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Local News / Automotive

Friday, 18 February, 2011 3:28 AM

Big three automakers are profitable, but need to stay competitive, experts say

PHOTO BY JASON RZUCIDLO / ©AMERICAJR.com

SAE International CEO David L. Schutt, Ph.D., Center for Automotive Research Chairman Emeritus Dr. David Cole, Automotive News Editor Jason Stein and OESA President & CEO Neil De Koker.

by Jason Rzucidlo
americajr@americajr.com

 

|

TROY, Mich. -- Chrysler definitely hit a home run with its highly-successful Super Bowl commercial featuring Detroit rapper Eminem. All three Detroit automakers -- GM, Ford and Chrysler are profitable. But now is not the time to go back to the old ways. These car makers need to keep their quality up, watch production levels and keep coming out with eye-catching designs. There's no question that Chinese and Indian automakers will be selling cars in the U.S. over the next two to three years.

The SAE Detroit Section hosted its annual State of the Industry meeting on Tuesday at the San Marino Club in Troy, Mich. Dr. David Cole, Chairman Emeritus of the Center for Automotive Research (CAR), Neil De Koker, President & CEO of the Original Equipment Suppliers Association (OESA) and Jason Stein, Editor of Automotive News were this year's panelists. SAE International CEO David L. Schutt, Ph.D. was the moderator of the event.

"We can make money at 60 percent capacity utilization," De Koker said. "Emerging markets and other sections are growing. Only 6 percent of electronics are being made for the automotive industry. Things are mostly positive. We are going in the right direction. Toyota is not having major quality issues. GM warranty costs are down. Quality is up significantly. Chrysler is making strides with new vehicles coming out. We're being asked as suppliers to report how we're doing to OEM's [original equipment manufacturers]."

One of the key points from the meeting is that automakers should stay away from production push. That is the term to describe producing vehicles just to keep employees working, without paying attention to demand. Automakers should only be making enough vehicles that they think will sell. If there is an excess, they will sit on empty lots. Then, it will end up costing the company in the long run because they will have to offer big incentives, which means they will receive less money once the vehicle is finally sold.

"We are moving past offshore labor," Cole said. "You have to be competitive. A lot of skilled people don't have the ability to work at a world-class level. You'll also see Indian companies here. The world is changing very quickly. The east coast is facing the intensity of global warming efforts. In 1974, Congress passed the Seatbelt Interlock Law. Less than a year later, Congress rescinded the law. What we've been through in this industry is a life-changing experience. When really pressed, what amazing things people can do."

In past decades, anyone could apply for a job at a GM, Ford or Chrysler factory right after getting out of high school. Today, that is simply not the case. The minimum requirements now include a high school diploma and a two-year community college degree. With states cutting funding, colleges and universities are forced to raise their tuition making it will be more difficult to get a job in the automotive industry.

"You can be a dealer if you go to Northwood University," Stein said. "The No. 1 growth area is Chinese students. They're coming here to learn. It is interesting how green has become the badge now. Ford is going it well, staying flexible with new ideas. We're a lot leaner. Sergio is doing a remarkable job. I think that the mood in the hallways and at the table is noticeably better than it was last year. I think we have officially driven a stake through 2009. I think we can now sleep better. That was so last decade, wasn't it?"

Those who are lucky enough to get a job in the automotive industry will have to work very tough. It has never been an easy job. However, today's workers are asked to do tasks that two or three people used to do. That trend is likely to continue into the future as companies are looking to save money.

"I don't know anybody that feels under worked," Cole added. "There is an emergence of new leadership. They are coaches rather kings. It's about the team, the team. We are in interesting times for sure. The optimism has been building for a long, long time. It's really rising very, very fast. We continue to be in the last stages of the perfect storm. You have amazing growth in different places of the world like China. I think you'll never see the U.S. No. 1 in car sales again. We have tremendous volatility in the materials sector today."

De Koker added: "Recognize that anything is possible. Sharing with each other and learning with each other in times of crises. We see significant confidence in the industry going forward. Nine and a half million units of production in North America is what it took to actually survive. The break-even point of 2007 for the industry when we were producing 15 million vehicles was 14 million vehicles. So we took the industry from 14 to 9 1/2. That eliminated a lot of jobs, closed a lot of factories. It was very painful, but we made it through there and we're doing quite well."

The next SAE Detroit Section will feature the Nissan NV on Tuesday, March 15 at the Burton Manor in Livonia. The Chevrolet Volt will be featured at the next meeting during the SAE World Congress on Wednesday, April 13 at Cobo Center in Detroit. The Ford Focus will be featured at the SAE Detroit Section meeting on Tuesday, May 17 at the Ford Conference & Event Center in Dearborn, Mich.

For more information on the SAE Detroit Section, visit www.sae-detroit.org.

Related Story: Ford, GM and Chrysler are on the way to being profitable very soon, panelists say

 

PHOTO BY JASON RZUCIDLO / ©AMERICAJR.com

Dr. David Cole of the Center for Automotive Research.

 

PHOTO BY JASON RZUCIDLO / ©AMERICAJR.com

This chart compares the annual fuel cost vs. the MPG of new vehicles.

 

PHOTO BY JASON RZUCIDLO / ©AMERICAJR.com

OESA President & CEO Neil De Koker

 

PHOTO BY JASON RZUCIDLO / ©AMERICAJR.com

"Nine and a half million units of production in North America is what it took to actually survive," he said.

 

PHOTO BY JASON RZUCIDLO / ©AMERICAJR.com

A question-and-answer session with all of the panelists.

 

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