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Optimism Returns to American Auto Industry
 

Optimism Returns to American Auto Industry

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Strategy & Business article summarizing findings from US Auto industry survey. ...

Strategy & Business article summarizing findings from US Auto industry survey.

Automobiles are selling again, and executives are confident. The U.S. auto industry is positioned for a global economic recovery — if car manufacturers can avoid repeating the mistakes of the past.

Includes a sub-section titled "Chinese OEMs and the U.S. Market — Fact vs. Fiction"

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    Optimism Returns to American Auto Industry Optimism Returns to American Auto Industry Document Transcript

    • strategy+businessONLINE JUNE 4, 2012BY BRIAN COLLIE, SCOTT CORWIN, AND ARJUN KAKKAROptimism Returns tothe American AutomotiveIndustryAutomobiles are selling again, and executives are confident. TheU.S. auto industry is positioned for a global economic recovery —if car manufacturers can avoid repeating the mistakes of the past.
    • T Optimism Returns to the American Automotive Industry Automobiles are selling again, and executives are confident. The U.S. auto industry is positioned for a global economic recovery — if car manufacturers can avoid repeating the mistakes of the past. by Brian Collie, Scott Corwin, and Arjun Kakkar1www.strategy-business.com Exhibit 1: Perceived State of the Industry Compared to 2011 Relative to last year, industry executives are significantly more bullish on the state of the automotive industry. he U.S. auto industry is emerging from one of supply side, 65 percent of respondents cited the auto Somewhat worse the darkest periods in its history. Car sales are industry’s restructuring as one of the top three drivers of climbing, and most estimates predict total sales strong performance. Automotive companies have gone About the same of more than 14 million vehicles in 2012, an increase of to great lengths to improve balance sheets, remove Much better 1% nearly 9 percent over 2011. Car manufacturers and sup- excess capacity, and reduce costs. These efforts have 6% pliers are increasingly profitable, and many automotive allowed both suppliers and manufacturers to lower their 28% industry executives are more bullish about their own break-even point, enabling them to turn a profit on a Somewhat better prospects, and those of the industry at large, than they much smaller total industry volume. have been for years. Better product offerings are a significant factor as More than 200 executives from 75 automakers, well, and new vehicle launches are offering a level of per- 65% suppliers, and dealer groups responded to Booz & formance, technology, safety features, and fuel efficiency Company’s annual U.S. Automotive Industry Survey and Confidence Index, conducted in February and Source: Booz & Company March. Ninety-three percent of the survey respondents view the industry as stronger than a year ago. This is in stark contrast to the results from the 2011 survey, when more than half of all respondents said the industry was about the same as or worse than it was in 2009. (See Exhibit 1.) Unlike housing, which is still searching for a bottom, the automotive industry has emerged from the lows of the 2008–09 recession with a much stronger and more stable foundation for profitable growth. It’s a success story that would have seemed implau- sible in 2009. The industry’s current strength stems from a combination of external forces and the industry’s own improvement, resulting in a far better alignment between supply and demand. (See Exhibit 2.) On the
    • Brian Collie Scott Corwin Arjun Kakkar Also contributing to this year’s study were Booz & Companyis a partner with Booz & is a partner with Booz & is a senior associate with Booz consultant Jessica Newman,Company in Chicago. He Company based in New York. & Company’s automotive prac- senior executive advisor Reidspecializes in business unit He specializes in growth tice, and is based in Cleveland. Wilk, and former seniorstrategy and transformation for strategies for the automotive, associate Patrick Mulcahy.automotive and industrial media, and consumerclients. industries. 2 www.strategy-business.combrian.collie@booz.com scott.corwin@booz.com arjun.kakkar@booz.com Exhibit 2: Key Drivers of Strong 2011 Industry E Performance Survey respondents attributed the improvement in industry performance to OEM and supplier restructuring efforts, along with pent-up demandnever before seen — giving customers far better value experience,” says Dave Cosper, vice chairman and CFO that has led to a rebound in sales.than in the past. Quality ratings for the industry as a at Sonic Automotive, which has more than 100 dealer- Percentage of respondents that ranked a driver in their top 3whole are continuing to improve, and the gap between ships in 15 states and sells 30 makes. OEMsdomestics and imports has narrowed considerably. Among vehicle manufacturers, this entails a new Externally, several