Sunday, 12 July 2015

Industry Practice – Volume Manufacturing – Call for a Paradigm Shift...Usual Rhetoric or Prescient Timing? (Part 3)

Re-Cap -

Previously, Part 1 offered a critique of 'Confessions of a Capital Junkie' by FCA Group's CEO.
It is his ongoing call for sector consolidation, given the what was described as the ongoing value destruction of today's structural template (relative to WACC) when compared to other industry and service sectors. Marchionne then exercising the believed size of envisaged savings to be gained from the mutualisation of 'invisible' common parts across modules and platforms. This seemingly very rational ploy has been the historical panacea to apparent industry woes during periods of sub-par profitability.

The critique proffered by investment-auto-motives sought to dig deeper – in a wholly unbiased manner – into that which appeared truly persuasive, aswell as highlighting how and why the presention was, in sections, also an overtly simplistic snapshot. Recognising also that since the 'corporate turnarounds' within the sector since 2008 and a new rising economic tide in the west, that each VM has variously experienced different rebound rates; well understood by auto-executives and sector analysts alike.

The intention of Part 2 – summarised by the accompanying graphic - was to inform of the broad intellectual debate surrounding the auto-sector; one which has been underway since the mid 1990s, seeking-out transformative formulae and new business cases for sector incumbents and possible new entrants alike.

It was shown how the sector presently appears when read through two dimensions of 'Technology' (Progress) and (Industry) 'Structure'. Effectively a 3x3 matrix, with each axis labelled 'Evolutionary', ('Intermediate') and 'Revolutionary'.

It highlighted how the major VM firms, led by Toyota, had by deploying their embedded conventional hard assets (production plants and R-D functions) to usefully advance the apparent technological norm, via ICE technology mated to more newly introduced hybrid power-train systems (aswell as the low volume consumer testing of pure EV models). Toyota then created a new middle-ground ambition with Prius, so prompting GM, Ford et al to instigate greater 'bolt-on' eco-tech (from capacity down-sizing to cylinder de-activation), and albeit far more slowly (given the USA's PESTEL norms) the availability of hybrid. Far more technologically ambitious and progressive has been BMW with its mould breaking 'i3', requiring a re-configuration of its supply chain and internal processing capabilities of carbon fibre, in order to present a true 'leap-frog' vehicle, yet able to be assembled in the conventional manner.

In the 'Intermediate' co-ordinate points for both Technology Progress and Industry Structure, was recognised the arena of 'Niche Manufacturing'. This typically consists of what may be regarded as the 'low-end' approach very much reliant upon reduced cost investment business cases. (The very opposite of the high-end approach seen with supercar* producers). The centrality of a high quotient of cheaply available labour (to avoid high CapEx), was evident from 1950s onwards across Europe and North America. However, high living costs and wage demands since the 1990s in many instances saw attempts to have production 'lifted and shifted' to cheaper foreign regions (eg Malta in the 1990s etc) and even in a bid to maintain local assembly, deploy the use of prison workforces (eg Shelby American in Las Vegas during the early 2000s).

[NB * although the term 'hypercar' is now widely publicly understood to indicate the most capable and highest priced sports-cars, within the industry itself very often the term 'hypercar' is associated with the lightweight eco-car specification ideals of ecologist Amory Lovins].

Critically this commercial template was recoined 'Micro Factory Retailing' in the 1990s and viewed by academia as re-deployable in those 'Pioneering' global regions (beyond MINTS and CIVETS) which sought indigenously created mobility to help propel their own economic development agendas. However, in yet another twist, simultaneously this 'MFR' template was re-imagined once again: as the optimal route by which to introduce all new, eco-oriented makers and brands into the Triad regions of NAFTA, Europe and Japan (and very possibly “Chindia”).

As also seen, far closer to the build methods and practices of Volume Manufacturers – though often with dedicated “short order” plant such as 'carousels' - is the realm of 'Contract Manufacturing'; firms that offer additional capacity and special variant build capabilities to major VM clients and others seeking to heavily modify part-built or complete ex-factory vehicles. (As an example, recent press reports state that Jaguar Land-Rover has agreed with Magna Steyr of Austria to outsource its excess production. However, the report is unconvincing since the stated “E-Pace” - a smaller sibling to new F-Pace – would actually be directed at a high volume market, thus Magna Steyr would not have the required capacity. Instead, more likely is that E-Pace is either a low volume Hybrid or EV version of F-Pace. This forming a JLR-Magna relationship with potential for future shared CapEx projects under-pinning high volume models and variants).

