The general pan-European stock-market collapse which started in late March this year hit those who were viewed as most exposed the hardest. Few saw innate corporate value destruction to the same extent as Peugeot SA.
From a YTD high of E16.31 on 3rd February, the slide took seven months to perceptively bottom only very recently on 5th September at E5.74.
The question many are asking – institutional investors, the PSA Board and crucially the new French government alike – is whether the recent impressive rebound is simply a 'bear share' rally promoted by the ECB's recent macro announcement (to effectively back-stop the Euro via European banking system through national bond purchases), or whether this rebound can be sustained in the medium and long term by execution of the present and future micro 'turn-around' plans within PSA.
Basic Situational Analysis -
That rally has been accompanied by a number of beneficial and damaging factors:
Beneficial has been President Hollande's recognition that job cuts are indeed “inevitable”, an important tailwind for the group and a strong 'real-world' stance by Hollande given his socialist principles (The fact that his presidential victory drive was in a PSA vehicle, himself stood through the car's sun roof, yet in the pouring rain, was viewed by investment-auto-motives at the time as highly prescient).
The outcome, a retrenchment process that will see over 8,000 posts eliminated or re-classified, and the high-cost Aulnay plant near Paris shuttered. To assist the balance sheet, the ongoing divestment programme, with sales of property assets through the summer, now sees 75% of the group's Gefco logistics division being purchased by OAO Russia Railways. Though not yet officially 'sealed' yet, it suggests that operational logistics loss would be substituted within Europe by the logistics agreement wrapped within February's GM agreement. The sale to OAO also obviously boosts industrial and political relations with Russia, an increasingly important marketplace and industrial space for PSA.
Previous PSA investors were somewhat 'diluted' by the much needed new E1bn share issue in early 2012 which itself help drive down the stock's valuation in the short term, but provided improved confidence for the mid term. Viewed negatively has been the demotion from France's CAC40 index, reduced expectations of the previous manufacturing alliance with GM, and release of an independent report which berates PSA's primary shareholders for “strategic errors” to date.
The fall out of the primary index is seen as a fall from grace, an embarrassment itself. Yet out of the direct spotlight provides the fortuitous ability to not be 'tossed and turned' by reactionary CAC40 sentiment, especially when it recedes. That should mean that its share value and so market capitalisation will better reflect informed investor opinion, and the meaningful research of institutional buy-side analysts and private investors alike. This should provide a firmer financial base from which the PSA Board can execute the intended turnaround.
Interestingly, in a volt-face, it appears that GM is unwilling to share its medium/large -size vehicle platform, which PSA was due to adopt for its large sedan/wagon cars. GM China stated that offering the platform would enable PSA to directly compete with GM in the all important Chinese market. (This issue should have been 'baked into' the original agreement via a production clause, but serves to demonstrates the lack of engineering – or indeed corporate - compatibility that investment-auto-motives highlighted after the February announcement).
A Rhetorical Report -
The independent report was commissioned by the government and undertaken by Emmanual Sartorius. Its results stated that PSA was/is/has:
1. late in achieving cost savings between the Peugeot and Citroen divisions
2. overly reliant upon the European car market,
3. had little foothold in emerging markets
4. had not formed an entwined strategic alliance in the Renault-Nissan manner
5. had no reach into the premium car segments
6. overtly controlled by the major shareholder interests of the Peugeot family
But in truth, most of these strategic shortcomings were recognised by the company some years ago, there is little of true insightful value from what has been reported.
Well Recognised Challenges -
Historically PSA has been a leader regards its internal cost equation across its two brands, the mid 1990s seeing the pinnacle of Peugeot-Citroen systems sharing, an industry leader at the time. Progressing this background, it has been the impressive manner in which the newer DS sub-brand has been platform engineered – splining Peugeot & Citroen systems to create something new which offers the much needed cost-down and up-pricing efforts.
