Evelien: ‘Why remaking the auto Industry makes no sense’

After many succes stories, now a lot of bad stories concerning the automobile industry circulate. In order to ensure this markets future, we have to inteverne before it is too late.

According to Maryann Keller, an automotive consultant and former investment analyst with more than 28 years of experience, there are two possible theories on which we could base the drastic intervention.

First, the auto manufacturers could start all over again by outsourcing major component systems and give up on the traditional dealers. Second, five or six giant companies should rule in a globally consolidated auto industry.

Despite the realistic economical intentions of these theory’s, they only make sense on paper. In practice the auto industry is a special case. You can say that this industry doesn’t work by the basic laws of the market and never has. This is namely due to enormous political influence. Over the last year only, governments around the world have pumped more than 100 bn dollars in the automotive industry to keep their champions going.


A clear example of this is GM’s Opel division. From the economic point of view, Opel should die or be reorganized. Instead of following this perspective, the German government did everything in its power to keep the division within her borders. Of course this takes higher investments than when they could shut the high-cost plants down and open new ones in cheaper countries. So the government forces Opel’s new owners to increase production to make a return on their investment. Which directly contains unemployment for many Germans.

If we rather have to thank the governments or criticize them for their efforts remains questionable. Certain is that the automobile industry’s future won’t be different from its past. Even when it seems hopeless, political measures will continue to help them to survive.

Personally I believe that you can offer a helping hand but you can’t save everyone. Sometimes you need to make sacrifices so you can take a fresh start. Closing big companies in bad papers, despite the fact that they have a world-known brand, gives opportunities to upstart entrepreneurs and fresh investment capital.

We must remain critical towards government interference. Many entrepreneurs are struggling right now. Governments financial resources aren’t infinite. Where do they draw the line? On what do they base their decision to take measures or not? Many already feel like they’re left in the cold.

By Evelien Van Gaeveren

Source: www.businessweek.com
article:‘Why remaking the auto Industry makes no sense’
Link: http://www.businessweek.com/lifestyle/content/sep2009/bw20090929_277702.htm

Livine: Economy is looking up, sort of

GDP shrinks at a smaller-than-expected pace.

This week, I have chosen for a bit more positive article about the economy. In this article it is about the slow recovery of the economy.

In the spring, the recession was disappearing slowly. People believe that the economy is growing again because the economic activity shrinks at a lower rapidity than the economists had predicted and then the previous quarters.

The most important reason for this is that companies didn’t cut back their spending on equipment and software this much as expected. A second reason is that consumers also didn’t cut back their spending so much.

President Barack Obama has also given the economy a financial stimulant of 787 billion dollars. Because of that stimulant, the auto sales increased again. People can get more reduction if they buy a more eco friendly car.

Despite this good news, analysts are warning that the recession and his consequences are still not over. Especially, the consequences are not to be underestimated and people will still feel the effects of this crisis a while.

Certainly the people who has lost their jobs because of this and the credits who are hard to get these times could cause a shrinkage of the spending.

All in all, there is a recovery and this is expected to persist the coming months but at a slower tempo.

I also think that the consequences of this recession will still be touchable a while but when people show a good attitude and don’t sit at the address everything is gone be solved in time.
There is off course a need after enough financial support of the government. The government should invest more in companies so that they can offer new jobs and they have to encourage people with subsidies to start new businesses so that they can make new jobs. There should also be a better and more specific control system for the banks so that this won’t happen again.


You can read the article on: http://www.nydailynews.com/money/personal_finance/2009/09/30/2009-09-30_economy_is_looking_up_sort_of_gdp_shrinks_at_a_smallerthanexpected_pace.html

greet,
Livine

Annelies: Frugal management and a focus on gas-sippershave served the Japanese carmaker well in the recession

Frugal management and a focus on gas-sippershave served the Japanese carmaker well in the recession.

Summary

Ito Takanobu became Honda Motor's CEO in June. Before he was already working for the company but in the department of motorbikes.

The man is a frugal manager. He comes to work on his motorbike, he works from a plain wooden desk in a room with nearly a dozen other executives. Many management meetings are held nearby at a small round table with four stools.

That kind of frugality has helped Honda in the recent economic crisis. When we compare the financial results of Honda with Toyota or Nissan, than Honda is better off.

It helps that Honda has the right product mix for the times. With its lineup of gas-sippers, it has benefited from U.S. drivers. They have given up the big SUVs in favor of compacts. And Honda is the world's No. 1 motorcycle maker. Motorbike sales are likely to account for half of the operating profit this year. That is partly due to Honda’s success in the developing countries. There, people buy more and more motorbikes.

Honda's recent strength is also due to its culture. The company has a tradition in quick thinking, conservative investments, and a down to earth attitude.

A few years ago Honda managers decided already not to invest in building big pickups. Instead, Honda increased its profits by doing what it does best: building small and midsize vehicles. While bigger cars typically make more money, Honda finds economies by concentrating on four key models.

Another differentiating characteristic is that Honda is relatively unhierarchical and forgoes many of the trappings of corporate success. Most top executives, including Ito, are engineers and seem more energized talking about technology than discussing finance.

Ito Takanobu states that when the economic crisis started, Honda was quick in taking decisions:
· Honda delayed construction of two factories in Japan and postponed expansion of plants in India and Turkey.
· A plan to launch a new sports car was canceled.
· In January all Honda directors took a 10% pay cut and saw bonuses slashed.
· Honda pulled out the Formula One circuit in December.

An other advantage for Honda is that its North American factories make 80% of the cars it sells there.

Honda is criticized for abandoning flashy models, but Ito says Honda will not develop new cars unless they are environmentally sound.

My opinion

I think that Honda has taken the right measures to face the economic crisis. They were conservative in their investments and they gave up making the big SUV cars. Also, I think that Honda is concerned with the environment. As I just said, they gave up making the SUV’s. These cars consume a lot of fuel. Also, the new CEO has said that Honda will not produce new flashy models unless they are economically sound.

What I especially like about the new CEO is that he is a modest, simple man. He comes to work with his motorbike, he has a simple desk and he organizes his meetings at a small table with four stools. If you compare this with the luxurious meeting halls and offices of many CEO’s in the financial sector, the contrast is very large.

Another thing I appreciate is Honda’s culture. They are very down to earth, unhierarchical and many top executives are more interested in technology than discussing finance. I must say that I have more faith in a company were managers are more interested in the products they make than in the profits they can possibly make.

Source: http://www.businessweek.com/magazine/content/09_42/b4151057071523.htm?chan=magazine+channel_what%27s+next

By Annelies Devos