Monday, 20 August 2012

Micro-Level Trends – North American Bus & Coach (Part 1) – Evolution of Producer & Operator Structures.

North America is obviously undergoing an unprecedented socio-economic shift. Whilst the red and green ticker-boards of Wall Street reflect moment by moment reaction to incoming business news, the fact is that Main Street America is a very different place today, and many people who inhabit this all too real world face a very different future. One that has very real echoes of the past when the country itself saw its population mass-mobilised to seek work and find affordable leisure times.

Such a fundamental shift should commercially and technically re-invigorate what has become arguably a lack-lustre and outdated domestic bus and coach sector.

This following Part 1 of this specific weblog looks at the broad role of the American bus, before the following Part 2 provides insight into the internal dynamic of the industry, with critical attention drawn to the lessons that have been, and still can be, learned from Europe, where mass-mobility transport has typically been more advanced.

Part 1 – The Social Context -

Since North America's mass popularisation of the private automobile - thanks to Henry Ford, Alfred P Sloane and Walter Chrysler – the bus has for the last 90 years has been perceived as a transportational 'poor cousin'.

Yet it has kept the USA and Canada on the move and been a vital component of economic activity in good times and bad; both as a productive industry in its own right, and as prime travel enabler for millions of people for work and social purposes.

Compared to the impact and economic might of car production, with its massive advertising campaigns, global reach and consumer aspirational brands, the Bus & Coach sector appears at first far less glamorous and so interesting. Whilst overshadowed, like he truck sectors it provides a necessary socio-economic backbone to all countries. Though that argument appears less convincing for notionally 'advanced' regions like the North America relative to the BRIC and CIVETS countries, given the far higher private vehicles per head ratio, the fact is that 'new western norm', with far tighter national and personal fiscal conditions indicates that the Bus & Coach sector may be set to enjoy greater popularity than seen over the last 50 years

The sector began to fundamentally shift as the 20th century gave way to the 21st, with a new and unprecedented wave of new foreign ownership across many of the nations bus operating companies. Percolating throughout the entire downstream 'operator' structure: from regulated public services and school-bus services, more recently seeing a greater innovation in schedules and charter services via web-based booking, new improved vehicles and the introduction of new brands, often the result of imported practice.

Yet that very surge of change - in what was arguably previously a introverted, self-serving and possibly progressively stagnant sector – may have gripped the interest of America's own industrial giants. The automotive producers – as the 'old heart' of the industry – previously had deep commercial tentacles in Bus & Coach throughout its heyday to both benefit from and influence its activity.

The difference being that today those interests span the two parallel markets of USA-Canada and China, with each regions neighbouring geographies and the respective regional and international trade pacts.

Basic desk research suggests that a lost foothold to European industrial interests in this sector – in operational service and thus product origins - might well be sought to be re-obtained. This done as a plethora of dynamic socio-economic shifts inside N.America (but most powerfully in the USA) combine to create the 'new norm', providing a fresh era for business potential, yet paralleled by greatly much increased customer expectancy within Bus & Coach.

This 'new norm' of an economically de-based West alongside an ever increasing raised expectational by the fervently mobile middle-tier and bottom-tiers peoples of EM nations across the world. So demonstrates a larger than ever global potential for bus and coach product producers (which as we have seen in past web-logs have risen in those EM countries) and the primarily western service providers.

“All aboard” was the familiar cry across the bus stations of 1950s America. It could well be the Bus & Coach sector's powerful commercial cry today, so pre-empting the commercial potential of tomorrow..

The Dreams of the 'Bus-Boy' -

The bus has been a mode of transport typically used by the 'bottom tier' of American society; the general case in all but the most densely crowded cities. A state-wide and trans-national conveyance mechanism toward the idea of a better life through prospective higher income, better living conditions and improved overall life prospects – the theory often illusionary for those with little to offer besides manual labour.

Well depicted in the 1969 film Midnight Cowboy: its mains characters: a young, optimistic Joe 'Buck' initially travelling north into New York City to make his fortune, and an older, cynical 'Ratso' Rizzo wanting to head south to get away from the seedy side of NYC, the bus represents escape and betterment. The departure of a character leaving his/her home-town to taste the world outside, by stepping onto the bus, a culturally immediately recognisable story reference point at the beginning or end of movies. “Moving On” a constant theme for an economy reliant upon the high mobility patterns of its manual work-force.