The product strategy and engineering elements of the company appear fully conversant with the present-day challenges. Their own strategic options pallet is limited to extricating internal value on core vehicles and buying-in platforms and expertise for fringe vehicles. This the case for many years and central to PSA's long-standing business plan. The greater challenge, still well recognise by Varin et al, is wholly structural regards its fixed and variable cost—bases, primarily about production efficiencies but necessarily spanning the whole organisation. But beyond even this cyclical reaction is the need to wholly re-orientate the complete business model so as to become a progressive thought leader in 21st century products and services provision; with acccordantly strong internal and external value chain(s) reach.
To this end the challenge is greater than expressed by general commentators.
Signs of a ttrue desire to metamorphosise into that 'future company' have been evident since CEO Varin's appointment; given his steel-sector roots and the need to redefine the buyer-supplier relationship, and new (still relatively tentative) initiatives such as the ‘Mu’ programme which seeks to offer personalised flexible transport solutions and better match multi-vehicle useage patterns to user needs.
So the ‘deep and far’ reaches required whilst not wholly evident in the present commercial shape and revenue streams of the company, especially given the required sale of Citer vehicle rental business, look to be seeds of the future.
Talking Heads Defy Progress -
Bloomberg TV have had talking heads stating that PSA should: cut capacity, introduce appealing products and find new routes to market. Whilst useful for filling the ‘media air’ this states little more than the obvious. How this is done in execution, as part of the short, medium and long-term structural solutions, is what matters.
Meaningful Macro -
Unsurprisingly, the most pressing issue is macro-economic in character.
Presently the likes of PSA and many similar European companies presently suffer as a direct result of the sovereign-debt crisis, so in recent times greatly dependent upon expectations regards the nature and timing if the liquidity feeding mechanism promised by the ECB into each EU state’s banking system.
Given its primary role, Germany’s reticence about such notionally heavy-handed QE measures is more than understandable, whilst by procrastinating, also assists the competitive advantage of its own auto-players.
Yet the fact remains that the ability for PSA to access cheaper wholesale funding, given its lowered investment grade status, remains vital. In order to underpin Banque PSA in for internal funding needs and its own vehicle sales/leasing activities externally.
Presently that situation appears “critical but increasingly stable” thanks to much improved national debt management conditions and less stressed capital markets, and the company's ability to access low interest capital with balanced income vs maturity schedules; but tensions invariably still exists.
Mending the Micro -
But of course, ironically, it is largely the apparentongoing instability of cross-border European banking at the macro level which at presently enforces the strict discipline of fundamentally re-shaping the company’s micro-level cost-base.
[NB Intelligent investors closely will monitor exactly when divestment and cost reduction programmes have gained internal traction and wholesale liquidity access is externally forthcoming].
Much has been said about PSA’s over-reliance upon its European sale-base in H1 2012 (giving 58% of its income) relative to its limited but slowly growing presence in many higher-growth EM markets.
However, as some of those ‘over-heated’ EM markets slow their own growth rates (esp Brazil & India), and install policies to support indigenous producers, so the CAGR rates of the previous opportunity momentarily abate, though overall volumes continue to swell. Vehicle price wars within those temporarily squeezed markets are not the right context for expansionary marketing and maintained margins of a 'quality' European vehicle. However, the respective proximity and size of Russia and China appear to provide greater incentive and lesser immediate market headwinds, so the need to maintain sales push to continue the mutual small but important market share growth rates over H1 2011 in what are the world's strongest growth geographies.
Though it may seem illogical given the constant downcast commentary on Europe, PSA’s strong foothold of 12.9% must be defended. There is the possibility that the less financially constrained UK where sales are slightly up, can be used as a ‘beach-head’ whilst awaiting the ECB's liquidity feed into Southern European banks, and trickle-through to the vehicle sales base. Of great importance has been recent recognition of France's reduced sovereign debt woes. Plus, Scandinavia's buoyant economic standing. Together, this golden triangle may act as the foundation for the long awaited European sales expansion.
