Even in the midst of its best profitability in decades, the global auto industry faces a strategic threat to its existence.
Fiat Chrysler Automobiles CEO Sergio Marchionne said it: The industry makes meager profits while burning huge amounts of capital.
He wasn't first. Wall Street has said it for decades. Thoughtful industry folks have said so privately for years. But Marchionne is the car exec who said it publicly, with PowerPoint slides.
The message is simple: The auto industry requires stupendous amounts of capital.
It doesn't recoup the capital it spends, destroying shareholder value.
That should be apparent from General Motors' two-generation descent from world's largest corporation to bankruptcy over a trail of write-offs and accounting tricks. Or from the bones of hundreds of automakers that ran out of capital, from Packard and Studebaker to Rover and American Motors.
Auto industry veterans are inured to low rewards. Modest returns on capital seem normal. So what?
But Marchionne sees a coming capital crunch to develop autonomous driving, connected-car technology, alternative powertrains and shared-mobility solutions.
Consulting firm AlixPartners sees growth slowing and few existing players with enough scale to invest in all those technologies.
And the scent of disruption is attracting cash-rich newcomers sensing fresh opportunity.
That's a picture of a slow-growth industry on the cusp of fundamental change, pitting flush newcomers against experienced incumbents seeking investors despite a centurylong track record of low returns on capital.
It's uncertain where the auto industry is headed. But conventional responses, even bold ones, may not continue to work.
Companies must adapt by re-examining assumptions, expanding contingency plans, monitoring competitors more closely and bolstering relationships with vendors and customers.