Quite obviously, the very notion of 'contract manufacturing' – like 'contract services' for engineering development – raises the theoretical possibility of external parties undertaking vehicle assembly on behalf of a present day VM. This done either completely or for a major portion of output. The term 0.5 Tier Supplier has emerged over the last 20 years or so to describe this scenario, and would most likely be offered by a Tier 1 Supplier seeking to extend higher up the value chain. (Magna International's purchase of the Graz, Austria plant from the previous Steyr-Daimler-Puch is seen as a step toward this possible ambition, itself enabled because the Graz plant typically handles higher margin 4WD vehicle variants. Graz's expertise in 4WD systems (from 'portal hubs' to FWD adaptations).

Critically this also highlights the idea of externalised 'contract services' for vehicle engineering development taken far further than seen to date. Thus far applied from specialist disciplines (eg military land systems) to commoditised 'bums on seats' (eg MSX International), but with the acquiescence of client VMs the potential to become a truly large (pre-market) automotive services sector, seen as the flip-side of the after-market realms. Provision of this service is termed (likewise Tier 0.5) 'Vehicle Integration'.

Such changed dynamics to the auto-sector's historic 'Command-Control' mentality would be monumental, and no doubt offer up a new world of investment potential to the capital markets.

However, many VMs recognise the many and great advantages of a 'secured' value chain: from Henry Ford's efforts at Fordlandia to the Japanese Keiretsu / S.Korea Chaebol systems to FCA Group's subsiduaries spanning basic castings to components to production systems and PSA's holding of Faurecia parts). That sense of self-determination is what enabled the creation of national auto-industries led by national champions, and so an historically induced reluctance to fragment.

That process of asset and activities fragmentation is generically termed 'Unbundling'; and has been applied to various sectors previously, with the rationale of “releasing internal captive value”.

This has happened previously in the auto-sector, unsurprisingly in the capital markets driven USA, when GM and Ford divested their respective internally created supplier divisions 'Delphi' and 'Visteon'. And more recently, after the 2008 crisis, with PSA's sale of 75% of its stake in Gefco.

This Part 3 conveys in greater detail why certain quarters – primarily capital markets, sector consultants and academia – have long call for a radical change in the structure and manner of the traditional auto-industry. These voices essentially inferring that the sector, whilst buoyant and healthy at its western mid 20th century peak, has become over-bloated, inefficient and ultimately (over the economic cycle) value destroying.

“Unbundling”: The Call for “All Change” -

The attached derived graphic (from Part 2) illustrates the theoretical shift required if across the board sector “unbundling” is to occur.

By far the most vocal proponents for such a wholesale re-orientation have been Graeme Maxton and John Wormald, the authors of 'Time for a Model Change' (sub-titled: Re-Engineering the Global Automotive Industry').

As a follow-up to 'Driving Over a Cliff' of 1995, 'Time for a Model Change' was published by Cambridge University Press in 2004. Both books seek to act as more than Devil's Advocate regards the question 'investability' in the overtly historically engrained auto-sector at the end of the 20th century and at the beginning of the 21st century.

Having described in detail the macro and micro picture over the previious half-century, the previous decade and at the turn of the century, the 2004 book purports (on p201)...”the need for counter-veiling forces to emerge – the is the whole thrust of this book”.

The research-work behind the treatise is substantial, and thus a compelling big picture presented for fundamental change, given the evidence of western vehicle market saturation, the ensuing general stagnation and inevitable decline, along with sourced observations of concern from outside experts and provision of the authors' accrued absorbed learning.

Presented Thesis -

“Time for a Model Change” begins with the following thesis:

.The automotive industry ranks among the most significant business phenomena of the 20th century and remains vitally important today, accounting for almost 11% of the GDP of North America, Europe and Japan and one in nine jobs. In economic and social terms alike, its products have had a fundamental impact on modern society - for better and worse. Yet the industry has found it hard to adjust to recent challenges and is no longer much valued by the capital markets. It is riven with internal contradictions that inhibit reform, and faces a stark choice between years of strife or radical change. This book is a wake-up call for those who work in the automotive business. It highlights the challenges and opportunities that exist for managers, legislators, financial institutions and potential industry entrants. Most of all, it gives us all cause to reflect on the value of our mobility, today and tomorrow.


1. From automania to maturity – in the main markets at least
2. The problems that can be fixed (emissions, accidents, congestion)
3. The global resource challenges (energy, global warming)

4. A global industry and the changing international order.
5. The supplier industry – the catalyst for the profound changes to come?
6. The downstream sales and service sector.

