Europe: What's a CEO to do?
Keith Crain is editor-in-chief of Automotive News.
Last week, it was reported that Lamborghini and Bentley may delay introduction of their SUVs. Since they will use the same platform, it makes sense that they work in harmony.
We're going to hear about more companies delaying new models.
It is a prudent step to save cash while the sky is falling all around them.
But the real dilemma is what programs to delay and how serious the repercussions will be. If you delay a new model and your competitor doesn't, that competitor will send you to the cleaners. Your market share will tank, and you'll be behind for quite a while.
If you could pick which product program to delay knowing that your fiercest competitor is delaying the same program, you might be able to survive at least, if not prosper.
But no one wants to be in the marketplace with a noncompetitive vehicle. That's one cost savings that will eat you alive.
Just about every company in Europe is bleeding. Whether a company is based there or elsewhere, losses in Europe are going to have a profound impact on its cash flow and product planning.
It's not pleasant to drop or delay product launches. But if there is not enough cash, the options aren't very good. Without a line of credit that runs a few miles long, only the very rich will be able to keep their product plans intact.
If you have cash, another effective ploy might be to raise incentives. If no one else can match the additional use of cash, your market share could go sky high at your competitor's peril. Your cash might diminish rapidly, but you could see spectacular sales increases.
I am sure that all these tactics are being used and discussed in Europe. In Europe, cash is king, and the manufacturer with access to the most cash could have a very strong hand today and tomorrow.
If a company is generating profits and cash in another part of the world, it can use those profits to create a spectacular impact over both the short term and the long term.
There are no simple scenarios in Europe. The possibilities are dramatic and far-reaching. Only time will tell the winners and losers.
You can reach Keith Crain at email@example.com.