PSA is indeed a “generalist manufacturer” and has been increasingly squeezed between an ambitious and expanding VW Group, the dividing of the mainstream mass market by quality and affordable players reflected by the Germans and Koreans, with the Japanese increasingly positioned as the newer mid-tier occupants. Hence the continuing loss of European market share by the old guard Opel, FIAT, Renault and PSA. The de facto reaction has been to create low cost cars (indeed whole platforms) such as VW’s original efforts with Skoda-SEAT, and Renault’s impressive deployment of the Dacia cars from re-engineered old generation platforms. But, broader Dacia sales have recently contracted, given across the board EU and MENA woe, even with new purchase appreciation levels amongst shallow pocketed westerners.
To this end, though arguably late in the day, PSA announced of the new 301 budget compact sedan/saloon. It strikes at the heart of EM nations’ preference for sedans (family transport, taxis and company cars) and will provide for a valuable resuscitated income stream, especially in MENA regions (see below) and China.
[NB It reflects the new naming structure which sees use of the suffix ‘1’ applied to specific EM market vehicles].
Extolling European Product Advantage -
Over the last 15 years of so during EM region economic expansion, cars like the ooriginal Skodas and SEATs and Dacia's were perfectly designed to appease the motoring desires of th new middle classes. But they have also seen and experienced those other more advanced and desirable vehicles that had been previously beyond their reach.
Now required are meaningful, 'par-excellence' affordable motoring products that have been originated in, and dedicated to, Europe and made avalaible elsewhere. High impact, demonstrably 'new era' vehicles, which are released onto the international stage with intrinsic European kudos, manufactured locally alongside EM dedicated products. The FIAT 500, Ford Fiesta and VW Up create the template, yet PSA (and Renault) could make strides by further extolling its European roots.
Looking at the small car sector in Europe, presently, Opel appears rather hamstrung in its efforts with the new Adam. Although referancing the originator Adam Opel it has little inherent cultural meaning to the masses outside of Germany, and its mixed concoction of retro-modern styling cues without definite heritage provides little credibility. Conversely, FIAT leads the pack with its range deployment of the 500 persona, now arriving in different variants and guises, obviously mimicking BMW's Mini. Renault has shown little thus far, but a re-invention of its original popular Twingo – to overcome the present lacklustre vehicle and contrast the new generation sporty Clio – looks inevitable.
Peugeot’s New March -
With such strong competition abound and expected, having seemingly well engineered the impressive new core model Peugeot 208 it must now be properly supported by sibling products and powerful marketing to maximise sales traction, and maintain clear differential between it and its sister Citroen C3.
PSA must broaden its concentration on re-inventing its A-segment 108 and C-segment 308. The 108 will be a replacement for the long-lived Toyota Aygo based 107, suggesting an on-going product replacement agreement with Toyota for something far more impactful than the designed for production Aygo/107/C1. Whilst the 308 will have been engineered in a module constructed manner alongside 208 to generate fixed and variable cost savings over its prime models.
As stated previously by investment-auto-motives, an exhaustive exploration of how PSA and Toyota could further integrate respective interests would be most pleasing, given the useful but limited results with Mitsibishi. After the very successful Renault-Nissan merger and the recent Mazda's sportscar agreement with FIAT's Alfa Romeo (expected to expand) continuation of Euro-Japanese meshing is compelling; VW's retraction from an alliance with Suzuki possibly the very well rreasoned exception that proves the rule
Toyota's need to equally alter its historic 'wholly controlling' business model and better commercialise its R&D means it could be receptive to a definite but loose industrial arrangement with PSA.
The upcoming Paris Auto Show unfortunately looked originally set to under-whelm. PSA re-exhibiting the SR1 large coupe concept alongside the new HR1, 'old' Revolt and new 2008 concept, in addition to its web-presented new and re-hashed concept cars, the inclusion of the new 208 GTI and SY variants seeking to create a link between the now and tomorrow. However, it seems that seeking to provide a late talking point, he company is showcasing 40 models to contrastedly 'overwhelm' the show and demonstrate its French and European muscle; a good PR initiative.
[inserted PS...the surprise Onyx showcar provided a good contextual description for the PSA, having to create a 'twist on convention', doing so with carbon-fibre and copper mixed material surfaces on conservative supercar proportions].
