Automotive News - May 19, 2008 - (Page 12)

12 • MAY 19, 2008 opinion Smart, steady growth works best for suppliers Automotive News’ annual list of the top 150 North American original-equipment suppliers is a telling snapshot of the modern auto industry. The newest list carries two messages. 1. This is a global industry. Of the top 10 suppliers to customers in North America, five are headquartered outside the United States. So are 27 of the top 50 and 83 of the top 150. Suppliers based elsewhere are bringing their technologies and management expertise to an industry that is constantly in search of innovation. North America’s auto business is stronger for their presence. 2. Mergers and acquisitions remain a proven way to grow, but how a company goes about it makes a huge difference. Suppliers that pursue grandiose acquisitions often find that they need to unwind at least part of those purchases later. On the other hand, suppliers that make one small acquisition after another, learning how to absorb a new company’s expertise and culture along the way, have a much higher chance of long-term success. This is not unique to the auto industry. Many studies have shown that blockbuster acquisitions often fail. In today’s soft market, many suppliers will look like ripe targets to aggressive pursuers. Buyers could learn from the mistakes of the past by not biting off more than they can chew. I can remember when the first oil crisis hit the United States in late 1973. It caused chaos. People were dumbfounded at having to pay double what they were used to paying at the pump. It turned the automotive marketplace upside down. One of the only things that remain from that first crisis is the famous or perhaps infamous rebate. “Buy a car, get a check,” extolled Joe Garagiola, Chrysler’s spokesman. It worked for a while; everyone else got into the act, and rebates have been with us for more than 30 years. But the product planners went nuts. All of a sudden, people wanted small cars and if they couldn’t get them, they wanted fuel economy. With no warning and no lead time, the Big 3 put together all sorts of terrible combinations, big cars with little four-cylinder engines. The automobiles couldn’t get out of their own way. DAILY AUTO NEWS >> You can get the news you need every day. Go to www.autonews.com/signup and sign up for our daily e-mail newsletter. Be careful; don’t do anything dumb This time, we’ve had almost 35 years’ warning, and it hasn’t done much good. During the second oil crisis, which started in the late ’70s, you often couldn’t find a gas station that was open. Or you could buy gasoline only on odd or even days. Everyone wanted fuel economy and range. Can I get to my cottage and back on the weekend since I may not be able to buy fuel on the weekend? Both times, it was a mess. And the Japanese automakers, with cars designed for Japan, had the perfect products for the times. With great reliability and fit and finish, buzzwords back then, they started their conquest of the U.S. market. Today, the Detroit 3 will tell you that they We’ve had almost 35 years’ warning since the first oil crisis, and it hasn’t done much good. have no time. With sales of big cars, pickups and SUVs plummeting, they have to change their product mix overnight. It’s not possible. Detroit doesn’t have the flexible manufacturing that it needs to switch from big to little or from truck to car. It might make a lot more sense for Detroit to shut down some of its largevehicle factories rather than try to dump large vehicles into the distribution system. And they should start running the plants that make the most-fuel-efficient vehicles flat out as quickly as possible. It’s an unbelievable challenge for the Detroit companies. Let’s hope they figure it out, or you’ll see even more red ink. York as soon as possible to stop the madness. BARRY BYERS Washington, Mo. The writer works for an automotive supplier in finance/accounting. Dealers as scapegoats The dollar’s weakness against foreign currencies is stimulating a resurgence of the gray market. New vehicles designated for sale in the United States are being exported to other countries. Automakers are raising penalties against