By Peter M. De Lorenzo
Detroit. Judging by the latest frenzy of link-ups, tie-ups, “blue sky” fliers and other maneuverings, you might get the impression that automakers around the world are in a race to shed their old-school manufacturing reps for cleaner, shinier new-tech personas. And to a large degree, that’s true.
This stems, in part, from the large chip that rests collectively on the shoulders of car companies in the auto business. They feel that they’ve been written off for far too long as moribund purveyors of “yestertech.” That being part of the fabric of this country’s manufacturing base, though absolutely crucial to this nation’s future, isn’t sexy enough, that if they don’t get out in front of this future tech business, there is a real danger of being left at the station.
In other words, they’re betting on the come that something big is going to happen, and they're deathly afraid that if they’re not a part of it there’s a real danger that they will be swallowed up whole by savvy competitors or even worse, marginalized into irrelevancy. So, they’re flying around making deals with companies they barely know while buying into the promise of technology that exists only in the imaginations of a few brainiacs who project the promise of The Future as an idyllic land of bunny rabbits and rainbows, filled with transportation conveyances emitting only the wisp of jasmine as they whoosh by.
Is this a recipe for disaster? Yes. Will billion-dollar deals be made that don’t pan out? Yes. Specifically, is car sharing The Future? It will be a selective part of the transportation business, yes, but “The Future”? Not so fast. But wait, then autonomous cars will be The Future, right? I mean isn’t that what everyone is talking about? Autonomous cars will be part of the kaleidoscope of transportation choices and part of the future urban landscape in select cities. But “The Future” that will dramatically alter our lives by next week, or ten years from now? No.
The “blue sky” aspect of the automobile business’s headlong rush into new think and future technology is commendable, but not for the reasons you might assume. One surprisingly positive aspect of the swirling maelstrom surrounding The Future is that, lo and behold, the Silicon Valley hucksters have found out the hard way that Detroit and the other old-school relics of the auto industry not only know how to build “stuff” but are in fact hotbeds of technical innovation unto themselves, to the degree that St. Elon is turning – yet again – to auto industry manufacturing veterans to dig him out of the hole made by his grandiose promises for the Model 3. (My prediction? The Model 3 will get built, but actual production will begin trickling out, at best, at the very end of 2018. As for 500,000 of them? With no track record demonstrating the ability for true mass production, and a glaring legacy of piss-poor launches? Good night and good luck.)
So, in the meantime, while we wait for “The Future,” what is this business going to look like in 2026? Who will still be around and who will be left like a house standing by the side of the road?
Needless to say, the all-encompassing oppressiveness of the Chinese market will intensify. As I said several years ago, people in this market better get use to the design and packaging of their passenger vehicles being dictated by the Chinese market, because it will only get more pervasive. Not a big deal, you’re thinking? Well, we’ll see about that, won’t we?
This would also suggest that car companies doing well in China now would be around for the foreseeable future (Toyota, GM, Ford, VW Group etc., etc.), and this is a valid assumption, as long as the Chinese government doesn’t go batshit crazy at some point and decide that all foreign manufacturers are enemies of The State. If that happens all bets are off because that means that the joint automotive ventures established and dictated by the Communist party overlords could possibly be dissolved overnight. I’m hearing auto executives mutter into their cornflakes right now, "Not even a remote possibility!" Really? Not even a remote possibility, huh? Have you been paying attention to the sword rattling going on in international waters of late? Don’t kid yourselves, because absolutely anything is possible.
And what about the landscape here? Toyota and Honda will continue on, as will Nissan and the VW Group (even though the VW brand in this country will be toast for years to come). In fact Toyota will solidify itself as the biggest and richest car company in the world by far. But watch out for the Koreans. The initial promise of “we’re going to dominate the world” fell flat because Hyundai/Kia executives were too insular and too arrogant, and they refused to bring in the real talent that could help get them where they wanted to go, because, after all, they had all the answers. That has all changed. They’ve hired the talent and they’re creating enticing, attractive products with real dynamic legitimacy. Watch Hyundai’s new Genesis luxury brand take its place among Audi, BMW, Lexus and Mercedes-Benz in the luxury segment by 2021. And watch Kia establish itself as a real force to be reckoned with in the mainstream market.
It’s inevitable that Daimler (Mercedes-Benz) will partner with somebody, they’re going to have to. And BMW will be sold, eventually, but to whom is another question altogether. Will Mercedes and BMW join together in a loose but separate arrangement? Stranger things have happened, but wow, talk about stepping on each other in the market.
As for FCA, its fate is sealed. The Google partnership is only the beginning. Marchionne has one thing to do before he trots off to retirement, and that is to make sure that he and John Elkann (and the gaggle of Fiat heirs) are well taken care of. That means Sergio is going to make a deal for the “C” part of FCA, and sooner, rather than later. Will Google buy the “C” assets and let John Krafcik run the show? It’s possible, but I still think Sergio will take the cash while the getting is good, and that means parting out Jeep and Ram truck to the highest bidder. The “C” in FCA will cease to exist one way or another, and Marchionne and Elkann will retire to café society back in Italy - divvying up around $12 billion - swilling espresso with abandon while regaling their paesani with how they took it to the stupid Americans, satisfied in the knowledge that they still have Ferrari, at least.
As for GM and Ford, they’ll be around, lawyered-up and partnered-up with their favorite tech partners du jour. As for the “mobility” thing, it has already become the thing as Ford and GM jockey to position themselves as mobility companies of The Future. They might not be driving the engine like they so hope, but at least they’ll be in the first car, content in the knowledge that the dreaded station back in Loserville is fading off in the distance.
And that’s all well and good, as long as both companies never forget that they still have to build compelling vehicles that are pleasing to look at, fun to drive, and with impeccable quality and safety.
Because ten years from now it will still be all about The Product, same as always.
And that’s the High-Octane Truth for this week.