The auto industry of tomorrow will be made up of two groups: the quick and the walking dead.
The quick will transform their business model and their capital sources. They will search for new equity solutions and seek new catalysts for change among more competitive financial markets in Asia and private equity.
The walking dead will fall prey to the challenges of increased global competition, productivity givebacks, escalating material costs, declining volume of some customers, unstable oil prices, razor-thin margins and macroeconomic reality.
The U.S. auto industry's historical performance has led the U.S. financial markets to believe that past performance equals future performance.
As a result, the U.S. public equity markets and credit markets have undervalued supplier capabilities and technologies and walked away from the industry. That has translated into an elevated cost of capital in the United States, which has increased the chances that failure will occur.
The quick will not let that happen. They will see conventional U.S. capital markets as no longer competitive and look elsewhere for their sources of funds.