(The Investment Case)
7. When the numbers do not add up.

(Degradation vs Reorientation)
8. Choosing a future for the automotive industry

9. Time for a model change...”the 4th automotive revolution”

Herein, the major points and verbatim and para-phrased passages – set out in Chapter 7 - which are pertinent to the crux of the Maxton/Wormald argument, are provided.

Chapter 7:
When the Numbers Do Not Add Up

(By 2003) the authors had “painted a picture of an industry which had been filled with mounting troubles for a decade” (problematic by the mid 1990s).

- Unnoticed by most because the “progressive sickness” was slow (harder to diagnose).
- A period of economic boom in property, IT stocks, (+ general services and credit provision)
- Boom fed by media, uninterested in possible flailing of remaining smokestack sectors were
- Not in the public interest to scare-monger.

But the financial sector was cognisant

- Some wrote warning papers about the auto-sector's inherent problems
- Deutsche Bank, Citibank, Goldman Sachs and Bloomberg leading protagonists
- Banks / Institutions / Private Equity had long reduced portfolio exposure to Autos
- This relative to new opportunities across other sectors, geographies and asset classes
- Autos reduced economic importance in value creation (re: MktCap 2002 vs 1990)
- Academia (CAR, Michigan) echoes the 'big investment, small return' perspective
- (2002) USA, Autos = 10% GDP, but its MktCap less than 5% of that figure

“It is becoming a sunset industry, a has been in financial terms – a flagrant contrast with its continuing social role, its share of employment and political influence”...however... “the conventional view about the industry is through the lens of the manufacturers”. Thus for many [though not all] Detroit's historical obsession with: production volumes, market share and sales persists across the mainstream players.

Thereafter bar charts are shown illustrating the mixed business mentality dichotomy (in volumes, sales, profits and market capitalisations) between, at the extremes, GM, Ford, Chrysler vs BMW and Porsche; with in-between the host of other global manufacturers. [The exception at the time was Wall Street's view of Toyota, seen as the sin qua non mainstream player].

Of particular note were two charts sourced respectively from Deutsche Bank and Goldman Sachs. The first titled as 'not firing on all cylinders' depicted each auto-maker positioned within a Volumes vs MarketCap framework and noted them as either 'strong', 'mediocre' or 'weak'; each firms position reflecting the intuitive business strength understanding of independent industry experts, with (again) the Americans weakest and Japanese and Germans strongest. The second (and more complexly calculated) chart used the dimensions of: ROIC-WACC vs EV/IC to provide yet greater clarification of 'investability'. Once again divided into three sections for 'over-valued', relatively under-valued' and 'under-valued', wiith the ROIC-WACC axis showing a delineation between 'value creation' and 'value destruction'. This perspective (in 2002) demonstrated that even the doyen BMW, whilst under-valued was also (at this point in time) was slightly value-destroying (which itself is anti-intuitive), whilst all Japanese players were balanced in valuations, and (unsurprisingly) Porsche well placed, and with PSA showing greatest potential (at the time).

“Too man of them are in the value destruction business...that is why the capital markets are punishing them”.

The example of the then Daimler-Chrysler provided yet further demonstration of this fact, as the highly ill-suited marriage [recognised by many at the time] took place during the merger and acquisition craze of the mid to late 1990s.

However, conversely, the strong and happy marriage of Renault and Nissan, demonstrated how with the correct and truly complementary merging of well aligned businesses, run by those with real market and sector insight and a proper eye on profitability – and not sales for sales sake – the outcome could be value creation. Carlos Ghosn was heralded by the authors as being exactly the right mould of CEO, neither the “petrol-head” nor “bean-counter” variety which has tended alternately dominate through the variously good times and bad. Instead a balanced attitude to truly setting out a powerful and workable ('alliance') strategy, and combining the best attributes of what were previously two very different French and Japanese businesses to improve French quality and add to Japanese product appeal.

Nonetheless, Renault-Nissan appears the odd man out, amongst its rivals.
Expansion was divided as either – simplistically but importantly - good or bad.

Ford's efforts under Jacques Nasser to move further downstream into the higher margin after-sales realms to capture value, fell very much short. Its limited diversification efforts with the UK's Kwik Fit and some local USA dealerships was too little. This a function of the limited expansion strategy cash available (and no doubt the unwillingness for downstream owners to sell at less than inflated prices) vs the embedded attitude of controlled accounting and management.