factors are turning in the indus- approach: fewer, more profitable car sales each year.try’s favor. Consumer confidence is increasing and cred- One clear sign of this shift in orientation is production Industry Restructuring 62%it is more widely available. Rising fuel prices are capacity. Instead of ramping up to match the highest Pent-Up Demand 58%prompting some buyers to upgrade to more fuel-effi- rate of recovery — the equivalent of recalibrating to the Production Discipline / Tight Inventory 48%cient models. Pent-up demand is also spurring sales. The high-water mark — vehicle manufacturers are main- Improved Customer Confidence 46%average U.S. car today is more than 10 years old and has taining a highly disciplined stance. Certain manufactur- Better Product 34% Suppliers Pricing Discipline 30%logged more than 100,000 miles; both numbers are far ers are operating with very low inventories; for example, Availability of Credit 22%above historical averages. Many consumers who put off some report as few as 15 to 20 DSO (days sales out-purchasing a new car during the recession have less rea-son to do so now. Industry Restructuring 72% Pent-Up Demand 68% The new U.S. auto industry has some major differ- Production Discipline / Tight Inventory 34%ences from the old one, however. For one thing, the cur- Improved Customer Confidence 58%rent optimism among executives is noticeably tempered. Better Product 30%The industry has expressed a sober consensus that it Pricing Discipline 16%needs to grow intelligently, preventing capacity from Availability of Credit 22%growing faster than natural market demand. Projected Source: Booz & Companyindustry volume of roughly 14 million cars and lighttrucks in 2012 still represents a drop of nearly 20 per-cent from the levels sustained through much of the2000s, which hovered at 16 million to 17 million. Yetthis lower baseline represents a much better equilibriumbetween supply and demand. Instead of focusing onvolume and share, automakers are working to buildbrand equity with consumers, improve the customerexperience, strengthen their cost position, and competeglobally. Similarly, suppliers have managed to regainsome leverage in their relationships with manufacturers,and they’re working to stretch existing productioncapacity, rather than invest in new fixed assets. “Theindustry is the most rational it’s been in my 30 years of
    • Exhibit 3: Holding the Line on Pricing Both vehicle manufacturers and suppliers say they are being more disciplined about pricing than they were in years past: a situation deriving from better alignment between supply and demand. Use of Incentives by OEMs Increasing significantly 4% Significantly reducing Increasing 19% 24% opportunistically Holding the line3 53% Use of Pricing by Suppliers Aggressively using 3% price to win businesswww.strategy-business.com Opportunistically 39% Maintaining strong 58% using pricing as a pricing discipline standing), which is far lower than the peak levels of 100 lever to win program DSO experienced a few years ago. Hyundai is a good example. Among respondents to our survey, 88 percent expect Hyundai and its affiliate brand, Kia, to grow share over the next five years, more than any other manufacturer. Yet Hyundai has publicly stated that it does not have a goal of aggressively increas- Source: Booz & Company ing U.S. sales. Instead, it is focusing on improving its quality rankings and brand perception. Survey respondents also said that Ford, Volkswagen/Audi, and, to a lesser degree, BMW would gain market share over the next five years. Yet relative market share is no longer as significant as it was five years ago — another way in which the industry has changed recently. In a rising market, now that manufac- turers have effectively lowered their cost base to become profitable at lower volumes, they can enjoy the benefit of annual increases in market volumes, selling more vehicles profitably and not obsessing over slivers of share to the degree that they did in the past. This will also enable them to maintain a better balance between sup- ply and demand, and focus on medium- and long-term profitability. As Daniel Akerson, the CEO of General Motors, told reporters at the North American International Auto Show in Detroit in January, “I like profitability more than I do market share.” about pricing and production. This is a significant These industry dynamics have also helped manu- change from recent years, when many auto suppliers facturers remain disciplined about pricing. (See Exhibit struggled to earn a return on their invested capital. For 3.) Many auto manufacturers have reduced their need to far too long, many suppliers had been burdened with a rely on sales incentives, which were useful when supply huge asset base — after investing heavily to meet the greatly exceeded demand. According to Edmunds.com, often over-optimistic sales estimates of carmakers — sales incentives for March were down more than 3 per- and were caught in a downward spiral of bidding down cent from the prior month, and nearly 10 percent from their prices in a