Todays Turbulence: A Foundation for Future Success Todays Turbulence: A Foundation for Future Success David E. Cole Chairman Center for Automotive Research.

Today’s Turbulence: A Today’s Turbulence: A Foundation for Future SuccessFoundation for Future Success

David E. ColeChairman

Center for Automotive Research (CAR)

NASACT Annual Conference

Ritz-CarltonDearborn, Michigan

August 17, 2009

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2

NASA

“Houston We Have a Problem”

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3

Auto

“We Have a Problem”

Mostly Revenue –

with Depression Level of Sales

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4

Pillars of EconomyPillars of Economy

Mining

Agriculture

Manufacturing

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5

Manufacturing Like Rodney Dangerfield –

“Don’t Get No Respect”

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6

Across the Land –

Amazing Level of Ignorance on Auto Industry

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7

The Perfect StormThe Perfect Storm

Benefits

Hyper Competition

Competent New Players: China, India, …

Auto Industry

Tools

Materials

Policy

Money

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8

Auto Industry of the FutureAuto Industry of the Future

A World of

Vanishing Boundaries

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9

Energy

Policy

Money

Survival

Key Contemporary IssuesKey Contemporary Issues

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10

Economic Contribution of the Economic Contribution of the U.S. Automotive IndustryU.S. Automotive Industry

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11

Auto ManufacturingAuto Manufacturing

Manufacturers . . . . 332,000 + jobs

Parts Suppliers . . . . 544,000 + jobs

R & D Spending . . . $16 + billion

Source: BLS, NSF *includes NAICS 3361, 3362

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12

Economic Contribution Per JobEconomic Contribution Per Job

Auto Mfr. $329,000

Average Job $112,000

Source: U.S. Census Bureau Annual Survey Manufacturers 2005

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13

Economic MultiplierEconomic Multiplier

Auto Manufacturers – 7.5

Auto Parts Supplier – 5.7

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14

We Are Swimming a River

That is Getting;

Faster, Deeper, & Wider

But!

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15

The Pot of Gold on theThe Pot of Gold on the Other Side is Getting Larger Other Side is Getting Larger

Labor Cost ReductionHousehold GrowthPent-Up DemandCapacity ReductionScrappageReturn of Pricing Power

PALE Meeting-March 19, 2009 16

However, Will It Come Back . . ?U.S. Light Vehicle Sales Forecast

Source: CSM Worldwide, J.D. Power

+4.4 M+6.8 M

+8.9 M+2.4 M

-9.3 M -5.2 M

-8.0 M

PALE Meeting-March 19, 2009 17

U.S. Light Vehicle Sales History and ForecastCombined J.D. Power and CSM Worldwide Forecast

2007 - 2014

16.1

13.2

10.0

11.6

15.1

16.516.1

14.1

9

10

11

12

13

14

15

16

17

2007 2008 2009 2010 2011 2012 2013 2014

Source: CSM Worldwide, JD Power, Inc.

Mil

lio

ns

Mil

lio

ns

PALE Meeting-March 19, 2009 18

US Light Vehicle Sales Forecast

10,000

12,000

14,000

16,000

18,000

20,000

2008 2009 2010 2011 2012 2013 2014 2015 2016

Th

ou

san

d U

nit

s

10,000

12,000

14,000

16,000

18,000

20,000

Th

ou

san

d U

nit

s

High Low

Last update: Mar 17 2009

19

The Challenge:

Getting to the Other Side

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Failure of a Major OEM Failure of a Major OEM Would be a National DisasterWould be a National Disaster

2+ Million Job Loss

$100+ Billion Tax Impact

Prevention < $50 Billion

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2121

First year:

2.5 to 3.0 million jobs

LOST

50 to 100 Percent 50 to 100 Percent Detroit Three Shutdown Detroit Three Shutdown

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2222

After three years:

$275 to $400 billion personal income

$110 to $160 billion tax receipts

LOST

50 to 100 Percent 50 to 100 Percent Detroit Three Shutdown Detroit Three Shutdown

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23

“Ounce of Prevention is

Worth a Pound of Cure”

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24

Beware: The Aging of the Boomers.

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25

DemographicsDemographics

Consumer Behavior

Socio / Political

Health Care

Skilled Workers

World Issue

“Boomers go Boom”

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26

Auto Industry - Auto Industry -

Thousands of New Jobs – But OnlyThousands of New Jobs – But Only

for the Educatedfor the Educated

Automotive Communities Program17 April 2008

Kristin Dziczek, [email protected] Bernard Swiecki, [email protected]

Center for Automotive ResearchAnn Arbor, MI

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Success Requires Improvements in:Success Requires Improvements in:

Cost

Revenue

Agility

Innovation

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29

The Old Business Model

is Broken

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30

BureaucracyPaper Linear

Slow Lean

IndividualSequential

Regional

Physical Prototypes

Job for LifeKings

Talk

Competition StructuredAcquisitions

Vertical Integration

Legalistic

Old Business ModelOld Business Model

Control

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31

Anti-bureaucracyPaperless Collaboration

Fast Lean Agile

Teame-enabled

Global

Virtual Prototypes

People Flow Coaches

Listen

Coopetition

Parallel

FlexibleAlliances

Virtual Integration

Trust

New Business ModelNew Business Model

Empowerment

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32

TimeTime

Present Business Present Business ModelModel

New BusinessNew BusinessModelModel

RealReal

DesiredDesired

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33

Global Integration-Global Integration-

Platforms

Components

R & D

Plants

Everything

One Company World-wideOne Company World-wide

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34

Value of Global Economies of

Scale are Huge

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35

Lean / AgileLean / Agile

Investment

Engineering

Manufacturing

Everything

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36

Collaboration Driven by

Resource Shortage

Natural

Financi

al

Human

Time

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37

KnowledgeKnowledge

The Competitive Edge

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38

It’s nice to be smart and rich,

but smart is more

important than rich.

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39

Customer Pull

Cars and Trucks

Productand

Process

Technology Push

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40

TimeTime

KnowledgeKnowledgeApplicationApplication

KnowledgeKnowledge

Competitive Competitive AdvantageAdvantage

InnovationInnovation

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41

Auto TechnologyAuto Technology

At the edge of a revolution?

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42

Future Power Plants Future Power Plants

Gasoline

Diesel

Hybrid

Fuel Cell

The Answer – ?

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43

Coming Fast – Plug-in, Coming Fast – Plug-in, Series HybridsSeries Hybrids

ororExtended RangeExtended RangeElectric VehiclesElectric Vehicles

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44

Future FuelsFuture Fuels

Petroleum

Bio

Hydrogen

The Answer – ?

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45

Future Gasoline Price –

$ 1.50 – $ 5.00 /gallon

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46

Old Carbon Fuels Will ContinueOld Carbon Fuels Will Continueto be Used if they are Economicto be Used if they are Economic

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47

2 Key Developments2 Key Developments

Lithium Batteries

Cellulosic Bio Fuels

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48

Developments to WatchDevelopments to Watch

Vehicle/Infrastructure Integration

Auto/Utility Integration

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49

Future DirectionFuture Direction

It’s All a Matter of Economics

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50

World ClassWorld Class

is a Moving Targetis a Moving Target

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Upcoming CAR EventsUpcoming CAR Events

October 19-21, 2009–

The Business of Plugging In. A Plug-in Electric Vehicle Conference, Detroit, Michigan

Additional information available at CAR’s website www.cargroup.org

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