Evolution in the automotive world is an ongoing process. Brands start up, fail and fall by the wayside, shuttered forever left only as a hollow name. You may know many of them by the names: Edsel, Packard, Tucker and Cord. Even more recently brands such as Eagle, AMC, and Oldsmobile have become just distant memories and rusting hulks.
Back in the 70’s the big three were on top of the world in the U.S. market and scoffed at the very idea of imports eventually dominating the landscape. But then came the 80’s and early 90’s, and a decade of poor management decisions, deteriorating quality, and shoddy designs and a whole generation was taught that American cars were simply unfit.
As we round out the first decade of the 21st century, we see Detroit’s decisions may come back to haunt them, yet again. This time, the very process that saves the bottom line today, may eventually lead to more hostile environment in the near future. The sale of the Jaguar, Land Rover, and possibly the sale of at least one of GM’s brands may forever change the landscape as we know it.
With the dire economic downturn of the major makers are not only revaluating brands, but now they are jettisoning of whole wings of the manufacturing process. While the current practice of selling an unprofitable division may make economic sense. I see a far more dangerous side of the equation.
In the past brands were simply shuttered. The factories idled, and the infrastructure abandoned or stripped. Today however, the sale of whole entities now allows these critical structures to remain in place. An excellent case in point is the sale of Jaguar and Land Rover to the Indian firm of Tata. Rather than creating the whole infrastructure over several years as relatively recent brands like Hyundai and Kia have done. Tata now has an instant infrastructure of shipping, supply and even dealerships in place to continue with the sale of these luxury marques. Talk about an instant presence in a market that Tata couldn’t even break into a year ago. But how can this infrastructure be leveraged for new lines? You would be naive to think not, Jaguar potentially could market a low cost Nano derivative similar to what Mercedes has done with SMART.
Now let’s turn our attention to the Chinese. The sale of any of General Motors divisions will probably have to come from outside the U.S. and most likely from China. China’s largest manufacturer, Chery has already expressed interest in HUMMER and rumors persist of an interest in other GM brands as well. So for argument sake lets say GM decides to sell both HUMMER and Buick to Chery for a much influx in needed cash. Great news for GM in the short term, I guess.
However, which is more valuable the actual vehicle lineup, or the distribution, and dealership network? The dealership network can be leveraged for and all out assault lower cost vehicles directly from China? Think all of this speculation is ridiculous? The Chinese simply can’t compete? Look no further than Hyundai my friends and you will see just how fast it can be turned around. Once the brunt of jokes in the 80’s, in just a mere decade and a half Hyundai had become a respected manufacturer of high quality sensible cars. I bet GM and Ford didn’t see that coming, now did they?
Nor will they see the exact same thing from the when they compete directly against the very companies that gave them their foothold in this market? With lower costs in almost every area the Chinese will dominate the pricing equation, and it will only be a matter of time before the quality is there as well.
So have we given the competition the keys to our own industry?