quest to win business at all costs and fill March 2011, putting them at their lowest level for any the factory. When sales declined in 2009 and 2010, the March since 2002. situation became untenable; more than 60 suppliers It is worth noting that these gains come during a filed for bankruptcy and hundreds of smaller companies period when sales are rising rapidly and price discipline simply folded. is easier to maintain. Some in the industry question Now, suppliers have managed to regain some lever- whether this discipline can last. “I’m not sure we’ve real- age over manufacturers, and they are loath to surrender ly slain the dragon yet,” says Scot Eisenfelder, vice pres- that leverage. A survey by the Original Equipment ident of strategy at AutoNation. “I still see evidence of Suppliers Association found that 76 percent planned to push-based distribution, whether it’s in pockets of par- run overtime shifts in the first quarter of 2012, and ticular vehicles or whole model lineups. We don’t have a more than half of our respondents said they were con- system that reflects true demand.” The real test will strained by capacity. In other words, even as overall vol- come when the market experiences a month — or sev- umes and orders rise, many suppliers are choosing to eral — of slow sales and inventories build up. When postpone investing in new fixed assets that would that happens, will automakers stay disciplined and work increase production capacity, opting instead to add to “sell the car”? Or will they try to “sell the deal”? overtime shifts and other incremental approaches in Suppliers have also become much more disciplined order to optimize their existing capacity.
    • Exhibit 4: Expected U.S. Market Share of Alternative Powertrains by 2020 Alternative powertrains will gain share; however, adoption rates are seen as being extremely sensitive to government support. With Continued Expected Government Support... Share ... and Without 58% 30% Over 10% of respondents 4 20% 5%–10% 50% 29% www.strategy-business.com 0–5% 13% With this better alignment between supply andFour Key Forces for the Futuredemand, suppliers are now in a much stronger positionto set sustainable prices. The days of suppliers providingbig price markdowns may be over. In interviews, suppli-ers who had complained for years about “taking it on Source: Booz & Companythe nose” now say the crisis has shifted the balance ofpower. Many supplier sectors no longer have excesscapacity. In particular, suppliers that are truly differenti-ated — in terms of technology, manufacturing, orbranding — report that they have more leverage nowover manufacturers than ever before. Given the likely continued increase in sales, suppli-ers can afford to postpone new capital investments foronly so long. In making these choices on how and whereto expand, suppliers must bear in mind their relativecompetitive positioning, their strategic goals, and theirown independent view of demand — developing moreadvanced and analytically rigorous capabilities and link-ing all the pockets of knowledge in individual businessunits. Furthermore, these new investments should bemade only after all steps have been taken to stretch cur- the shift in demand around the world. The U.S.rent capacity. (See “Memo to Suppliers: Improve Your remains the most profitable automotive market, and theCapacity Planning,” below.) place where all global manufacturers need to succeed. But over the long term, emerging markets have much stronger growth prospects. Automakers must preserveThe survey results illustrate several fundamental forces their competitive position in developed, mature marketsthat will collectively shape the U.S. auto industry over while also funding the investment necessary for longer-the coming years: (1) a reemergence of fundamentals, term growth elsewhere. To that end, they need a better(2) a shift in demand centers, (3) uncertainties about understanding of emerging markets — which havealternative powertrains and other technology, and (4) an unfamiliar economics, consumer profiles, and competi-increasingly interconnected supply chain. tive dynamics. First, the reemergence of fundamentals is evident Third, there are real uncertainties about alternativethroughout the survey results, which illustrates just how powertrains — including electric vehicles, fuel cells, andmuch potential this industry has to be a profit engine. hybrids — and other technologies. The industry is onMany major auto manufacturers and suppliers effective- the cusp of significant technological changes that couldly hit the reset button to make more efficient use of pro- result in paradigm-shifting innovation. Whether a com-duction capacity and generate a profit at lower volumes. pany is a leader or a follower, playing in these new mar-Now, as sales volumes rebound, driven in large part by kets will require a significant investment in bothpent-up demand, easier credit, and greater consumer financial and human capital. Companies should thus beconfidence, executives are seeing these efforts pay off. very selective in placing their bets; they