In conjunction with the Detroit Auto Show that has been underway in the U.S. there has been no shortage of business media news stories related to the state of the industry. No doubt, the headline for industry and associated supply chain oriented audiences reflects on what a difference one year can make.

Readers can certainly recall that during the past global financial crisis, two of the largest automotive OEM’s were in bankruptcy and in need of large scale restructuring. Global markets were weak and many governments had to initiate stimulus programs to salvage their respective home country manufacturers along with industry jobs. Japanese brands were dominant, but Korean brands such as Hyundai were starting a thrust.

As we enter 2012, the industry has a far different picture. Both General Motors and Chrysler Group are doing superbly after re-structuring and new management. Auto sales among the “big three” U.S. OEM’s rose 13 percent in 2011. Volkswagen and Hyundai have garnered tremendous momentum while Toyota and Honda continue to respond to significant supply setbacks brought about by supply chain disruption.

From a global markets perspective, the largest growth market for autos was in the U.S. which experienced a 10 percent growth rate.  A review of individual OEM U.S. sales growth rates in 2011 reveals:

  • Chrysler up 26 percent
  • Volkswagen up 26 percent
  • Hyundai up 20 percent
  • Nissan up 15 percent
  • General Motors up 13 percent
  • Ford up 11 percent
  • Honda down 7.1 percent
  • Toyota down 6.7 percent

The state of the U.S. automotive supply chains has transformed and is in far better shape than just a year ago. OEM’s have worked hard on global-wide platform product strategies along with improved flexible manufacturing techniques that allow factories to be able to support multiple models with different market growth rates. The industry has also gained more sensitivity to positive supplier relationships and participation in globally focused S&OP planning activities.

China, the world’s other market in terms of long-term growth potential, only grew 2.5 percent in 2011 as suspended government subsidies took a toll on overall demand. Of more interest, foreign brands such as BMW, GM, Ford, and Volkswagen demonstrated healthier growth levels which indicate that Chinese consumers are very particular with the brands they ultimately purchase.

Europe’s auto sales actually contracted by more than one percent and the ongoing Eurozone financial crisis do not provide optimism that Europe’s market will improve anytime soon.  Europe continues to suffer from far too much production capacity, and industry executives such as Fiat / Chrysler chief Sergio Marchionne predict more consolidation among industry participants.

In recent weeks, as a result of these trends, as well as the worsening currency exchange and energy supply problems affecting Japan, there has been a spate of announcements from automakers who have now decided to additionally invest in U.S. production capability.  In addition to Honda’s significant announcement in December, BMW, Chrysler, Daimler, Ford and others have each announcement significant new investments in U.S. production capacity.

Hyundai has had such a spectacular growth in the U.S. and other global regions that its management has announced that it has throttled-back growth expectations to take the time to focus instead to build on process quality and customer service needs. The Financial Times last week noted that Hyundai management wants to avoid the mistakes made by GM and Toyota that put too much emphasis on growing market share than in quality.  Supply Chain Matters commends Hyundai for that decision.

A rapidly changing global economy, changed make-up of executive leadership, significant unplanned supply disruptions and continued investments in value-chain capabilities have resulted in the automotive industry being in a far different landscape in the coming months.  This is yet another reinforcement that for this economy the need for teams to have the supply chain in constant alignment to a rapidly changing set of business strategies is a continuous imperative.

In our soon to be published Supply Chain Matters Q4-2011 Quarterly Newsletter, we will provide additional commentary relative to the signs of a renaissance for U.S. manufacturing.

Bob Ferrari

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