In truth the present ‘public form’ of Peugeot especially in the critical advertising space appears poor, the new 208 especially so in the UK market, given its critical importance and the rather aneamic TV adverts. Here in the UK, at this proverbial 'beach-head', Peugeot tends to sell to singles and couples with greater disposable incomes (the RCZ the halo), whilst Citroen has greater family-market targeting, who themselves are heavily cash—strapped at present. Thus the focus on Peugeot and DS is understandable, with even momentary re-orientation of Citroen, since they will be expected to help off-set the lost (usually trade-in replacement) sales of Citroen.
Eactly how the DS sub-brand is managed hereafter is of vital importance if it is to gain popular respect and improve upon its novelty status. It realistically gains its higher price-point from being positioned as characterful, technical and customisable; yet cannot be labelled truly ‘premium’ (even if PSA seeks to do so) until its build quality and residual values are proven over the years to come. Managing the DS range may prove problematic into the future since the DS3, DS4 and DS5 share little family resemblance amongst themselves, and are extremely distant cousins of the original DS
As stated by investment-auto-motives some years ago, PSA should create a type of entry-level, affordable ‘ID’ brand so as to create a diamond-like brand positioning pattern in the all-important European market, itself able to be replayed across the globe later.
Necessary Contrarianism -
But, it is the MENA region which could offer a substantial mid-term boost. The new 301 demonstrates renewed commitment to the region, set to replay Logan’s success, but perhaps moreover.
It should be remembered that PSA did much to assist Iran when it sought to update its own auto-industry in the late 1980s, replacing the old Peykan with new Peykan/ Samand / Soren based on the 405 body-shell, with later engine and cosmetic updates. The new 301 could provide a new Iranian car programme, replacing or accompanying Soren.
To do so may presently be seen as inflammatory by other western nations, so a decidedly brave and contrarian attitude would be required by PSA to assisting Iran in its renewed plans for economic self-sufficiency and its overtly internalised economy planning.
This would vie against the American-led ‘international community’ sanctions - sanctions which PSa have upheld thus far with stoppage of CKD shipments - but without any direct US market presence and sales base as a concern, and few Isreali commercial links (unlike Renault-Nissan and the BetterPlace project) the company’s present weakness may mean that such a contrarian commercial stance is ultimately necessary as part oof its sustained development. Indeed then able to tap into Iran’s large population and so gain greater foothold the MENA markets as a pseudo non anti-Islamic multi-national, thereafter able to support sales ambitions across Indonesia, Malaysia etc. And vitally the much reduced value of the Iranian Rial would provide for a useful MENA export base for 301
Re-Capturing Europe -
Homeland France, Italy and Spain, as well as the remaining EU countries have proven historically critical to PSA, and will continue to do so into the future, even with ongoing BRIC and CIVETS expansion ambitions.
However, even with this fact, the Q1 2012 results showed a dire period. Sales declined by 20%, reflecting a similar loss of the overall car sector, and its market share slipped from 13.5% to 12.9%. Favourably the car market collapse was partly compensated by commercial vehicle sales which fell by ‘only’ 11%, PSA maintaining its lead with 21% market-share.
H1 2012 saw an overall YoY revenue loss of 5.1% giving E29.6bn, seeing a loss of E819m vs a E805m profit for the previous H1 2011 period. EPS was down to E-2.73 from a previous E3.55.
Yes, PSA is substantially reliant upon this territory, and some analysts / investors may seek to draw parallels between PSA today and the old GM within the USA before its collapse into Chapter 11 restructuring.
However, the two should not be confused.
Unlike GM and its high-profile but value-destroying Volt vehicle programme that promised a new future, PSA shows itself to have a strategic plan even if not made wholly explicit for commercial reasons. See between the lines and it is there. It also has an inherent re-structuring plan workable whilst operating as normally as possible: to retrench when and where necessary, to concentrate on core competencies (with technical bias) and fundamentally re-shape the business to suit the changed European and global ‘mega-city’ conditions of the 21st century.