“The heedless rush to acquire in this industry is also matched by an often considerable reluctance to dispose of, and a pronounced one, not to shut down”.

[NB This the reason why the very over-bloated 'Old GM' was forced into Chapter 11 bankruptcy].

“Killing the geese that lay the golden eggs” is used to describe how, many auto-makers tended to generate almost adversarial relationships with associated stakeholders, including: customers, workforce, distributors, other service providers, Tier 1 and 2 suppliers, and government. Detroit lambasted as worst.

[Although perhaps this outcome because Detroit is itself caught between Wall Street's' desire for profitability vs the per vehicle cost of legacy commitments and the previously endemic product quality gap with foreign rivals].

Unsurprisingly the manner in which Japanese firms generally conduct their external relationships – recognising the importance of togetherness – was highlighted by the authors, with the very real gain s to be had from commercial (and otherwise) mutuality and harmony.

The provision of automakers as consumer finance lenders is highlighted as critical “dangerous dependency” and “potential future conflict”. It was recognised that the US auto-makers particularly had themselves become hooked on providing captive credit via dedicated finance arms, since that credit in turn boosted sales volumes and kept factories running at their high capacity break-even point. Critically, to reduce the affect of massive CapEx costs on a per vehicle basis, more and more vehicles had to be assembled, and so the need to stimulate the marketplace demand, achieved through ever better financing terms and availability to those with little (and indeed 'sub-prime') credit ratings.

“Ford and GM were not terribly good banks. They lent mostly on assets they themselves sold and had to discount, which in turn, affected the residual values of the products upon which the loans were secured” (The same story for Chrysler, though with no figures made available from Daimler-Chrysler at the time). In short, the credit divisions became slave to sales targets, these slave to production targets. “Ford and GM were forced to cut back on lease finance, precisely because they had created such a destructive downward spiral”.

This spiral created by widening gap between the ever increasing cost of wholesale finance sold to the 'Big 3' (given their own decreased credit ratings) and the need to heavily discount cars and trucks, so reducing residuals further, with the additional need to offer good consumer credit deals. Lengthened lease terms (to 5 years) in a bid to yet again drive down consumer costs added yet more problems. Additionally, a substantial increase in the level of 'sub-prime' loans unpaid (“gone bad”) - and indeed even non 'sub-prime' – necessitated a massive increase in set aside 'bad loan' provisions in Detroit's accounting, even if not always stated in quarterly reports.

Thus a perfect storm creating that downward spiral.

Once again a comparison with Toyota was made to show how the Japanese firm, with better products and so residual values, could ironically offer attractive consumer financing on a per month basis.

A sub-heading of “A Fractured Industry – fault lines and the financial exposures” explains Deutsche Bank's 2002 belief that the mature dynamics of the auto-sector, its heavy capital expenditure requirements, intense inter-firm competition and 'commoditised' products create conditions for poor ROCE and, on average, an inability to cover WACC....only strong premium players offering the likelihood of generating economic value over the full cycle. A long way from reaching equilibrium of demand and supply...which would require structural shift in automakers' mentality, to reduce CapEx, down-size businesses and release cash to share-holders. Probably a long way off from such a shift in attitude.

To these problematic issues, Maxton and Wormald also add: product proliferation and the misuse of branding. To go further and re-cap previous chapter headlines:

- there is no significant growth remaining in mature (Triad) markets
- EM regions already breeding new competition.
- need for accelerated investment to progress new technologies (PESTEL trends)
- sector's competitive structure is not yet fully rational.
- far too many platforms, models, derivatives and major components
- excessive associated costs are typically absorbed by supply-chain firms
- fewer would still provide adequate market choice
- the downstream sector is unnecessarily complicated (providers, services bundling etc)
- auto sector's poor relationship with capital markets

Detroit's earnings structure at the turn of the new century is analysed by gauging the contribution by way of vehicle type (small car to SUV, pick-up to luxury car). This done on a chart comparing capacity utilisation vs operating margin. With the Big 3's average (reported) margin at about 5% and utilisation rate of typically 85%, a clearer picture emerged. It illustrated the exact level of losses experienced across: small cars, lower mid cars, sports cars, large vans, small pick-ups, upper mid and even large cars. These major losses were off-set partially by luxury cars (themselves still under par utilisation wise), but critically off-set by the major profitability gained from: minivans, mid-size SUVs, large pick-up trucks and the cash-cows of large/luxury SUVs. Chrysler the greatest beneficiary of this market dynamic.

