503 - Automotive_Industry

8/3/2019 503 - Automotive_Industry

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administrative situation.Research Associate WolfgangAmann updated this note in2005.

IMD-3-0911(GM911)

In 2004 the car industry was the world's largest manufacturingindustry, and the most global. What was once a comfortable,predictable, nationalist industry had gone forever--global reachand critical mass were required to survive. The call foreconomies of scale led to previously unthinkable deals, such asthe DaimlerChrysler "merger of equals," the Renault-Nissanconnection, and Ford's acquisition of Volvo, Jaguar, Land Roverand Aston Martin.However, the mood in the industry had changed considerablysince the announcement of these mega-mergers in 1998 and1999 respectively. The president of Chrysler was removed inNovember 2000 after a mere l2-month stint and Fortunecommented: "The hottest company of the past decade, Chryslerhas become the biggest turkey of the new one. Its problemsencompass everything from aging designs and untimely modelchangeovers to flawed marketing strategies." However, theproblems in the industry were not limited to DaimlerChrysler.American car manufacturers were struggling in Europe, andsome European carmakers were trying to overcome thechallenges of globalization. Meanwhile Toyota reported higherprofits for 2003 than GM, Ford and DaimlerChrysler together.The figures were based on a market capitalization that alsoexceeded that of the three followers combined.Besides the operational challenges, car executives wereincreasingly concerned about new entrants attacking variousparts of the value chain. Although the industry wasconsolidating, it still offered many profitable niches. Butcould car companies exploit them?

Copyright 2005 by IMD - InternationalDevelopment, Lausanne, Switzerland. Not to be u,:'" 'J4'o,,!J( rwritten permission directly from IMD.

ehe case for learning Rest of the worldt +44 (0)1234 750903f +44(0)1234751125e [email protected]
mailto:[email protected]:[email protected]


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//\~~~\\/,,\->v_/ / ' ~ " ' . J - " '-,'yfl~,,,.teduci1}fipfoduction cost~ was not ~nough to. satisfy customers.Inc 1(,>::Uf\~~j)r irSwere deman~mg extras WIthout ~antmg to pay more _for1O'hl,s'JY7profitableccessones such as power windows, central lockingcOl\d1ttioningwere increasingly included in the standard package./) (:)y~/


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C : " ( \/_'"""'v/ ; ~ ~ \ < s ~~ ."~l\\,"))Smart capacity managerr:~fi:(\'i1a'Chip4~resented another key challenge. Startingin 2005, Mercedes-~,~nz"\6tf1~~.fl~iv20,000 C-class and E-class cars in China

annually. _ I I ! ord~r(to:::GJ1qpenge;;:t~JI(swag~n,~ wa~ adding another $3 billion tothe $2 billion ).t.jl,accafreaqY

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IMD-3-0911M)since they still made subst~"'" ''miums possible. Brand management wasa core competency, 1~~dihK:'/ ues of billions of dollars. The industry waslikely to see more/Pt1~comp n as well. To name but two examples, India'sTata Motors w)l~'~e'Yelopi car that would cost $2,000 and Renault waspromoting a 1 ,6 ~uclget;D for sale in eastern Europe, Turkey, the MiddleEast, Lat~:/place. Alt~ough ther~ were still approximately 1,50~ SImilar Intttn~r\'platforms m 2003, this number was a mere 200 by mId-2004. After tblS/ h < Ntrough .of disillusionment, there w~~e signs that the .Inter~et/:Jil'g~ be ; ( t ~ 3 Vembarkmg on a plateau of profitabllIt;: after a profeSSIOnal}fo:~,t'!:~I$fl,"l~~e- "" "' ' ' ' '' ' -\ < : \ ~ : ; , >

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1M) IMD-3-0911;::"\ -e, ',/ /d~~', I\~jl)rleril prices were relatively high. Oil also had a political dimension.::::tJltf'~dvertisementsby non-governmental organizations in the US heldt'\.bliyers of large SUV s responsible for funding terrorism. Thus the industrye",',. '~"\_ /f .(....\,v Emerging, growing markets, especially China, repV~8~c?1;1t,eQ/:ar .' :~~llengefor all players. Less than one-third of jOi(t2-~!~b 'ina were/~'''(,//[") )",~./ " ' ~ ~ > ~ " . vI - ;

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503 - Automotive_Industry