A little more than 12 years ago, the late Alex Trotman, then chairman and CEO of Ford, sat down with a magazine editor to talk about the global auto industry. One of the themes he kept returning to was global overcapacity - too many OEMs supported by too many suppliers with too many factories and a surplus of dealers.
At the time, the global industry sold about 50 million vehicles annually but had the capacity to build 70 million. He knew, with the ambitious growth plans of Asian automakers, that the problem was only going to get worse.
Trotman rationally predicted that there would be fewer automakers and far fewer suppliers and dealers. But capacity is sticky, as successive CEOs around the globe know all too well.
Once capacity is installed, it's very difficult to remove because of strong unions, political pressures, state franchise laws and other factors. As a result, very little net consolidation actually occurred.
Even our current crisis hasn't removed as much capacity as one would have expected, no matter what part of the value chain you look at.
For example, we project that 21.1 million units of excess global production capacity will still exist in 2012. The number of suppliers, dealers and brands also remains higher than many had anticipated.
What has slowed the pace of consolidation?
Does that mean we as an industry are wasting a good crisis, as the saying goes? The answer to that question is, for the most part, no.
As Michael Robinet points out in this issue of Insights, many OEMs are, in effect, merging with themselves to reduce or eliminate their internal overcapacity.
He cites some eye-opening figures about the economies of scale that companies like Ford, Renault-Nissan and Toyota expect to achieve by deriving more of their global volume from far fewer platforms. We expect to see Renault-Nissan, for example, increase its average volume per platform in the B-D segments by 380 percent.
That will put them in a far stronger competitive position than companies who continue to operate regionally, or who lack strategic alliances for product development and manufacturing.
What this means to suppliers is clear: There will be fewer but better opportunities for companies with the right relationships, technologies and geographic footprints.
To give you the most accurate and complete view of market trends like the internal mergers going on at OEMs, we at CSM are continually investing in our forecasting capabilities.
Over the next several months, you'll be seeing several new and enhanced products that will help you plan and invest even more strategically.
It's all part of our commitment to give you the tools you need to succeed, no matter what the sales environment looks like.
Thanks for reading,
Craig Cather
President & CEO
