’s Tobin Dodge, Tobin Infiniti etc etc. As it is now, if you own one dealership you are likely to own 5. We will see more many hundred plus dealerships (Penske, Autonation, whatever…) type of organizations. This economy of scale will be a much larger competitive advantage in the future.
As for the higher up picture. It’s difficult to see. I see the need for GM to have a Low End, Mid Range, and Premium brand of vehicles. But what of say a Buick which traditionally has been a different demographic target and not easily falling into a low-mid-premium business model. I struggle with what to keep and what to drop. And I’m largely only familiar with GM in NA.
So since I’m making WAG’s… Saturn will be the KIA of GM. Cheap, plentiful. Attempts at Value. Think about the massive Sunfires/Caviliers out there. Perhaps a cheapo small truck (think of those old 4 cyl Toyotas out there). Cars, Minivans. Possibly a small SUV. Differentiation will come in cheaper parts, plastics, suspensions and so forth. Chevrolet will a mid range company this is the Malibu’s of the world. Lots of trucks and SUV’s if they are still in vogue. Cadillac will be the premium brand. What about a performance arm (say Pontiac), what about an obscure Swedish brand that hardly anyone knows anything about? What about a rental/business wing? These are things that GM is likely looking at right now and I have no clue if they survive into the future.
I could go on with Ford, but it’s somewhat similar. They sure look like they are hunting the same customers with the Lincoln, Volvo, Jag thing.
Is Nissan going to stay in the US market? Mitsubishi? Subaru? I see so few of these cars on the road on a daily basis. They don’t sell worth anything around here(north of Texas).
Part of that RTZ is the strength, or lack there of, of the local dealers. Here, in my part of the world there is lots of Nissans in traffic. When I was in Bar Harbour Maine for a few days I was blown away by the number of Subbies there. Mitsu undoubtedly has pockets of strength as well.
I would say that they all will compete in the US. One of Nissan’s problems would be that they aren’t thought of immediately when you mention Japanese vehicles to the common person. It’s usually Toyota, and then Honda (in my perception anyways). Nissan as a company desperately wants to be thought of as the 3rd of the big three Japanese auto makers. In reality, it might be number three but it’s grouped more with the also rans of Mazda, Mitsu, Subbie.
Customization at Nissan home market proved a disaster and almost cost them the company. Modularized fabrication will have to go a long way before we see a Dell type manufacturing capability. Standard Disk Drives, Standard Memory, Standard Power Supplies etc, etc; Standards across the brand spectrum (globally) if we want to realize the economy of scale necessary to Dell a car.
Predicting the outcome of market forces with conventional wisdom is fun and interesting but I think real change will come from revolutionary forces rather than evolutionary ones.
I have lived all over the US and travel extensively. There is a traffic jam out there folks! Morning and evening, Friday night and Sunday night, you can’t move. More cars and more highways aren’t the answer either. The attempt and keep things from getting worse, by building new roadways is ludicrous.
The car itself is already impractical in many populated areas. The problem is so bad that it is rendering your new car; whoever builds it; useless.
Hey, I’m a gear head. Let’s use the highways for optional transportation. . i.e. vacations, sight seeing and just plain driving for the fun of it.
Commuting for work and business should be handled by more appropriate means. . . Rapid, comfortable and economic forms of rapid transit; rail (Maglev), Air Taxi, Web connected business (working at home!).
My last sports car was a 2001 Z06. I loved it but could never enjoy its handling or power because of the congested roadways here in Virginia.
We must all come to terms with reality. We’re all kidding ourselves. If we want to protect our ability to drive and enjoy any car regardless of its power, trim, price or manufacturer we have to make a place for it to happen.
I’m thinking of a couple of other industries that have gone through hard times – airlines and Big Steel. Some companies sputter along, others consolidate or get bought out, and the others go under entirely. I’m not sure what’s going to happen to which company, but it sure doesn’t look pretty for GM & Ford in the long run.
When has an industry in decline reversed itself? When a blogger writes who could have forseen 30 years ago the problems for the big 3? I respond, the day Honda was allowed into Marysvillle 30 some years ago and the UAW couldn’t unionize them (after many tries). the die was cast. The UAW has relied on pattern negotiations for years. They pick a target company, then settle on a sweet contract and force it down the other mfg’s throat. The theory being that the big three would have an even pain in their labor costs. his lasted from the late 1930’s until now.Now comes, Honda. toyota, nissan, bmw, etc. with no union to have to share a pattern contract with. Each year these foreign based companies get compound interest on not having to have a union. To me this means that GM Ford & chrysler vehicles will have to come from countries where these union contracts don’t exist. They can’t manufacture much longer in the States or Canada (same union). Canada will last the longest because they have univeral medical care paid by the government and not the companies. But they will still cost more to build in than Mexico, Korea, China, etc. Yes there will be fords and chevy’s but only the offices will be in Detroit.
Hi, Jerry:
Isn’t Canada on the brink of bankruptcy from the sheer weight of their government-paid universal health care? I could swear I just recently read that, but cannot remember where. Sigh. I read too much!
What makes a government any different from an auto manufacturer in this respect (except for size)? Neither of them can afford the pension and health-care costs of generation upon generation of new inductees who are living longer and costing more to sustain. More than they put into the system, and ever more each year due to rising costs and normal inflationary pressures.
The US’s own Social Security system is going to collapse in just a couple short decades. More recipients, fewer donors. Congress won’t do anything about it because the electorate isn’t willing to vote accordingly.
This is all just a math problem at its core. But hardly anybody can read their diplomas, let alone do actual mathematics!
Actually, Canada has had several years of budget surpluses. Given that the oil revenues from the Alberta oil sands and Newfoundland offshore wells are now contributing even more to government coffers in the current $70.00/barrel environment, there’s precious little likelihood of an impending cash crunch.
Add to that the fact that we import roughly 1% of our population every year. Many come over on family-class terms, but a large proportion do for economic reasons as well. It’s less fun than reproduction, but it keeps the numbers of younger, employable workers up while making someone else pay for their education and training.
although medicare could use a shot of money, part of that is reallocation of where funding comes from. Some of the federal budget surplus has come by pushing responsibilities like health care on the provinces, who now want more money to better fund their new additional responsibilities
The industry is doomed to repeat itself. It’ not so much the incompetence, but the nature of business. Large, broad companies eventually fold into themselves when confronted with dynamic, focused competitors. Ford, GM, and to some extent Chrysler have become the automotive Microsofts. Bureaucracy rarely votes itself into efficiency, and lobyists are cheaper than change.
As for the future, I think several focused competitors will use a web-based mass customized model. Fifty years later, there will be a few large conglomerates. Fifty years later, there will be a website asking what will happen after those conglomerates lose focus and fall apart. Maybe it’ll even be TTAC.