C1 – Resilience

frayed rope

The auto industry is an industry under stress. Two major car companies, Rover and Saab, have failed since 2005, and in 2009 GM, for decades the largest car company in the world, had to be bailed out by the US Government, along with Chrysler. There might have been even more auto company bankruptcies had it not been for support on the part of many governments, even ones ideologically opposed to intervention. Toyota, the star of the industry for more than two decades, faced its first ever loss in 60 years and suffered a bruising public relations disaster involving large-scale product recalls in 2010.

Analyses of car companies typically focus on the efficiency and effectiveness with which car makers design, build and distribute cars. These capabilities are of course important – but since the early 1990s we have seen a convergence in performance on these measures as car companies have learned lean methods from Toyota and other exemplars.

We argue that resilience cannot be understood in these terms alone, but requires the orchestration of several conditions simultaneously: coverage of multiple vehicle segments; economies of scale through common components and platforms; and a strong position in markets that are growing and developing. Plus, crucially, the ability to reach appropriate settlements with external stakeholders such as capital markets, owners, the state, organized labour - and customers.

 

Selected Quotes

"Companies become progressively more and more 'boxed in' by multiple constraints, so that fixing one problem often just creates others elsewhere". (p. 4)

"With a persistent 30 per cent production overcapacity worldwide... the industry faces yet more pain in the future". (p. 6)