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Following route the house of Jack built for businesses

on May 11 2020 | in Highlights, Industry news, Latest news | by | with Comments Off

The senior executive of a top 10 motoring nameplate in New Zealand is planning to exit the coronavirus lockdown with the words of hard-charging American business leader Jack Welch as a guiding light: “Face reality as it is, not as it was or as you wish it to be.”

The reality the motoring industry faces is a world of hurt, more damaging long-term than the Global Financial Crisis (GFC) of 12 years ago.

“That was a blip in comparison,” said the executive, who spoke on the condition of anonymity. “This is going to last much longer. We don’t even know how long.

“We didn’t make any money in April, an industry down by hundreds of millions of dollars. We won’t make any in May either. Who knows what June will bring?

“We’re all bleeding money. Even with Level 2 this week, it will be July/August at the earliest before anything resembles normal. What will be normal? Social-distancing isn’t going to go away. It will be different than anything we’ve known.

“It’s not just distributors and dealers who are bleeding but the support industry – tyre outlets, panelbeaters, parts suppliers, mag wheel people, groomers, carriers … everyone is getting hurt.

“What about the impact on commercial real estate – and that includes car yards – as businesses realise that teleworking on Zoom means they need less office space?

“Many businesses, and that’s already evident, aren’t going to survive. Unemployment is going to be scary. Some sectors of the economy will disappear.”

The executive dismisses as diversionary a call by the Motoring Industry Associaton (MIA) for Government to scrap old, stink-bomb vehicles and boost the uptake of electric models.

“Good idea but it’s not going to happen anytime soon, if at all,” he said. “The industry has been on at governments for years about that.

“A scrappage scheme allied to more electric cars was always going to cost billions of dollars in taxpayer-funded subsidies. That sort of money was never there for that and it certainly is not there now.”

US business dynamo Welch, who died aged 84 two months ago, was chairman and CEO of General Electric from 1981-2001. During his watch, GE’s market value grew from $US12 billion to $US410 billion. Fortune magazine called him the “manager of the century.”

Another of Welch’s dictums will accompany the NZ motoring manager into the ‘new normal’: “Only satisfied customers can give people job security – not companies.”

Surveys show the lockdown is accelerating trends that were already underway in the automotive market but not widely adopted. They are all to do with communication.

The US and European editions of Automotive News write that such trends will likely become the new normal. They are:

  • People are finding comfort in car ownership
  • People expect to find a deal
  • People want the dealer experience closer to home
  • People want online buying and home delivery
  • People are tuning into digital events

The newspaper tells the industry: ‘Because of social distancing, customers are now living in a world filled with texting, online conferencing, video calls, social messaging and chat. The communication landscape has changed.’

Carmakers say they are readapting proven methods of business practice for the new normal, following such foundation measures as the Japanese ‘kaizen’ principle, or ‘change for the better’.

One such method is the ‘PDCA cycle’, or ‘Deming wheel’ developed by renowned US management consultant Dr William Deming in the 1950s. It stimulates the continuous improvement of people and processes.

Plan – Recognise an opportunity and plan a change

Do – Test the change, carry out a small-scale study

Check – Analyse the results. Is the finding more efficient?

Act – If so implement it company-wide

Another reality facing carmakers was raised in the UK by the Volkswagen Group as it resumed limited production in Germany: “We don’t want to be building cars for which there’s no demand,” said company spokesman Oliver Larkin. “There’s a lot of cars already in showrooms.”

Thomas Schmall, chief executive of VW’s components brand, told a news conference: “The step-by-step reopening of our plants was important in order to safeguard supplies to overseas locations.

“Now we need to restart the entire production network while taking comprehensive protective measures and to supply all the vehicle plants of the various brands with components.”

That dilemma is going to be an issue for the rest of the year. Ford’s first quarter results were described as a “train wreck” by analysts, with its chief executive Jim Hackett saying “there is no future.” Even the VW Group is forecasting no profits in the second quarter of this year and negative cash flow.

 

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