An emissions consciousness in Europe and the much needed anti-air pollution policies of EM ‘mega-cities’ mean that shared socio-technical solutions will be inevitably sought.
This means that PSA is in fact in a fundamentally very strong long-term position, even if it has experienced constrained cash-flow conditions over recent years from volatile EU sales and the weight of internationalisation CapEx projects.
Showcased previously, even if witnessed little presently, is the progress made with eco-orientated vehicle solutions. Across the realms of:
1. emissions-cut diesel and petrol engines
2. impressive ‘lightweighting’ of monocoque structures
(new 208 actually 110kg mass reduction over outgoing [though heavy-spec’d] 207)
3. hybrid applications speciality for 4WD systems
(enabling a FWD vehicle platform to gain 4WD capability via a ‘bolt-on’ rear axle integrated electric motor
4. a new 3-cylinder engine as installed in new 208 & 301 (to follow elsewhere)
(matching other's 3 and 2 cylinder units)
5 Ahead in the key issue of diesel-hybrid appplications.
When taken altogether, the eco-leap PSA promises will directly benefit itself as a prime USP and may very well be doubly recouped via sales to its business partners; very probably including GM given its 7% stake.
2015 Rebound Plan –
CEO Varin’s turnaround vision was communicated in the 2015 Rebound Plan, seeking E1.5bn of cost savings and so FCF breakeven by end 2014. Gains sought are: €600m from reorganizing the French production - stoppage at Aulnay, adjustment at Rennes. E550m reduction of CapEx after the ramp-up volume in Russia, Latin America and China. Optimising product costs with GM synergies to give E350 million (half from purchasing synergies, half from development and production unit costs).
Changing Macro Conditions –
A little publicised fact, coming to light only recently, is that France has not substantially suffered from the previous downgrading of its sovereign bonds. The spread on France’s 10 year bond has actually narrowed considerably over the past 12 months, illustrating market confidence, its improved performance actually beating the demand-led yield fall of US Treasuries and German Bunds over the last year; which arguably may have hit rock bottom ‘inflation inversity’.
This then indicates that those previous barriers to national self-financing via the capital markets and any required access to ECB liquidity have been largely dismissed. On a national budget cash-flow basis, the country sits quite well; so presently able to fund its industrial and commercial ambitions.
Furthermore, and viewed as very important by investment-auto-motives, is that France’s close collaborator Switzerland has spent much of the last year printing money under the pretext of a deflationary stance to match the Euro. Yet with little need for those funds to be directed to national infrastructure projects or as social security provision as is the case in US or EU, investment-auto-motives believes that much of that newly created will have been acquired by Swiss investment banks. So ready to lend or take equity stakes in turnaround companies, very possibly including a ‘new future’ PSA, as a recognised leader of the eco automotive pack, both in terms of its vehicles and deployment of its systems R&D to others.
Conclusion -
The rapid damage caused first by the 2008 financial crisis and latterly by the 2010 sovereign debt crisis provided a double blow to the major industries of Europe. Yet those very same blows have also instigated a global-perspective reality check; especially for the likes of PSA, soon recognising the unsustainability of its old Eurocentric and critically undifferentiated products and service business model(s).
That set-off an industrial re-alignment effort across France, abetted by austerity measures, the likes of which has not been seen in the modern era.
Good potential exists for value creation at PSA and so share-price climb given the company’s underlying eco-tech strengths, its ability to shrink expensive French production (and ideally back-office functions), the opportunities to create powerful extended and new commercial alliances beyond GM (eg Toyota, BMW) to creating a deeper web of more B2B relations, which in turn providing for broader strategic possibilities; as well the desire to become a new-age flexible personal transport provider from scooters to ‘tread-lightly’ SUVs to vans.
And critically, the Euro vehicle downsizing trend is set to create the template for the world from here on in,
That broad and ambitious perspective was seen by the 80% over-subscription of its E1bn new share release earlier this year.
But whilst grand ambitions are abound, the present investor focus must be on those near-term structural achievements in capacity utilisation, divestments , project by project synergy savings, and the bottom line impact of the raft of new product launches. Launches that must see much improved supportive and meaningful advertising.
