What the trade is saying

lindenengineering

Well-known member
MB et al take note:-

This came my way through Aftermarket Business, thought I would share it with MB and others in mind who want to forge their own way and tie up all the aftermarket business for themselves.
Article:-
The original equipment manufacturer (OEM) side of the automotive industry is on the precipice of experiencing what financial analysts call disruption. There are a number of factors at play and shop owners should be paying attention because what happens in manufacturing is going to affect repair shops.

In April, Fiat Chrysler CEO Sergio Marchionne delivered his manifesto on what ails the manufacturing part of the automotive industry. Fundamentally he said that OEMs are addicted to capital (money they can spend) and that over time they generally are good when they make back enough to break even.

He went on to say, and I paraphrase, that it only takes one bad year and they are hemorrhaging capital, which causes stockholders to lose their stock value. Why do you care? You care because if nobody wants to own auto stock, OEMs will not have money to spend to design and build vehicles. The truly scary part is that most of the players at Marchionne’s level agree with him for the most part.

The core issue according to the FCA CEO is that OEMs spend a fortune in R&D creating proprietary content and designs that the majority of vehicle owners who don’t have the “car guy gene” can even recognize. In fact, TrueCar President John Krafcik opined that most people could not identify the difference between a BMW component and a Chrysler component.

Bob Lutz, a former GM executive, agreed adding that most people could not tell a meaningful difference between an F-150, a Silverado and a Ram pickup. If you have worked the counter at an auto repair shop you know that this is true. Often customers have no idea what vehicle they drive every day.

Marchionne says that OEMs need to merge and they need to reduce their R&D budget radically by partnering long term with suppliers to share technologies. The pushback is pretty typical of the industry.

Former BorgWarner CEO Tim Mangello summed it up pretty well when he said that OEMs are all pretty happy with their profitability. The boom or bust nature of the industry over the years tends to level that playing field. Whether mergers are a good idea or not is a much larger conversation, but let’s consider the case for shared technology by taking a look at Apple and Dell.

It could be argued that more than 50 percent of their content is shared: CPUs, memory (RAM and storage) cables, materials, and video cards. How does Apple differentiate itself from Dell? They have an operating system that is unique, they have a high-definition monitor and they have a slick case. But at their core is marketing.

So if the OEMs were to take a page out of the computer hardware companies playbook what would that mean to the repair segment?

More standardization should be the first thing that comes to mind. An engine management system might show up on many different brands of vehicles allowing technicians to be more experienced earlier in the life cycle of the system. Better quality due to less parts proliferation and suppliers having more time to perfect a product. Multiple brands using the same engine causes many of us pain, but it’s already going on. A huge differentiator will be the way cars look.

If you take a look at the balance sheets of carmakers compared to the big tech companies, there is a very good business case for this. It seems to me that Marchionne may be right, but until there is some real pain he will have to be happy with his Nostradamus-like opinion. I suggest you watch connected cars and China for the pain.
 

1109

New member
Sounds like Marchionne wants to run the next GMC like company. Oh he is already on his way. Funny after all these decades how so many CEO's still want to be bigger through merging and acquisition only to fall like Goliath. Or should I say GMC.
 
MB et al take note:-

This came my way through Aftermarket Business, thought I would share it with MB and others in mind who want to forge their own way and tie up all the aftermarket business for themselves.
Article:-
The original equipment manufacturer (OEM) side of the automotive industry is on the precipice of experiencing what financial analysts call disruption. There are a number of factors at play and shop owners should be paying attention because what happens in manufacturing is going to affect repair shops.

In April, Fiat Chrysler CEO Sergio Marchionne delivered his manifesto on what ails the manufacturing part of the automotive industry. Fundamentally he said that OEMs are addicted to capital (money they can spend) and that over time they generally are good when they make back enough to break even.

He went on to say, and I paraphrase, that it only takes one bad year and they are hemorrhaging capital, which causes stockholders to lose their stock value. Why do you care? You care because if nobody wants to own auto stock, OEMs will not have money to spend to design and build vehicles. The truly scary part is that most of the players at Marchionne’s level agree with him for the most part.

The core issue according to the FCA CEO is that OEMs spend a fortune in R&D creating proprietary content and designs that the majority of vehicle owners who don’t have the “car guy gene” can even recognize. In fact, TrueCar President John Krafcik opined that most people could not identify the difference between a BMW component and a Chrysler component.

Bob Lutz, a former GM executive, agreed adding that most people could not tell a meaningful difference between an F-150, a Silverado and a Ram pickup. If you have worked the counter at an auto repair shop you know that this is true. Often customers have no idea what vehicle they drive every day.

Marchionne says that OEMs need to merge and they need to reduce their R&D budget radically by partnering long term with suppliers to share technologies. The pushback is pretty typical of the industry.

Former BorgWarner CEO Tim Mangello summed it up pretty well when he said that OEMs are all pretty happy with their profitability. The boom or bust nature of the industry over the years tends to level that playing field. Whether mergers are a good idea or not is a much larger conversation, but let’s consider the case for shared technology by taking a look at Apple and Dell.

It could be argued that more than 50 percent of their content is shared: CPUs, memory (RAM and storage) cables, materials, and video cards. How does Apple differentiate itself from Dell? They have an operating system that is unique, they have a high-definition monitor and they have a slick case. But at their core is marketing.

So if the OEMs were to take a page out of the computer hardware companies playbook what would that mean to the repair segment?

