The Future of the Auto Industry

A big question on every American's mind is, "With the billions in restructuring money we spent on the automobile industry, what will we get from our investment?"

The major automakers are wagering that their line-up for the coming year and beyond will perfectly mesh with the needs of the car-buying market, thereby setting a course toward sustainability. Karl Brauer, editor in chief at Edmunds.com sees the market leaning toward mid-size hybrids: consumers want fuel efficiency and a practical size. Other analysts conclude that baby boomers are now looking for more practical mid-size sedans and crossover vehicles.

The Power of Politics
Putting the future of the automotive industry into sharper focus came with President Barack Obama's challenge to see 1 million electric cars on the road by 2015 and to bring fuel efficiency requirements up to 39 mpg for cars and 30 mpg for trucks by 2016. By restraining domestic oil production, President Obama is also going to allow gas prices to rise, further stimulating the fuel-conserving, alternative fuel vehicle market.

The New GM
While we are going to miss a few long-running badges such as Pontiac, GM is also in the final due diligence audits before selling its Hummer and Saturn brands. Its trimmed down physique will be composed of the Chevrolet, Buick, Cadillac and GMC brands. By introducing the series hybrid Chevrolet Volt, which is scheduled to start production this month, vice chairman Bob Lutz is working towards changing GM's focus. In an interview by the Washington Post, Lutz states that the goal he sees for GM is for a "pure electric future."

Chrysler and Fiat
Chrysler, who up until 2007 produced 32 different models, will emerge from Chapter 11 with a stable of only 13 vehicles. Pending any last minute appeals, it will eventually make room on showroom floors for vehicles from its new share-holder, Fiat. The few Chrysler models which will most likely survive will be its minivans, the Dodge Ram pick-up and the Jeep Wrangler and Grand Cherokee models. Chrysler needs a mid-size sedan, and the Alpha Romeo 159 is very attractive. The fuel-efficient Fiat 500 and Grand Punto mini-cars could become popular offerings as well.

Exporting U.S. Jobs
When Chrysler filed for bankruptcy, it reneged on a promise to its workers to keep them employed, and announced that their production facility in Kenosha, Wisconsin would be closed and those 800 production jobs would go to Mexico. American taxpayers, confident or not in the likely success of the federal bailout of the auto industry, watched billions of their dollars being spent on: the largest bankruptcy proceedings in national history, the closure of thousands of dealerships and numerous production facilities, and the export of thousands of jobs out of the country. At least one aspect of the automotive industry seems to remain unchanged: the well-off getting wealthier and those at the bottom being left out in the cold.

Marketing
Competing with dealers selling the same car across town has dried up much of dealer profit and has caused dealers to resort to the unpleasant persuasive style for which they are notorious. The consumer approaches the purchase process with distrust. Internet services have quickly arrived on the scene in which new car buyers can evaluate and compare vehicles, leaving them with a more positive experience. Successful marketing now assesses the customer life-cycle value chain by identifying sources of value for the customer base. Knowing that about 85 percent of customer loyalty comes from the sales and service experience while only 15 percent is derived from the perceived value and quality of the vehicle, gives innovative retailers more opportunities to capture sales.

Conclusion
More alternative-fuel vehicles will be introduced in the next two years, especially plug-in electrics and hybrids. We will find ourselves doing double-takes at the variety and sizes of mini-cars soon to be darting through traffic. Those unconcerned by the cost of gas will still choose from a slightly smaller selection of SUV's and performance vehicles. Your car-buying experience may range from traditional dealers, Internet sales through a factory-direct channel, or a discount outlet with multiple brands. The classic multi-faceted new car dealership, with used car, loans, service, parts, and insurance departments will be "parted-out" as separate entities.

The net benefits of the restructuring of the auto industry will be improved service and selection with better pricing through alternative channels. The outmoded sales model has been resistant to change its practices which run coontrary to garnering customer loyalty. It will either evolve or be replaced by other, more efficient distribution channels, with the new car buyer being the winner.