These alone will underpin credibility of a sustained transformation process, and so a broad range of cross functional operational targets should be set in stone and ideally communicated to Paris, Frankfurt, London and Wall Street through more detailed, operationally orientated, IR presentations.
The successful 2012 new-share issue and the opening of funding through the ECB and Switzerland may indicate that capital markets are now chasing industrial opportunity. But even with additional Euro and US QE and the likely increasing availability of private capital, that capital allocation will still need to be conservatively distributed and seen to 'sweat'.
Those who provide the best value creation opportunities, even if currently upon a ‘back-foot’’ position (such as PSA), must seek to do so through meaningful explanation of their big picture ‘destination’ and the milestone achievements of that journey.
Given the company's obvious tailwinds, if Peugeot SA does not pull-through its present circumstances and ultimately re-rise in a different shape, then (to badly re-appropriate Shakespeare) "Something is very rotten in the state of France".
Monday, 17 September 2012
Saturday, 8 September 2012
2012 Paralympics – “Inspire a Generation” by Engineering “Enlightenment for All”
It could be argued that the 2012 Paralympics has gripped the British - perhaps even global - public imagination in a way that 'the alternative games' never has before. The games has most definitely come from the shadows to present itself as more than equal to the traditional Games, primarily because its participants not only embody the Olympic ideals, but those men and women philosophically stretch those ideals to acquire powerful renewed definitions.
Though the ongoing battle is to close forever the social gap that has unfortunately existed between notionally 'normal' and 'different' people; ironically that gap has been much narrowed by demonstrations of super-human spirit, dedication and application. Whilst these are stories of individuals and teams wearing national colours, they reverberate with the a generally silent but increasingly powerful minority of society with similar physical traits, causing a ripple effect of understanding throughout the nation and the hopefully the world.
The impact of the Paralympics, that of “the 3rd Games”: the Special Olympics, and critically the demands of physically and mentally impaired people to live full, self determined, lives demonstrates that the very definition of 'abnormality' is being re-written, to demonstrate that if any true social gap exists, it is because many such impaired people should be viewed as better than the average person since they have had to overcome greater adversity.
Here in Britain the motto “Sport for All” seeped into the public consciousness during the late 1970s as a raft of new inner-city sports-centres were created. Beyond providing a weekend destination for young families, seeking to maintain the physical fitness of the post-WW2 baby-boomer generation (then the core of the workforce), the prime political agenda was to channel the energies of the mostly poor local area young away from dubious activities.
Such centres were at the vanguard of disability access, with ramps and specialist facilities, yet all too often these sporting hubs also conveyed a foreboding atmosphere which discouraged participation. Constructed in the archetypal modernist brutalist style of grey concrete, they often appeared more forboding than the institution in which a person may be resident. And moreover, people with disabilities tended to go, or were taken, mid-week when relatively deserted, yet that visiting time also brought with it a likelihood of far greater personal aggrevation. Periodocally having to withstand jeers and name-calling from groups of local 'latch-key kids' The very well know specific insults are better left in the past and do not require re-iteration. Yet also there was often little empathy either from the supposedly better brought-up 'nicer' middle-class kids who muttered those names between themselves. Unfortunately, many adults barely matured themselves, veering themselves and their children away from “those people” in public spaces - a donation to the annual Variety-Club Sunshine Minibus collection assuaged any lingering guilt, easily done from a safe-distance.
[It is suspected that the reported rise in disability hate crime is derives from the rise in numbers of people recognised disabled, given better general professional understanding in recent decades].
If you happened to be an impaired person in the 1970s and 1980s, no matter what the good municipal intent, the “Sport for All” motto was a hollow one.