The lowliest restaurant post was duly christianed 'bus-boy' – still in use today – derived from “just off the bus” between the 1920s dust-bowl era, through to the 1950s beatnik traveller age and onto today.

A Reflection of Broad Society -

As post WW2 indigenous white Americans gained longer-term and secure employment, thus leading to widespread car ownership, the wealth gap, lifestyle gap and so perceived racial difference extended yet further between the white populace and the so called 'colored' peoples – primarily African-Americans.

Now recorded in the history books, it was on a bus in late 1955 that Rosa Parks made her stand by refusing to surrender her seat to a white person at the demand of the white male bus driver, so practising her right to equality, even if not then recognised by the Alabama statute books. She was arrested, so leading to the Montgomery Bus Boycott. Her action recognised as a defining moment in the civil rights movement. She saw well within her lifetime, the defining moment when African-American females began to occupy bus drivers' seats for themselves in the late 1970s.

Over the following years non-US born, Hispanic peoples - from Cuban, the Caribbean & Mexico - became prime customers for bus operators. With the rise of national post-graduate education through the 1970s onwards students became a growing customer-base, often themselves 'education-stay' immigrants or sons and daughters of poorer families. They were joined by the international 'back-packer' set consisting of Europeans, Australians, New Zealanders and later various Asiatic nationalities. And most recently, the recent arrival 'low-cost' Chinese and Vietnamese workers.

Whilst the comparative inconvenience of bus travel is the prime negation factor for wealthier Americans, so utilising cars, it would be wholly disingenuous not to highlight the other obvious issues that effectively now subtly segregate the car user from the bus user.

Although US bus travellers now reflect a wider demographic than ever before, there still exists major and very real gulf between the privacy of a cocooned car interior with its many conveniences at hand, and the probable personal intrusion on a bus. Each in a way reflects the lifestyle of its user, wealthier car users typically able to have greater personal space at home, at work and in social circles, whilst the bus user will typically be far more socially integrated for more of the time, at home, at work and in social activities. The luxury of wealth, as well known by philosophers and sociologists alike, is that in most cases it affords far greater privacy.

Unsurprisingly so there is an engrained perception amongst many hard-working aspirant Americans (of all hues) that the “bus is not for us” - not conducive to lifestyle and preferences – and so tied to the car with a psychological umbilical cord.

So whist the public transit ideology was originally intended as a democratic all-inclusive form, and often reflects a any nation's level of social cohesion, in the USA it also an vehicle that both ironically socially promotes and yet personally defies the idyll of the 'American Dream'.

Private cars to this day remain the quintessential foundation-stone of that idyll.

Things though may be slowly shifting as socio-economically the 'new norm' increasingly avails itself as part of the necessary re-shaping of the United States.

Transport as 'Social Glue' -

More positively, for many the daily or weekly familiarity and routine of state-run and private-bus systems mean that differing persons across varied social groups ultimately mix to one degree or another.

Most obvious in the US is that of children, the 'big yellow' bus historically a major part of many children's lives, where parents can neither afford the means or time to drive their off-spring. It could be argued that the big yellow bus, certainly more than the streamed-learning school classes of similar ilk, and possibly more than any other formalised social initiative, could be seen to be the true 'melting pot' of early phase multi-cultural American life.

When eventually the commercial lifetimes of the vehicles have been drawn through the accounts book by way of full depreciation, those ex-school buses, the ex-company buses and ex-corporate buses are refurbished by new community groups, to serve the needs of the myriad of regional churches that span the reaches of the South and Mid-West, so as to transport their 'flocks' between religious events and social outings. Unfortunately, the great irony being the Pastor often travelled separately in (stereo-typically) his Lincoln or Cadillac to maintain his authority. So highlighting the innate social discrepancies that exist in even the supposedly closest- knit groups.

[NB The “Pastor's Caddy” just one example of the simplistic fallacy of the recent “99% vs 1%” demonstrations].

