Vehicle manufacturers must embrace radical change or face a period of “graceless degradation,” according to Graeme Maxton and John Wormald in their forthcoming book 'Time for a Model Change: Re-engineering the Global Automotive Industry'.
They criticise the constant drive for volume. While General Motors says it is the largest vehicle manufacturer in terms of number of vehicles produced, and Ford is the second largest, in terms of company value Toyota is actually larger than Ford, GM and Chrysler combined.
The struggle for volume has led to a proliferation of models and highly inefficient use of resources. Unless vehicle manufacturers find a new business model many more companies will be struggling on poor margins, having to cut capacity and employment.
“Companies get into a death spiral,” says Maxton. “They cannot fund new product development, their market share goes down, and then it is very difficult to get out of trouble because it takes five to seven years to replace the failing models. This is exactly the problem that Fiat is facing now, for example.”
So what is the alternative? Maxton and Wormald suggest a complete rethink. Does Chrysler need to manufacture cars, for example? Does Mitsubishi need to manufacture engines? Could other companies brand cars instead, like Sony or Hitachi? If just one large vehicle manufacturer were to adopt a radical strategy, it could lead the industry into a new era on a much firmer financial footing, the authors conclude. 'Time for a Model Change: Re-engineering the Global Automotive Industry' will be published in September.