[NB Physically and/or mental difference often brings with it far greater perceptional sensitivity of surroundings and personal inter-activity, from birth or post-trauma effects. This often fundamentally re-shapes the mental make-up of someone focused upon simple constructs of right and wrong, but thereafter required to live in a supposedly normal world which is anything but when objectively viewing the subtle but engrained norms of social behaviour. (Ranging from the disingenuous social interests of small-talk through to far more inciduous and so repellent group/gang behaviour intended to subtly target a non-conformist victim through subtle mental taunting. Often the far more acutely intelligent 'disabled' person (esp so 'learning difficulty' people) knowingly or unconsciously view such scenarios as 'untrue', so repels and may react angrily, at the negative social construct; which itself has been devised around power-constructs. Thereby causing an external viewer's re-affirmation of their problem (parent, assistant, doctor etc), when the supposedly different individual see it as society's problem, not his / her's].[And remember, basic group-think, whether from bullies or healthcare workers, comes from making the 'different' person their raison d'etre, so continuing the intended or unintended alienation of that 'different' person].
Hence during the 1970s/80s, attending such brutalist and brutalising sporting and recreation centres was for many anything but relaxing and life-affirming.
Today, decades later, those type of experiences seem far fewer, though no doubt still occur. Societal relations have been, and continue to be, improved. European, British and increasingly International Law, whilst periodically unjust in application and outcomes of individual cases, have been more successful in laying-down general templates for the behavioural expectation pertaining to the everyday human rights of those with reduced abilities. Social guidance which itself filters down into popular consciousness has been successful in raising broader understanding.
Much of this the result of campaign efforts by a host of representative and lobbying groups. Organisations with charitable status such as the RNIB, Mind and Scope have been the vanguard for, with latterly a massive growth of individual issue-specific groups, under broader umbrella contact points such as Disability Rights UK and UK Disabled People's Council
Relative to sporting interests, bodies include BBS (British Blind Sport), WheelPower, British Wheelchair Athletics Association, British Wheelchair Racing Association, CP Sport (Cerebral Palsy), DSA (limited growth persons), Mencap Sport & UKSA (learning difficulties), UK Deaf Sport & Deaf Athletics, all assisted by the English Federation of Disability Sports and other similar.
Whilst the start and end ceremonies of the 2012 Olympics centred upon the required nationalistic agenda to highlight Britain & London as leading commercial 'psycho-geographies' on the world stage, by retelling their historic and contemporary stories, the agenda for the 2012 Paralympics was a brilliantly humanitarian, global, and embracing one. It over-arching theme to reflect the drive of the human spirit to overcome adversity. This depicted by the 'flying' actions of chair-bound people across the arena. And with the shining example of Prof Stephen Hawking, more than ably demonstrated that the true depth of a disabled person has little to do with their physical or mental 'label'.
The achievements of the athletes is plain to see. And obviously it has been the evolution of various mobility aids - predominantly wheelchairs, hand-cycles, running blades, prosthetic limbs – that have enabled improved participation.
Each of these assistive instruments is hardly a generic item, each represents specialist and tailor-made articles that must both functionally perform to extremes and still fit like the proverbial glove. They represent the latest developments in bio-mechanical evolution, a long long way from the generic old wheelchair, Douglas Barder's 'tin legs' and the cosmetic prosthetics seen in generations past (which themselves were major advances). These aids have been designed as pure pieces of functional equipment, a truly positive modernist echo of form following function. The sociological impact of this 'substitutional mechanisation' of the human body has been played-down by disability groups, intending that the appearance of the athletes do not lead to a stereo-typing as feature enhanced comic book super-heroes.
[NB Though obviously any tendency to fetishise must be negated, the theme of David Kronenberg's film 'Crash' all too disturbing. The greater concern aired is that the depiction of such 'super-human' athletes creates a damaging fractures within the mass of disabled people, especially at such a critical time given the threat of government budget cuts].
To date disabled people have unfortunately been regarded by certain quarters as an unhelpful drain on the economic resources of the nation; offering little productivity in return for being “looked after”. This of course is a ridiculous, very malicious, mass generalisation. Only when completely 'locked-in' with severe disabilities are people unable to offer useful activity to their community or and industry, and even then their unfortunate circumstances demonstrates a socio-economic need for professional support services.