[NB this general picture was understood by most in the industry at the time, yet the diagram provides very useful enhanced appreciation].

This, the authors state, begs the question as to why major producers facing such a reality do not instead only target the most profitable segments and leave those that drain cash? The answer provided is that every major VM is still obsessed with providing a full range product and price ladder up which a loyal customer can climb as s/he grows older, with greater spending power. Yet yesteryear's level of loyalty has almost totally disappeared.

This market duplication, along with respective duplication in structures, engine families, chassis parts etc, along with distribution and service elements, creates massive amounts of internal sector redundancies. But “why make engineering and production 'lean', but undermined by over-proliferated product lines?”...”because that would mean challenging the current economics of the mad house'.

Toward the end of this chapter, the issue of theoretical cost-savings – and so improved profitability – is presented through the use of a table which compares (the then) current 'proliferated' costs per average vehicle in Euros vs the envisaged 'deproliferated' costs. This done throughout the value chain, from project engineering and general overhead, through procurement, manufacturing, plant depreciation, distribution and onto the retail point of sale.

'Deproliferation' involves the following assumptions:

- Notional average vehicle selling price reduced from €19,000 to €17,100, thus adding €1,900 per vehicle (exc incentives) which would provide an industry gain of €29bn. On an averaged basis a VM would see a 15% drop in its overall absorbed cost structure.

- - Notional transportations costs remain the same given unaltered volume of vehicles, whilst warranty costs much reduced. A 50% reduction in the new product introduction rate so the vehicle lives twice as long in market as before. The introduction of a truly independent wholesale layer to aid European market demand vs supply dynamics.

- Large national and international retail chains emerge, which integrate wholesale aswell, across all (mainstream) vehicle brands. The influence of these large wholesale buyers and retailers would promote the 'deproliferation' process, exercising influence at the product planning stage. They would also undertake the major bulk of advertising so reducing VM marketing activity and so internal VM overhead.

- Notional 5% price reduction of a VM's procured parts, when in reality a 50% deproliferation would provide 15-20% gain.

- Saves the VM 5% and restores 10% or more of margin to the supply chain firms, which would aid research and development at Tier 1 and 2 levels. VM firms save €6bn, Tier 1 and 2's €12bn.

- Manufacturing labour costs estimated to reduce by 10% given reduced in-plant complexity.

- VM internal production costs fall by 10%

- Estimated €1000 per vehicle directed toward research and development, this split 60:40 between base platform engineering and upper structure 'top hat' base to suit model.

- Outcome is a tripling of VM firm's EBIT per vehicle, despite 10% fall in price to the consumer. Annual gain to the sector is €17bn, enough to restore deficient profits and allow massive investment in new technology.

- With service de-coupled from sales (as part of 'unbundling') and ousting 'monopolistic' dealer-bases, charge-out rates for service technicians could drop by 25%. All part of a unified after-market with true competition.

“This is the new Eldorado of an 'unbundled' and reconstituted industry, with production in the right places and the right relationships with strong independent suppliers and equally strong independent distributors. The reason this does not exist today is VM 'control mentality' of resource allocation, with control beyond their normal boundaries....

“We believe that many of the conventional historical constraints can be loosened (via unbundling) and re-aggregates into more economically viable units working together on an equitable basis...

“In the absence of external monitoring and control, this has become sub-optimal, with strong predilection for preserving the status quo...

“The bundling and conglomeration have made it difficult for capital markets to play their role in stimulating the re-allocation of funds from mature to growing sectors in the auto-industry, and from unsuccessful to successful businesses...

“There is a desperate lack of sector internal transparency about the industrial, commercial and consequentially financial justification for inter-corporate transactions...just as bad for large projects. More salutary if astute outside analysts pored over better availed commercial intelligence and internal recommendations...

“We believe the industry is at a historic turning point between two alternative futures....firstly to try and continue the historically engrained 'Command-Control' method, which has led to increasing problems with the finance community...the second to face-up to restructuring and openness”.

Interpretation of the 'Unbundling' Ambition
With Over a Decade of Hindsight -

Besides the failure to predict the truly massive impact of the BRIC's economic on the demand for vehicles from 2003 onward, and the rewards this brought manufcaturers, Maxton and Wormald have shown themselves to be important observers and critics regards the general condition of the auto-sector in the Triad regions.