should investMany companies report record profitability since mid- only where they have confidence that they have the dis-2011. Also, as one might expect in a product-led recov- tinctive capabilities necessary to win, and that theseery, the industry leaders tended to express strong investments are coherent with their broader strategy.confidence in their current portfolio. In our view, these One major uncertainty about alternative power-findings represent a sober, collective recognition on the trains is the level of government support they willpart of auto companies and suppliers that they need to receive. Half of the respondents to the survey said thatgrow intelligently and not chase sales volume for its own this segment will remain limited to 5 percent or less ofsake. the U.S. market in 2020 — without government sup- The second key force that will shape the industry is port. (See Exhibit 4.) But close to 60 percent of respon-
    • Once you have a clearer idea of fixed investments increase your capacity requirements needed to fill capacity enough to meet demand? the gap in the short and long term, • How flexible is your existing you can consider specific measures production equipment? Are you strik- to increase capacity while optimizing ing the right balance between significant investments in fixed focused factories and flexible manu- assets. For example: facturing? • Increase production hours or • Do your other regional or staffing levels by using existing shifts global facilities have available capac- by Arvind Kaushal and Steven Eldam to schedule overtime production or ity that can cost-effectively serve adding shifts to increase overall incremental demand? As demand rebounds, suppliers are capacity. • Will hiring new employees in working hard to stretch current • Eliminate production bottle- the short term create long-term lia-5 capacity further and postpone com- necks by increasing staffing levels, bilities? Are there facilities that offer mitting to major capital investments adding equipment, or outsourcing a lower-risk option? until absolutely necessary. This is a non-core processes to generate bet- The key is to invest in new tightrope act in which the conse- ter throughput. capacity only if you are confident of quences of miscalculation are steep • Improve overall equipment sustainable demand and sure that — including potentially shutting down effectiveness (OEE) by enhancing the new capacity will be cost advan- vehicle production at a manufacturer equipment availability, increasing taged relative to competitors (on thewww.strategy-business.com and losing that business forever. productivity, and improving quality. left side of the supply curve). This will An objective, integrated view of • Increase flexibility of existing help cushion the impact of demand Memo to short- and long-term demand is a equipment to provide the capability to shortfalls. All else being equal, you critical first step in developing the shift production between facilities or may prefer adding capacity in regions Suppliers: Improve right response to the capacity gap between production lines within where you have opportunities to challenge. Although it’s important to facilities. repurpose the capacity to a fast- Your Capacity understand your customers’ view of • Invest in new capacity if need- growing market, in case there are demand growth projections, that ed to meet lasting high demand. hiccups in the region for which the Planning should not be the only major consid- To help you decide on the set of capacity was initially intended. eration. The key to developing confi- options that would work best for your dence in your demand forecast is to company, consider formulating Arvind Kaushal triangulate the external and internal responses to the following key ques- views, gathered from across the tions: is a partner with Booz & Company organization, using them to develop • How confident are you in the based in Chicago. an integrated view of various demand demand forecast? scenarios. This growth projection • Is the expected demand– Steven Eldam capability is at a nascent stage at capacity gap short term or long many suppliers and is often the basis term? is a senior associate with Booz & of disconnection between sales and • Would incremental capacity Company based in Chicago. operations. improvements without significant arvind.kaushal@booz.com steven.eldam@booz.com dents said that if the U.S. government continues or uncertain future, given the current fiscal environment. expands its support of alternative powertrains, they In the end, adoption of this automobile segment will expect penetration of 10 percent or more of the U.S. depend not just on continued support but on the right market by 2020. kind of support. Truly disruptive technologies such as Either way, government subsidies for consumers plug-in vehicles will require a more balanced approach who buy these cars, along with support for companies to government assistance, such as infrastructure support working to advance alternative powertrains, have an for a national grid of charging stations.
