Growth5 Blog

Wednesday, March 18, 2009

Update on the Auto Industry

1. Automakers are having trouble getting rid of their inventory. Click here to see more car inventory photos like the ones below.

Nissan has announced plans to cut its Sunderland workforce by 1,200. Thousands of unsold cars are stored around the factory’s test track.

Newly imported cars fill the 150-acre site at the Toyota distribution centre in Long Beach , California.

The build-up of imported cars at the port of Newark , New Jersey

Thousands of new cars are stored on the runway at the disused Upper Heyford airbase near Bicester, Oxfordshire (UK).

2. Bloomberg reports February 2009 auto sales fell to a 9.1 million vehicle annual rate, the lowest since December 1981. "Additional government aid to keep the automakers out of bankruptcy is making less sense, because it has become difficult to project an end to the sales declines," said Stephen Spivey, an automotive analyst at Frost & Sullivan in San Antonio.

-Toyota sales fell 40% in February (year over year), their biggest decline ever. Forecasting their first loss in 59 years, Toyota is considering asking the Japanese govt. for 200 billion yen ($2 billion) in loans.

-US employers shed 651,000 jobs last month, the most since 1949. Consumers that qualify for loans are hesitant to buy cars they might not be able to afford if they lose their jobs.

3. The Wall Street Journal Reports that perhaps China can save the auto industry.

4. In the April 2oo9 issue, Fast Company offers 25 ways to fix the auto industry. Three ideas that caught my attention:

  • Robin Chase, founder of ZipCar: "I'd take 10% of my current R&D budget and put it into a venture fund. I'd finance startups, experimenting in areas where I lack core competency: truly alternative vehicles; services that relate to car maintenance and in-car experience; services that conceive of the car as one node in the larger transportation network; and ideas that leverage my cars and my consumers as a means of collecting data or marketing other in-car services. This is a smart use of my money because I would be investing alongside others instead of financing all the R&D in-house. In the process, I'd gain firsthand insight into a whole realm of business models that might be my future."

  • Mike Hughes, president and creative director, The Martin Agency: "As powerful as advertising and marketing are, they're not going to save the American car industry. What the industry needs is a vision. The kind Bill Gates had for software, Steve Jobs has for Apple, and, yes, Henry Ford had for automobiles. Don't just give us what you think we want; give us what we should want.

    Don't keep telling us your cars are every bit as good now as Toyotas or Hondas. That's probably true today, but you've been trying to sell us that line for far too long. Tell us why we should want your cars. If you can't figure out what makes your product special, then it's probably not special. When you do have something to say, market the hell out of it. Boy, would I love to do that campaign."

  • Look to Europe. Robert L. Kanode, President & CEO, Valence Technology

    "The U.S. auto industry will need to follow a model similar to what we see in Europe, with the planned rollout of pure electric vehicles for everyday and commuting needs, and of super fuel efficient turbo-diesels for long distance driving, in order to meet the needs of the average family. In addition, the US government will need to play an active role in encouraging increased battery manufacturing by investing in commercially viable technologies and in providing incentives to consumers to purchase electric cars."

5. Bankruptcy Lawyer Joins Obama Auto Team: This auto team should either declare subsidies to the auto industry as a "jobs program" or they should begin pre-negotiated bankruptcies. Why? This is where it's heading anyway because both the leadership of the automakers and the UAW just don't get it. See #6 & #7 below.

6. Time for GM to Declare Bankruptcy? This article by Victor Cook at SeekingAlpha demonstrates a path to break even for GM. But GM leadership has no interest in shrinking their business to break even. So what GM, the taxpayers should cover you until bankruptcy shrinks you to break even?

7. UAW unwilling to give same deal to GM that was given to Ford.

8. Washington Post: What's Good For General Motors.... Would be a Miracle

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