With the now present slow-down of EM regions, with very importantly China's continued 'modicum growth' at 6% or so, and its the need to stimulate internal demand yet further (across the South and Inland cities), and the returned but seemingly limited growth envelope for vehicles in the Triad, it seems that today is the point at which such intrinsic questions about the all too vital auto-industry, must be asked...and hopefully prompt reaction across all stakeholders.

These verbatim, paraphrased and summarised descriptions then highlight what Maxton and Wormald view as the need for a “4th Revolution” within the auto-industry; after the paradigm shifts that were: Fordism's standardisation, the creation of the aspirational brand/product ladder by GM and the introduction of 'lean production' by Toyota.

However, the major difference being of course that all three of these revolutions were created from inside the industry to provide competitive advantage, whilst the idea of the '4th revolution' runs (essentially self admittedly) counter to the 'command and control' theology of the industry's giants.

Thus any such re-orientation of the auto-sector - all too realistically - lays in the hands of either industry regulators or the slow progress of those new sector entrants (necessarily with massive liquidity), able to defy the previously insurmountable barriers to entry.

The likelihood is that, as seen, given the immense size of the sector in notionally advanced regions and those of now well developed BRIC+ nations, regulators well recognise the need for maintained stability throughout the conventional value chain; so that the economic beast itself remains at least mostly intact.

There may be room at the margins in the West, but embedded manufacturers recognise the threat of the new, and so embrace aspects so as not to become 'out of phase' with social trends. BMW's experimentation with a 'owner-lender' rental scheme (to defray the cost of ownership) demonstrates.
Such moves seek to create an even greater stranglehold on downstream consumption habits, little or no willingness to see down-stream activities fragmented when so much is at stake, especially so in the West.

Likewise, EM nations – and their typically conglomerate corporate structures – will try to emulate the golden years of the auto-sector once again, for their own gain. And that means effectively re-running the previous industrial and commercial template.

The opportunity for possible drastic change came with the demise of 'old GM', but in Washington's rush to resurrect an automotive phoenix, upon which so many people relied, America's biggest producer was invariably recreated as a renewed shrunken entity, effectively in the old image. Almost expectantly, new GM's return to its heavily engrained behaviour, relying upon discounting and incentives to 'shift metal' to re-boost revenues and seemingly accounting ploys to grow its bottom line during its early return phase. Similarly, the re-booted Chrysler soon re-adopted the sub-prime financing to boost sales, persuaded by the 'new beginnings' of the American economic cycle.

As regards the possibility of sector re-orientation from external quarters, the seeming likeliest candidate Tesla has instead chosen to deploy the standard industrial structure (albeit with advanced technology) as its seeks volume growth. If it remains 'plugged into' this template, it seems likely that it too will likely mimic the very same 'command and control' commercial mentality over the up-stream and down-stream aspects of its business.

Similarly, other efforts to re-create the sector model have come from start-ups such as Local Motors, Oscar etc, obviously undertaken in a very small manner. But these have only done so thus far by exploiting general economic inconsistencies; such as unpaid open-source design-work and the innate challenges of the 'real-world's' local labour rates, the problems of volume 'ramp-up', overly ambitious desires for a broader product range. In effect progress through artificial solutions.
The only firm to have seemingly conquered this thus far – at the very low volumes to date and a more convincing master-plan - is the UK's GMD.

So inevitably new entrants will want and need as much 'holistic control' as possible, so as to drive the commercial vision and any associated spirit of the brand. This so even with attuned stakeholder partners, who invariably act in the role of 'soft venture capitalists' or 'vision enablers and gainers'.

Consequentially, in 2015+, having now absorbed the auto-industry boost that was the 'EM leap', this is indeed the right time to table questions, observations, comments and recommendations about the modus operandi of the global auto-sector's players.

Yet even in what could be a momentary period of TIV stagnation as AM regional growth off-sets EM contraction, it would be overly optimistic, if not fool-hardy, to expect the true beginnings of the “4th Revolution”.

Instead, something more likely of an evolutionary 'Version 3.5': as conventional value-adding solutions (such as JVs) are re-played to reduce costs, aspects of the foible that is product proliferation are addressed 'in-house', a new focus on brand differentiation to combat 'commoditised products', contained CapEx when contract manufacturing can be sourced elsewhere, and most progressively, the tentative steps taken to exploit the possibilities of new (prompted) lifestyle choices enabled by the slowly emerging 'internet of things'.

If not a complete structural revolution over the next decade, then at least a much quickened path of evolutionary learning and adaption, undertaken with necessarily improved business rationality.