    • Exhibit 5: Getting Ready for the Next “Black Swan”In response to the devastating earthquake and tsunami in Japan, many OEMs and suppliers have taken some concrete steps to reduce the riskfrom future unpredictable catastrophic events. Worked with suppliers on contingency planning 51% Identified risks and developed contingency plans 42% Moved to increase the use of dual sourcing 31% Moved to localize supply base 29% 6 Built redundancy into sourcing 19%Created new org. structure for risk management 19% No action taken 12% Other 4% www.strategy-business.com 0% 10% 20% 30% 40% 50% 60%Source: Booz & Company Even with government support, adoption rates of plans to develop their own proprietary in-vehicle tech-alternative powertrain vehicles have fallen short of nology for consumer digitization — providingexpectations thus far, because the inherent cost differ- advanced customized electronics and inboard access to aences have proven too substantial to be recovered with- variety of media. This may be a potentially risky strate-out a sizable and sustained increase in fuel prices. gy, given the fact that personal technology devices haveBelow-expected sales volume has made it difficult for far shorter product cycles than automobiles — witnessmanufacturers to recoup their own investments, at least the ubiquity of GPS systems on mobile phones — andso far. Differences across geographic markets pose an the way that a single family may have multiple driversadditional level of complexity — given national varia- who share multiple cars.tions in energy supply and consumption, no single pow- The fourth and final force that will shape theertrain technology will replace the internal combustion industry in the coming years is an increasingly inter-engine. connected supply chain. In 2011, the Japanese tsunami “A lot depends on advancement in technology,” says and the floods in Thailand brought home the limita-Mark McNabb, president and CEO of Maserati North tions of a lean global supply chain facing “black swan”America. “Battery technology has to be more enhanced events. Many of the incremental benefits from just-in-to make a strong business case. It’s a higher cost, and the time inventory evaporated in six months, especially atanxiety over range is an issue for plug-ins with a lot of manufacturers that had limited safety stocks. Amongconsumers. I think success hinges on two factors: a respondents to the survey, more than 80 percent saidcoherent government policy, and how quickly the tech- they were affected by the Japanese earthquake andnology can advance. In the meantime, manufacturers are tsunami (although some were helped by risk mitigationspending a lot of money working on this, and they’re measures already in place).spreading it around to a lot of different ideas.” Since then, both suppliers and manufacturers have A more immediate return could come from taken steps to prevent similar mishaps. They assessedenhanced investments to improve the fuel economy of the damage, weighed future events and probabilities,traditional internal combustion engines. “There’s still a and are working with each other to be better prepared.lot of life left in that technology,” says Scot Eisenfelder In the past year, 19 percent of manufacturers have builtof AutoNation. “Through design changes and other new organizational capabilities to manage risk, anincremental gains, you can generate a significant implicit admission that sufficient mechanisms were notimprovement in fuel economy without relying on a dis- in place before the quake. For suppliers, these risks,ruptive technology.” although daunting, offer an upside opportunity. This same uncertainty applies to in-vehicle connec- Companies that differentiate themselves by shock-tivity and entertainment. Approximately 40 percent of proofing their end of the supply chain will have a clearmanufacturers that responded to our survey expressed competitive advantage beyond price. (See Exhibit 5.)