dealers who sell cars and trucks that wind up on the gray market, even if the dealers don’t know their customers plan to export the vehicles. It’s understandable that automakers want to preserve their plans for allocating vehicles globally. But if a buyer in, say, Russia or China understands he cannot automatically expect warranty coverage for his gray-market vehicle, it’s hard to see how this amounts to a franchise issue. More broadly, why should a dealer be punished for the legal actions of brokers, exporters and foreign consumers in the name of protecting an automaker’s own sales strategies? If factories don’t want to reward buyers who can import a vehicle more cheaply than they can buy it in their own countries, the remedy would seem to be to rationalize pricing across borders — not to treat dealers as scapegoats. Looking ahead to different industry To the Editor: Regarding Edward Lapham’s April 28 column, “Look for some new global auto heavyweights”: I agree that in the next 10 to 20 years, there will be mergers mostly by necessity. When the Chinese and Indian markets have developed, there will be too many players to support the demand and the cost of technology and legislative changes. There will be the very large players and also those that, through specialization, will live if not thrive. It’s difficult to see how Ford will remain a major player. The volume is there and Mazda is a strong source, but Ford in 10 years will not be in the top five without a more radical policy change. The company is too centralized and willing to back out of important markets. Volkswagen will not be in the top five either; it will be Porsche by then. Renault-Nissan (with an integrated U.S. manufacturer?) and Hyundai-Kia (possibly with a U.S. partner as well) will most likely be part of the big five or six. In the subtier groups, Suzuki, PSA, BMW, Daimler and the like will survive if not excel in their specialties. Finally, the Chinese market is still completely open to the larger companies, including FAW and Dongfeng. Independents such as Geely that do not have to deal with as much bureaucracy as Shanghai Automotive Industry Corp. and FAW have a lot of freedom to pursue market-driven policies. What is true is that the field will be very different. CYRUS ETEMAD-MOGHADAM Managing Member RPM Tech Fallston, Md. The writer works in product development consulting. THE WEEKLY NEWSPAPER OF THE INDUSTRY Established in 1925, published every Monday by Crain Communications Inc. Cerberus doesn’t belong in autos To the Editor: Regarding Keith Crain’s April 28 column about Cerberus and Chrysler LLC (“Don’t be surprised to see Ghosn in N.Y.”): I think that the investment company should never have put its nose in the auto business. The sad thing is it got in just before auto sales turned down. The only thing Nissan needs is the Cummins engines — stay away from the rest. BUDDY YOW Valdosta, Ga. The writer is a salesman at a Ford dealership. Keith E. Crain, Publisher and Editor-in-Chief Peter Brown, Associate Publisher and Editorial Director David Sedgwick, Editor Edward Lapham, Executive Editor HOW TO REACH US Web site: www.autonews.com Editorial staff autonews@crain.com Phone: 313-446-0361 Fax: 313-446-0383 Circulation Advertising subs@crain.com rgreer@crain.com Phone: 888-446-1422 Phone: 313-446-6050 Fax: 313-446-6777 Fax: 313-446-8030 Editorial data/research To locate information that has been published in Automotive News, call 313-446-1662. Customer service To start or renew a subscription or to report an address change or a delivery problem, e-mail subs@crain.com or call 888-446-1422 (in the U.S. or Canada) or 313-446-1662 (in all other locations). AUTOMOTIVE NEWS (ISSN 0005-1551) is published weekly at 1155 Gratiot Ave., Detroit, MI 48207-2997. Periodicals postage is paid at Detroit, MI and at additional mailing offices. Postmaster: Send address changes to AUTOMOTIVE NEWS, Circulation Department, 1155 Gratiot Ave., Detroit, MI 48207-2912. Canadian Post International Publications Mail Product (Canadian Distribution) Sales Agreement #40012850, GST#136760444. Canadian return address: 2-7496 Bath Road, Mississauga, ON L4T 1L2 Printed in the U.S.A. They thought they