OBSERVATIONS ABOUT CHANGE IN THE AUTO INDUSTRY – INTERNATIONAL

It’s always interesting to look at instances of severe change – sometimes called “crisis” – in retrospect.

We can now do that for both Volkswagen, Germany, and Peugeot, France.  The overall backdrop for this examination is the general decline in auto sates and the rising technology costs that auto makers are facing, globally.  With that in mind, it’s interesting to note that Volkswagen has just reported “remarkable stable results,” (ref WSJ).  The VW revenue for the first half of 2019 was 5% higher than in 2018 due, largely, to strong pricing and rising sports-utility vehicle sales.  The company has well-established brands like Audi, Porsche, VW and holds a dominant position in the Chinese and European markets.  And, it has also invested heavily in technology, from electric vehicles to new diesel filters.  But there is one other reason that one won’t find discussed very frequently – and that’s the “diesel crisis” when the company was charged with emissions fraud in 2015.  As a result of this crisis, the company’s management took the opportunity to enact much-needed change in the company, using the crisis as their reason for doing so.  They cut costs and bet heavily on electric vehicles.  Peugeot is another company that benefitted from a crisis – coming close to bankruptcy in 2013.  As a result of the actions taken to avert that crisis, the company is now able to report a first-half operating margin of 8.7%.  Both VW and Peugeot are stories of restructuring in the face of crisis.  And, interestingly, they are the top-performing European auto stocks this year.  Ford, another instance of seeking to gain advantage by re-grouping is learning that those kind of changes take time.  When the company let its performance fall well below GM’s, CEO Hackett undertook to offer a plan that would bring the company back to “fitness.”  Recent results, although reflecting that Ford is the top-performing auto company globally, also show that it will be several years before full “fitness” is achieved.  So, the question for all of these companies becomes how to keep up the momentum, engage all the moving parts of the company, and ensure that yearly changes bring continued progress in performance.  In other words, companies can never let their guard down when it comes to continuing to instigate change.

Leave a Reply

Your email address will not be published. Required fields are marked *