Auto Industry

Bright Future for Auto-Industry

/ prabasiva / 2 Comments

Simplifying a complex problem by breaking into small solvable parts and using knowledge learned in a driving school during a fatal accident are simplification and abstraction techniques widely used in a practical  world. Have you ever noticed the behavior of a person during  a fatal accident? During an accident, provided the person is not seriously injured and able to think to their capacity, the capacity (volume) and capability (strength) of the person is fully utilized to face and over come the situation. The capacity, capability and the effective utilization of it during the crisis or fatal accident increases exponentially.  If some one deeply think about why most of the people become effective during the crisis is due to extreme focus the brain forces itself to get over the situation. That is ultimatum for some of existing meditation techniques and the same reason why some of the adventures sports like rock climbing are very attractive. It is a kind of enforcement mind brings to mind itself. But at the same time, mind does not perform the strategic analysis  to its best during the crisis mode and that is the same reason why the best supreme court lawyer hires another lawyer when they face a crisis.

How this is relevant to current auto industry?

Well, GM and Chrysler both have had faced a separate fatal accidents.  Both are utilizing their capacity, capability and utilizing it effectively. When it comes to survival, as Maslow theory in the management suggests, your basic needs becomes top most priority and enlightenment are out of focus.  The decisions and execution made in last few weeks generally would have taken decades in their corporate culture. Executive management totally understand how to move forward. With assistance with auto task forces, concessions with unions, agreement with debtors ,reduction in  dealer network, dropping a brand, focus on fuel efficiency and quality  are good signs for a great recovery.

Why a great recovery waiting for them?

Four years ago, US market sold 17.5 Million units per year. This year, industry is struggling to sell 10 Million units. The average car age in America today is 9 years old.  Car purchase is the second biggest purchase a consumer would make after the American dream of owning a house.  Consumer confidence is the key and it is and it will continue to gain slowly for next 9 months and rapidly after that.  The credit market is far better than it was 6 months ago with enough capital infusion to credit market. Introducing better credit standards, oversight and governance, the credit market is stabilizing. The moment a person believes their jobs are safe, the consumer confidence in stock market, retail purchase, credit market will raise and the consumer is going to donate their 10 years old car to charity and buy the fuel efficient (Hybrid, Diesel, Electric) car. Both GM, Chrysler are making tough choices now and getting  ready to meet the huge market demand in 18 months.

Until then, sit tight and be part of the touch choices and move Detroit to new 2011++ future.

Yes I hear you.., I have not written a blog for almost a month.. that is mainly due to my last few weeks focus on completing  the graduate course on Linear Algebra. I had my finals yesterday and thinking about, should I take Dynamical Systems and Choas theory in summer. It will definetely help to model the current economical situation!!!

Out of box ideas for Big 3 – Strategist view

/ prabasiva / Leave a comment

American auto industry in the brink of collapse and Deutsche bank slashed the GM target price to zero. Big three (Chrysler, Ford, General Motors) actively looking for government aid and president elect is committed even before election to assist to maintain the American iconic auto industry.  All big three need immediate cash to survive but need products and customers to sustain. They will survive for now if government provides assistance, will they sustain?

Here are my out of the box sustainability ideas to keep the icons alive:

  • Ask U.S Government to provide defense contracts to manufacture big trucks, small trucks & jeep
  • Send the highly paid sales VPs to meet the defense ministers of countries like Israel, Saudi Arabia, Finland, Norway and etc to get defense contracts to manufacture trucks and jeeps
  • Big three should collaboratively compete. Follow Nash equilibrium. Let Chrysler only make minivan & jeep, Ford only make truck and GM only make SUV & Sedan.
  • Ask U.S government to subsidize gas price for next 2 years. That is the price of gas will be fixed as $1.50 for next 2-3 years.
  • Establish American Auto Research firm (like Routeone) with the goal of producing a blue print to manufacture 80 miles per gallon car in 2 years. (WE CAN DO IT!! YES, WE CAN DO IT) Hire a quantum physicist as the CEO of AAR.  The guy who understands quantum can do anything!!
  • Change the culture. I heard, group of highly paid employees work really hard on a presentation for weeks (sometime months) to present and please a small set of executives. Cut the crap and ask everyone to relate their work to bottom line. Ask employees NOT to do a task if it does not directly relate to customer, product, cost, revenue and quality. Need strategic minded ,practical leaders deployed across to transform each division in each company