More standardization should be the first thing that comes to mind. An engine management system might show up on many different brands of vehicles allowing technicians to be more experienced earlier in the life cycle of the system. Better quality due to less parts proliferation and suppliers having more time to perfect a product. Multiple brands using the same engine causes many of us pain, but it’s already going on. A huge differentiator will be the way cars look.

If you take a look at the balance sheets of carmakers compared to the big tech companies, there is a very good business case for this. It seems to me that Marchionne may be right, but until there is some real pain he will have to be happy with his Nostradamus-like opinion. I suggest you watch connected cars and China for the pain.
Great write-up and thank you for sharing! :clapping:
 

Rock Doc

New member
This makes me think of what I've seen in the RV manufacturing industry for decades. There are really just a handful of parts manufacturers for the various systems (think Dometic and Norcold for refrigerators; Suburban and Atwood for water heaters and furnaces; Ford, Freightliner and Spartan for Class A chassis--Ford and MB for Class B/C chassis). They distinguish themselves mor by floor plans and quality of cabinetry than anything else, and that's where the real cost differentials come into play.

What happens in that style of market is that the "manufacturers" rally just become "assemblers", and there really isn't as much to distinguish one brand from another except fit and finish.

As a guy with the "car gene" this saddens me. This along with the fact that as we have more and more electronic controls on our vehicles and as we have tighter and tighter matching tolerances in our engines and other parts, it's becoming more and more impossible to do my own automotive work at home, especially as more and more automotive repairs have become "remove and replace", all the way up to and including the engines. Dennis himself has noted that doing an engine rebuild in your own garage is now a thing of the past. I miss that. :cry:

Rock Doc
 

lindenengineering

Well-known member
Some big changes are on the way!
Its called autonomous operation and so far more advanced with Interstate trucks and freight logistics (Class 8 rigs).

With vehicles now almost constructed at the passenger level car level across the board and big rigs very close to autonomous operation the end result will be huge redundancy for Interstate truck drivers.
From where I see it the trucking industry is in complete denial of a looming problem for a work force that thinks Mexican drivers & trucks south of the border entering the US are the issue!
In this case the unions are not going to stop this progression.

The same for the vehicle repair industry as a whole.
Certification akin to aircraft licenses has to be on the blocks going forward and I can see ,many mechanics and technicians leaving the industry already short of the skills needed to repair today's cars on the road!
For the DIY'r its fast becoming a no touch/no fix activity reserved for the few!
Those few will command huge compensation packages and it will change vehicle ownership drastically as it takes hold.
My crystal ball observations for now!
Dennis
 

Rock Doc

New member
Dennis,

This thought furthers the move that's been discussed on this forum regarding issues of the Digital Millenium Act impacting the software in our vehicles, under which ultimately our autos are leased and licensed from the manufacturers without actual consumer ownership of said vehicles. Where I can see this really moving forward is with the financial stakes I've read the manufacturers have taken in ride sharing companies (such as GM's investment in Lyft and another manufacturer investing in Uber).

Besides the obvious impact on auto enthusiasts (such as us on this forum by effectively taking away our major hobby), I foresee a huge impact on personal transportation in this country as the model changes from privately owned vehicles to one of either companies vying for our personal transportation versus a public utility. Effectively, it may change to a situation where personal transportation is relegated to a system of either taxis for individual transportation or public transportation such as buses and light rail. The sad impact is what this will mean for the people who live in rural settings for whom transportation will become prohibitively expensive.

This indeed would be one of the greatest disruptive inflection points in history if it comes to pass--both societally and economically.

However, one thing that would slow a progression to this would simply be the demand (and need) for something closer to our current situation in more underdeveloped and impoverished parts of the world that are not amenable to such an abrupt and expensive change. It would be rather challenging for them to revert back to horses and oxen...

Rock Doc
 

tinman

Member
I have to think that if there is any substantive move to autonomous operation there will be fairly tight regulation on required maintenance, who can do it, and what their qualifications must be. As Dennis stated, somewhat akin to specialized work on aircraft. Next question, how much of that regulatory control then filters down to the non-autonomous fleet? I suspect that as standards are developed and imposed on one segment, there will be pressure to do the same for the rest.
 

Aqua Puttana

Poly - Thread Finder
I have to think that if there is any substantive move to autonomous operation there will be fairly tight regulation on required maintenance, who can do it, and what their qualifications must be. As Dennis stated, somewhat akin to specialized work on aircraft. Next question, how much of that regulatory control then filters down to the non-autonomous fleet? I suspect that as standards are developed and imposed on one segment, there will be pressure to do the same for the rest.
I suppose that more laws and legislation are inevitable. Just legislate that autonomous vehicles need to be leased only. That will keep them under manufacturer/dealership control.

That can leave the general public to maintain their clunky old human controlled vehicles as they wish.

:2cents: vic

As an aside.

A friend of mine said that he was with a Tesla owner. As they pulled up to the front of the building and got out the owner said "Watch this." He pressed a remote FOB button and the car drove off, circled into the parking lot, found a spot and backed in. When they came back out the button was pushed again and the car came back to where it had been when they got out.

I don't think that he was spoofing me with that story. I didn't know the technology had progressed to that level.
 
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MeRob

New member
I remember a 'joke' / comment that was going around in the mid 80's...that asked if you could imagine driving a car that had the same unreliability issues as your new computer ? ( ...or smartphone?) I guess an Engine Light will soon seem trivial... Scary to think what a 'FOB hacker' could do on a busy freeway... hmmm.
 

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