TABLE OF CONTENTS The fun has gone out of what should be the most exciting industry on the planet.
Thomas Stallkamp, speech at Global Leadership Conference, White SulphurSprings, West Virginia, October 2002, quoted in Automotive News, October 28
The clear message so far is that manufacturers can either (a) sell as many cars as can be sold with the liberal use of incentives and stock holding or (b) sell fewer cars at a higher prices by meeting customers needs.
What is the cost of continuing on path a? Could things get any worse? The state of the industry is abysmal. Manufacturers try to keep up volume; suppliers try to avoid bankruptcy. Manufacturers and suppliers engage in mergers in the hope that the resulting alliances will give them the critical mass for survival. Profit-and-loss cycles wreak havoc not only on investors but also on employees, the supply base, and the economy in general. (Other concerns include the benefit and pension obligations the Big Three, particularly GM, will face over the coming years. See G. Lapidus et al., Automobiles United States, Research Report: May 31, Goldman Sachs, New York, 2001.) While these cycles do relate to business cycles, the industry seems to learn nothing from one cycle to the next. Capacity is built during each upturn, but is not eliminated when times are leaner. The problem, Goldman Sachs aptly observed, is they re sizing demand to meet capacity rather than sizing...
