Last month's Automotive News World Congress in Detroit featured a panel of five influential industry leaders discuss the changing issues of a global business. Not only are markets and products in flux, they indicated - so are the strategies and rules that govern them.
Answering a wide range of questions on the panel were:
Rudolph Schlais Jr., president, General Motors Asian & Pacific Operations
Peter Schweitzer, president of the international advertising agency J. Walter Thompson Co.
Dr. Ricardo Martinez, administrator, National Highway Traffic Safety Administration, U.S. Department of Transportation
Craig Muhlhauser, president, Visteon Automotive Systems
David Cole, director, Office of the Study of Automotive Transportation, University of Michigan Transportation Research Institute
What follows is an edited transcript of the discussion.
Automotive News: OEMs are moving out of vertical operations and transferring market cost of development and labor issues to Tier 1 integrators. What makes these suppliers think they can accomplish what the OEMs could not?
Visteon's Craig Muhlhauser: What many companies are going through is understanding what's at the basis of their competitive advantage. The business concept for an automotive company in the 21st century will be quite different from other companies throughout the world. We see Visteon's core competency as vehicle systems engineering, global delivery and our ability to apply electronics. The sheer size of the OEMs could make it difficult for them to be nimble enough to address the changing market needs and have fixed cost structures that provide enough flexibility to weather very uncertain economic times.
AN: Each of the existing OEM brands carries its own attributes. Do they face the risk of losing some of their attributes by trying to be global?
J. Walter Thompson's Peter Schweitzer: Yes, brands will have to become more specific.
AN: You've pointed out that consumer advertising is different in various countries because the consumers are different. Is the same true in business-to-business advertising?
Schweitzer: Business to business can be more global. The story is different. The audience is different.
AN: What are the determining factors that will decide whether a supplier must go global or can remain a local supplier? Does everybody have to go global?
Muhlhauser: Not everybody has to. The issues are going to be financial strength, risk, ability and a well-defined niche strategy. Much of the responsibility and risk of new vehicle development will be shifted to the supply base. That is why financial strength and scale are important.
Not all companies have to be global. But they have to be the best at what they do to be profitable.
University of Michigan's David Cole: I really agree with that. You don't have to be global, but everyone has to think global. If you don't, you're high risk.
AN: What is GM's production forecast for the Buick sedan in China?
GM's Rudolph Schlais: We will start off with 30,000 units, going up to 80,000 units and possibly up to 100,000 units.
AN: Suzuki and Isuzu: What are you going to do with them?
Schlais: Their brands in Asia are well respected. Rather than competing against them, we will work with them to sell more vehicles. How do we win for both companies? That's what we are really looking for with Isuzu and with Suzuki. It's a matter of working together to be the best. They are in many countries we are not in, so why put in new capacity that in effect exceeds demand?
AN: Is there an agreement between GM and Suzuki to produce in South America?
Schlais: There are some agreements, country by country.
AN: In terms of driver safety, how do you level the playing field between Navigators and Neons?
NHTSA's Ricardo Martinez: That is not an easy thing to do. We started looking at the compatibility issue years ago. When you look at the deaths, the fact of the matter is that incompatibility drives a lot of the numbers. Sport-utilities are about 30 percent of the market and 50 percent of the fatalities in two-car crashes. So we're looking to do something about it.
It turns out there are issues of mass, geometry and stiffness. We are working on all three of them. One thing we are testing is to see if there is a way to have that compatibility issue designed in even more. You can do some things, but I don't know if you can do everything.
AN: Are Visteon's customers asking about that issue?
Muhlhauser: We're very active in working with the medical community to get a better understanding of how we can be more aggressive in anticipating the kinds of injuries we can expect, and what we might be able to do. This is a huge opportunity.
AN: Will competitive OEMs allow Visteon to participate in advanced vehicle programs? Are you going to be a spinoff company like Delphi?
Muhlhauser: I can only say that independence is an important part of our strategy. I think the most exciting event of last year was being able to work with General Motors on a major concept car at the show. We've been in the design studios of at least five major OEMs. The nature of the marketplace is that if we have something that is very compelling, there is enough credibility and trust in what we are trying to do, then we get access. It's very important for me to be credible.
AN: Is Visteon's product portfolio too wide? And if so, what key product areas will you focus on? And how quickly will you act? Are you going to be actively acquiring competitors?
Muhlhauser: Our portfolio is too wide. We are looking at the sustainability of our business. Not all of the technologies we're involved with lend themselves to our core competency. So we'll be looking for ways to partner or align those businesses with other companies that represent a brighter future. We're not interested in buying any more capacity than we have. However we are interested in acquiring technologies that complement businesses that we have.
AN: When it comes to being global, how do you handle the issue of human rights abuses while trying to do business?
Schlais: We need to care very strongly about people. Certainly we are concerned about human rights. One of the things we do as we move into new plants is use the best practices that we can find. We are doing it in China and we are doing it in other areas to respect the individual. Where there is a violation we will object.
David Cole: From a business standpoint we are obligated to conduct our business practices according to our laws and rules here. And I think the same thing applies whether it is a legal or moral obligation. I don't think there is any doubt that human rights have to be an important issue as far as American enterprise is concerned.
AN: Does the availability of fossil fuel enter into the global auto population forecast?
Cole: When you look at the availability of petroleum in the world, there is no shortage. If you raise the price a little bit, the supply is much larger than people thought. Still, it will run out some time and we must be prepared for that. Some of the alternative systems being developed for the next century will result in some major changes in technology that will lead to far greater fuel efficiencies and perhaps less dependency on our petroleum reserves. It's not so much the cost of the fossil fuel, but some of the sulfur content that is driving concern at the local and national level.