[NB Indeed, under the banner of social injustice, what seem self-serving special interest groups appear to seek influence and power without evident formal accountability, strings pulled from the shadows. Moreover exploiting any ends to attract a following, such as the medium of diverting the genre of 'performance art' into “performance demonstration” to buoy participant numbers and to provide entertainment to the tent-city dwellers. Ms Rosa Parks, whilst recognising the importance of the general principles, would no doubt be sickened by the fatuousness of 21st century American demonstration.].

As seen, the very act of mass transit, especially in a routine manner, be it between strangers or community groups, creates a mode of 'social glue'. Whatever that level of integration, from a nod of acknowledgement to deep conversation, it is an activity needed perhaps more than ever as the country feels the ever greater strains of economic and so social fracture.

So whilst for many Americans “the bus” has dour connotations with the less fortunate members of society, it also demonstrates itself to be a conveyor of social hope and greater integration.

A Snapshot of America Today -

Whilst the “1% vs 99%” activism generated a highly simplistic interpretation of the current picture – and indeed subtly manipulated to create a “them vs us” mentality – the reality is that the picture across the US, North America, the UK and Europe is far more complex mosaic of issues and differences.

As well communicated in the quality press in recent years, different people in different situations – from SME business leader to factory hand - have different concerns and stories to tell.

A recent WSJ article (09.08.2012) provided a good contrasting 'snapshot' picture, comparing today with the performance of previous Presidents with Obama at a similar 4th-year 1st term / only term stage. The measures spanned: National GDP, Per Capita Income levels, Personal Net Worth and Household Real Estate Value. The results show that in 3 of the 4 measures (GDP, Income, Real Estate Value) America today is worse-off. GDP -1.8% worse than the previous low under Clinton, Income -4.6% worse than under the former low under G.W.Bush, and Real Estate -12% lower than under HW Bush. Only in Personal Net Worth +10.6% has this administration achieved a middling performance akin to GW Bush – largely thanks to its QE programmes boosting the NYSE, NASDAQ and periphery stock markets.

Thus it is plainly obvious that for much of the population who are either unwilling or unable to convert cash (of whatever sums small or large) into stocks, given their respective innate caution, the need to deleverage or suffering from modern poverty, there appears at this moment in time to be a divergence of fortunes.

[NB investment-auto-motives recognises that even this observation is bound to be overtly simplistic given the greater proclivity of the average Americans, relative to other national populations, to partake in the national stock market; though the terribly managed Facebook IPO will have deterred many potential newcomers].

Thus , whilst far from a case of the “99% vs 1%”, the basic figures displayed by the WSJ highlight the woefulness of an economy awaiting that much needed long-span, drip-fed productivity push described by investment-auto-motives in previous web-logs.

The coming of the 2008 financial crisis has obviously left a legacy of notable social differences.

The previous era of increasing apparent consumer equality - itself created via an unsustainable reliance on 'manufactured credit' – now wholly defunct. Unfortunately, the old saying about “swimming trunks and tides” apt not just for sections of Wall Street, but the whole sections of American society.

Given the previously described innate drive for private mobility and convenience, the economic general health and pulse rate of the nation is no better gauged than by the sales figures of Detroit's Big 3 auto-makers. In Q2 2012 we saw what were post crisis re-bound figures stall somewhat, indicating that 2012 would overall be a flat year in terms of sales and corporate income.

So whilst not faltering into negative territory again, the economic rebound is proving a slow and tortuous one.

This then boosts demand for utility type goods as seen by buoyant pricing in the used car market, and also creates a platform for utility type transportation, which bodes positively for the bus and coach sector.

Post Script -

To qualify...

Although certain quarters of the press may mention otherwise, there is no real direct substitutional effect between car and bus. Any car owner has a highly inelastic economic relationship with the car given upfront and through-life sunk costs of ownership. This obviously includes: purchase price (often ameliorated month by month and so a constant drain), insurance costs, road-use tax costs and maintenance costs. So the likelihood of a car owner switching to the bus to seemingly save on a 'per journey' basis (unless inner city) is remote given the economic and emotional investment. All the more so in regions of poor bus networks.

It is only when that owner fully halts car usage because of its far higher costs does he/she switch to the far less convenient substitute that is the bus.