    • Is the projected level of market domestic Chinese players are penetration shown in Exhibit 6 likely? focused primarily on selling to first- Maybe, but not by 2020. The actual time buyers in hypercompetitive performance and capabilities of the entry-level segments, where margins leading Chinese vehicle manufactur- are difficult to sustain. Thus, the over- ers — as well as their readiness to all profitability of these companies is compete in developed markets such typically quite low. That reduces the as the U.S. — is overestimated, for resources they have to expand over- several reasons. First, the size and seas. by Bill Peng, John Jullens, and scale of these Chinese companies are Furthermore, none of the leading Bill Russo fairly small, especially when one sep- Chinese manufacturers has yet arates the sales volumes of their achieved a major product or process One question facing the U.S. auto Western joint-venture partners. In breakthrough that could give it a sig-7 industry is the potential entry of most cases, the joint venture itself far nificant competitive advantage. This Chinese car manufacturers into the overshadows their relatively young is in sharp contrast to companies like Exhibit 6: How Rapidly Will Chinese Automakers American market. More than 50 per- Chinese brands. In addition, the Toyota, which built its initial position Enter the U.S.? cent of respondents to our survey said they expect China to own more than 5 percent of the American auto- mobile market by 2020. (See Exhibitwww.strategy-business.com 6.) Under this thinking, China would replicate the strategy of Japanese Chinese OEMs carmakers 30 years ago and Korean manufacturers a decade ago: and the U.S. Executives forecast a rate of U.S. market penetration for Chinese auto Establish a foothold with low prices, manufacturers that exceeds historical precedent. But currently, only Geely (with Volvo) and Great Wall have announced detailed plans to enter and then improve quality and brand Market — Fact vs. the U.S. market. perceptions. The only difference, Percent of according to this view, is that Chinese 47% Fiction respondents companies could accomplish this faster and more easily, because the 32% size of their home market will give them more opportunities for domes- tic growth. 12% 10% Forecasted Chinese OEM Share of U.S. 0%–4% 4%–8% 8%–12% Over 12% Market in 2020 SHARE Source: Booz & Company Capabilities for Growth It is not clear whether the industry is now fully pre- now face several external risks, including changes in pared for the next black swan event. Risk mitigation government regulation, potential fuel disruptions from measures are expensive, and, in a brutally competitive the Middle East, and continued economic woes in sector, they eat into margins. Accordingly, companies in Europe. Yet if history is any guide, the greater risk could the industry must determine an appropriate level of be from becoming overly optimistic about the market investment — low enough to be cost-effective, and high and expanding to meet demand that does not material- enough to ease the risk of being surprised by the next ize quickly. supply chain disruption. “In my experience, after 30 years in this business, every year someone else says, ‘I’m the guy with the great product lineup, and so I’m going to open a new plant, The executives of the auto industry’s leading companies add more shifts,’ ” says Robert Fazio, executive director have many reasons to feel proud this year. They haven’t of sales operations at Edmunds.com. “The high-poten- coasted on bailouts; they have learned some hard lessons tial dollars per unit are just too enticing. And the capac- and built a stable platform for profitable growth. They ity creeps up.” If that happens, and others try to keep
