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Keep recession's lessons in mind

February 15, 2013

This is no time to get complacent. The U.S. auto industry is back on track. Vehicle sales are expected to continue their upward trend, perhaps reaching 17 million units by 2015, experts say. And "profitability" is again a buzzword in almost every sector of the industry.

There is momentum, and it's all in the right direction.

But as the many speakers at the Automotive News World Congress cautioned last month, automakers, suppliers and dealers need to remember a few key lessons from the horrific experiences during the automotive depression.

It behooves everyone to avoid becoming inebriated by the success — and recovery — of the past 18 months. If the industry is to avoid sliding back into the ditch, important elements of the recovery and resurgence must be front of mind:

c Suppliers and automakers need to continue their pace of collaboration and partnering, which have created a wide path for innovation and given every stakeholder a piece of the success. Automakers are boosting production and speeding product development by working more closely with their suppliers. That must not change.

c In the heated race to gain market share, competition ought not be so desperate as to tarnish reputations, which would be a likely outcome if automakers return to their historic incentive battles. The recent overstatement of fuel economy numbers is a prime example of the kind of consumer trust that cannot be violated. As John Mendel, head of auto sales at American Honda Motor Co., said: "Competitive pressure should never let us betray the trust of our customers."

c The industry is working at the speed of light to incorporate new technology into vehicles, but that must be done with an eye on the negative effects of distracted driving. With the right technology, connected vehicles reduce distracted driving and improve traffic safety. That must be the goal.

c The drive for big profits cannot lead to overcapacity. Volkswagen announced at the Detroit auto show that it will add a crossover to its lineup; Kia introduced a premium sedan; BMW and Mercedes introduced entry-level luxury cars.

As billionaire private-equity investor Wilbur Ross told the World Congress audience: "Everybody seems to be expanding their product line, and you wonder if that isn't going to lead to problems."

The industry is on the road to better times. But it is crucial to remember what's in the rearview mirror.

This editorial originally appeared in Automotive News, a sister publication to Plastics News.