U.S. automakers need to leave survival mode, look to future

The haunting final seconds of the movie The Graduate are a metaphor for the auto industry.

In the 1967 classic, young Ben and Elaine wrench free from parents and a nearly disastrous wedding and escape on a city bus. They drop into the back seat, sparkle momentarily with exuberance, then deflate: Drama's over; now what?

U.S. automakers are now in that back seat. Emerging from financial and market chaos not seen for decades, they now have to shift from crisis mode to their real business: building and selling vehicles buyers want now, while making multibillion-dollar bets on what they'll want later. They must shift from doing business as if their hair were on fire to the sober, long-view approach of more normal times.

"If you operate in emergency mode, you tend to lose sight of long-term plans. If you're in triage all the time, God help you," says Umesh Ramakrishnan, vice chairman at CTPartners, a global executive-search firm in daily contact with CEOs and directors at auto and other companies.

So it's back to work — with some new realities.

Analysts, consultants and the automakers agree that for the long term, the survivors must make electric and other clean-fuel alternatives their mainstream task, not a niche.

Survivors must also defend their home market against emerging low-cost rivals such as China, India and Russia, while also trying to sell their products in those growing markets.

They must do it all without running up huge debts.

And their future-business alchemy must get underway now, even though it's the worst U.S. sales market in modern history.

"Even though we probably are past the most acute point in the crisis, the industry still is in a period of massive change," says John Casesa, co-founder of auto consultancy Casesa Shapiro Group and before that, a longtime Wall Street industry analyst.

All automakers have been slammed by the global recession and financial crisis. Even normally bulletproof Japanese automakers Toyota and Honda have lost money.

The 20 car companies doing business in the U.S. have sold 32.1% fewer new cars and trucks through the first seven months than they did a year ago, according to tracker Autodata. They're on pace to sell perhaps 10 million this year, vs. the 15 million to 17 million typical since 1994.

The collapse sent General Motors and Chrysler into Chapter 11 bankruptcy reorganization. Chrysler emerged in a partnership giving control and 20% ownership to Italy's Fiat Group. GM emerged July 10, and is 60.8% owned by the U.S. government, 11.7% by Canada.

Says Stephen Spivey, senior auto analyst at Frost & Sullivan: "The industry is undergoing major transition, and at the end of the transition, then what?"

Business is so dire throughout the auto world that, "We are back where we were 100 years ago, at a point where we must reinvent the automobile," Toyota Motor tm President Akio Toyoda said at an industry conference in Michigan last week.

Look for new blood

Just as Ben and Elaine can't go back to the world as it was, neither can car companies — even though it's been their habit.

"The industry has, sadly, been focused inward for so long, thought it had all the answers," Ramakrishnan says.

Thus, he was happy to learn that Ford Motor, troubled but strongest of the Detroit 3, is recruiting high-level people outside the auto industry for fresh ideas on cost savings, alternative energy and software.

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