knew everything To the Editor: Thanks to Keith Crain for his column about Cerberus’ involvement in the automotive industry. The only thing he left out was the Cerberus debacle with GDX Automotive. In three short years, it was able to take a $1 billion automotive supplier positioned for growth and bring it to the brink of bankruptcy. It is ludicrous to think Cerberus can achieve results with a company the size of Chrysler when it flopped with a supplier the size of GDX. Crain was dead-on with his assessment of the folks at Cerberus: “They thought they knew everything.” They still think they are smarter than everyone else. They manage by one metric only — cash. Everything else is secondary. They have been portrayed as patriots who have swooped in to save an American icon. Realistically, patriotism to them is how many U.S. dollars they can book each year. I feel sorry for the people who will suffer due to their misguided management. Carlos Ghosn should head for New http://www.autonews.com/signup http://www.autonews.com

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Automotive News - May 19, 2008 Ford eyes smaller F-150 cousin Sonic: Mercedes tries to 'extort' store upgrades Chrysler seeks 25% slash in parts prices Dealership managers pushed Chrysler's latest incentive Crain names 4 new VPs Automotive News staffers win Wheel Awards GM will keep cutting sales to fleets GM studies the future of full-sized trucks American Axle plans to expand in Asia At Lexus, the sales laggards are cars VW positions Tiguan as 'GTI' of small SUVs Tata enters race for 100-mpg car Harley Earl was the daddy of auto design Focus will follow Fiesta as a global vehicle Lexus shows how it sweats details Industry slows tide of state CO2 rules Chevy tweaks Cobalt to add fuel economy Be careful; don't do anything dumb Looking ahead to different industry They thought they knew everything Cerberus doesn't belong in autos Dealers as scapegoats Smart, steady growth works best for suppliers Farley's smart to value Ford's heritage Absurd logic in the U.S., cowardice in Germany BMW, Daimler keep a wary eye on U.S. economy James Franey Dealers' approach can lessen pain of staff cuts GM plans to distinguish Opel with image makeover Make or buy? Software can estimate costs for company Honda, Toyota see robots in their futures Bosch aims to lead in hybrids technology King of hearts Clarke aims to get GM back on track in N.A. Fields navigates Ford through 'white water' LaSorda steers Chrysler's global ventures Toyota's Lentz: A crash course in hard times Truck sales fall 13% in April Modine sells Thermacore unit Alcoa to close Mexico plant Toyoda Gosei expands in Mexico Hayes Lemmerz plans to close Georgia factory Japan's sales slide 2% in 1st quarter; output climbs Dealers Hyundai let U.S. direct Sonata freshening After .com and .edu, is it time for .car? Panoramic sunroof of Lincoln MKS boosts Inalfa sales Chrysler hedged gas price bet Smart phones help dealerships retain customers CAW completes pacts with GM, Chrysler early GM, UAW resolve 2 disputes New media buyer for Chrysler Visteon names Stebbins CEO Convertible registrations drop Ferrari: From denial to debut Buildings Porsches in U.S.? Depends whom you ask Toyota will go slow in Tupelo Ghosn is glum on prices, U.S. sales prospects Pischetsrieder has earned a celebratory cigar NHTSA spins VINs, averts meltdown F_RD GU_S WI_ BUI-_KS 50 PEOPLE FOR 50 YEARS Yutaka Katayama Clarence Talley Jim Morton Pete Brock Marvin Runyon Yoshikazu Hanawa Bill Bruce Shin Maki Jack Collins Mitsuya "Scape" Goto Bob Link Soichi Kawazoe Jerry Hirshberg Takashi Ishihara Roy Rogers John Parker Bob Thomas Teruo Uchino Morrie Sage Bob Thomas Nobe Wakatsuki Earl Hesterberg Carlos Ghosn Lee Clow Jerry Benefield Yutaka Kume Doug Betts Tim McCarthy Jed Connelly Atsushi Nakatsuji Dave Hubbard Joe Opre Patrick Pelata Yoshiyuki Kimura Diane Allen Mad Mike Taylor Chuck King Larry Dominique Mark Igo Mitsuhiko Yamashita Shiro Nakamura Tom Mignanelli Dick Roberts William Cushing Emil Hassan Chester Luby Jane Nakagawa Louis Schweitzer MR. K Ray Lemke Richard McCutcheon

Automotive News - May 19, 2008

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