    • in the U.S. through its famed Toyota talents of a worldwide human equipped models at very low prices,production system, a new and (at the resources pool. That won’t happen putting significant pressure ontime) vastly superior operating model overnight. It will also take some time incumbent players. For suppliers,relative to Detroit’s older mass pro- for Chinese carmakers to learn to that outcome may present opportuni-duction system. compete in markets where they don’t ties. Chinese manufacturers will have All of this is certainly not lost on have the benefit of a low-paid labor to rely on existing U.S. suppliers,the leading Chinese manufacturers, force, management team, and suppli- owing to their capability advantagesuch as Chery, Geely, Great Wall, and er base, and without favorable sub- over Chinese suppliers. To captureSAIC. These companies have all set sidy policies from the central and those business opportunities, Tieraggressive international expansion local governments. These companies One suppliers should begin to buildtargets of more than 500,000 units by must build a retail network and brand close partnerships with leading vehi-2015, but almost entirely in develop- in the U.S., which is a substantial cle brands in China, through jointing countries, instead of in the more investment. ventures or by developing simultane-mature North American and Nevertheless, many Chinese ous engineering initiatives. 8European markets. It will probably automotive executives aspire to cap-take several more years before they ture a meaningful share of the U.S. Bill Pengcan consistently meet competitive market. Some have started to evalu-product reliability and durability stan- ate potential entry strategies. For is a principal with Booz & Companydards, along with U.S. roadworthi- example, Great Wall, China’s leading based in Beijing.ness requirements and product producer of SUVs, is in discussions www.strategy-business.comspecifications. In fact, many Chinese with several companies to establish a John Jullensmanufacturers fear the potential dealer network in the U.S., whereasproduct liability and other lawsuits BYD is testing its alternative energy is a partner with Booz & Companycommon in the litigious U.S. business models, including the all-electric e6 based in Shanghai.environment. For these reasons, even Premier. SAIC, China’s largestamong developed markets, Europe automaker, has bought a majority Bill Russomay be a bigger priority for Chinese share in Visteon’s global interiorscompanies than the United States. business with the objective of devel- is a senior industry advisor with Booz To crack global markets, oping its supplier capability in the & Company based in Beijing and aChinese automakers must develop United States. former vice president of Chrysler’sworld-class supply chains and sup- Eventually, the U.S. market will business in Northeast Asia.plier partnerships, offer competitive see more competitors emerging fromfinancing products, and deploy the China, who will likely offer well- Resources bill.peng@booz.comrepeating the mistakes of the past. + john.jullens@booz.com bill.russo@booz.compace, supply will begin to overtake demand, steep incen-tives will reappear, and the industry will be back in a sit-uation of too much capacity, relying on incentives to Ben Klayman, “GM Focusing on Profits, Not Market Share: CEO,”move cars. Reuters, January 9, 2012, www.reuters.com/article/2012/01/09/us-gm- Here’s another scenario, though: If the U.S. auto usshare-idUSTRE8081MU20120109: Describes CEO Dan Akerson’s comments at the Detroit auto show regarding GM’s renewed push onindustry can stay disciplined and preserve the efficien- fundamentals rather than sales volume.cies it fought so hard to implement, it will remain cost-competitive with the most efficient car markets in the Alan Ohnsman, “Hyundai Puts Quality Advances Ahead of 2012 U.S. Sales Goals,” Bloomberg Business Week, January 9, 2012,world. It will be smaller than it was in the artificially www.businessweek.com/news/2012-01-10/hyundai-puts-quality-inflated boom years of the past, but will have a far advances-ahead-of-2012-u-s-sales-goals.html: Describes the automaker’sgreater focus on fundamentals. And it will sell higher- willingness to sacrifice incremental sales growth and focus instead on improving its quality scores.quality cars at greater profits. Which path the industrytakes lies within its own control, provided it can avoid
    • strategy+business magazineis published by Booz & Company Inc.To subscribe, visit strategy-business.comor call 1-855-869-4862.For more information about Booz & Company,visit booz.com• strategy-business.com• facebook.com/strategybusiness• http://twitter.com/stratandbiz101 Park Ave., 18th Floor, New York, NY 10178Looking Booz & Company Inc.© 2012 for Booz Allen Hamilton? It can be found at at www.boozallen.com