The fact is that the thousands of physically and mentally impaired people across the UK (spanning millions when seen in truest sense) and the multi-millions across the world are able to offer something of themselves and the economic vitality of nationhood. And the very fact that the internet and IT has 'freed' both body and mind of traditional travel and information access limitations indicates that this should be a golden age for the inclusion of impaired people, in whatever sense.
At a time when Britain seeks to re-energise its economy with the growth of new generation physical industries and services, centred around disciplines such as eco-tech and healthcare (ie “NHS International”), the unrecognised or untapped capabilities of people close to these subjects should be released, nurtured and directed.
Douglas Barder's progressive and perfectionist instinct to fettle his own 'tin legs' should serve as the encouraging example. No doubt there are many less well known others. The point being that those who have a specific impairment are often the best position to best understand the subject, and when given the 'tools' (spanning physiology to hi-tech engineering, or indeed perhaps even nuero-science to sociology) can create great leaps forward.
The specific arena investment-auto-motives wishes to spotlight is the potential opportunity to fast-forward the creation and commercialisation of bio-mechanical physical instruments and possibly bio-electro-mechanical devices.
This is a wholly unfamiliar topic to investment-auto-motives, but there exists examples of interest and influence from many disciplinary corners; from the 'imagineering' R&D activities of 'wide remit' automotive companies, to the visionary ideas of past and present science-fiction writers television and film productions.
As the UK government seeks to create a meaningful Olympics and Paralympics legacy, today is the right time to engineer such a future by interweaving such progress with general public consciousness..
Initially done so by surveying the rich cultural and industrial tapestry that exists across the imagined and existent worlds of “robotics”, “androidism”, “bio-morphism” and “cyborganism”. A few obvious examples are the two entertainment instances of the Bionic Man / Bionic Woman and Wallace & Grommitt, whilst from industry the amazing technical advances of Honda's 'Asimo'
The original 'Six Million Dollar Man' (a 'bionic' man, and later Bionic Woman) American TV series of the 1970s was inspired by a mixture of the NASA space programme as the story-line backdrop and the supposed highly secret research-work undertaken by the US government since the 1950s on 'mechanised soldiers' (with 'secret' projects which deployed various drugs to create uninhibited super-soldiers). The Steve Austin character is given 'bionically' improved body parts: eye, right arm and legs. Though such cyborg beings had existed before in comic books and films, the programme gained mass popularity, and offered a far more comfortable and humanised view of the mechanical-man idea, given his super-human attributes. .
Far more intentionally amateurish, in the psuedo-plasticine animation style allied with comic content, was Britain's 'Wallace & Gromit'. Wallace a well meaning Heath Robinson type inventor and Gromit his humanly-intelligent canine pet / friend. In 1993's “The Wrong Trousers” Wallace obtains a pair of ex-NASA autonomous robotic “Techno Trousers” intended as his personal substitute to undertake Gromit's dog-walking. The usual chaotic adventure ensues in which good overcomes evil, and the robotic trousers autonomously walk-off into the sunset.
These then just two of a myriad of film and TV productions which subtly acclimatise the masses to the idea of moving beyond simply mechanically assisted toward mechanically integrated human beings.
But it is in the laboratories of MIT, Cambridge and many other research institutes and the R&D of advanced technology companies that the truly transformative work is taking place; none more so than at Honda Motor Corporation in Japan.
Honda has for many years been developing robotics, furthering its original efforts in car plant robots. Since 2000 its ASIMO programme has been underway, the creation of a series of child-sized robots which have become increasingly sophisticated and capable, Designed as a personal helper, originally as a 'butler' to those people with mobility issues themselves, the robot is now able to recognise different people, pour drinks and other household tasks, is increasingly stable in its walking gait, can climb and descend stairs and even run up to 6km/h. Honda and its network suppliers then appears far ahead of other similar robotic efforts, and so sets Japan's in the forefront of physical impairment healthcare across the age-range, but perhaps initially tending to Japan's and the West's increasingly aged populations.
However, of critical importance, investment-auto-motives conjects that the fundamental robotic technology could be deployed in part-form, so attached as required to those with partial or full limb loss, and this may be the far-horizon vision for the ASIMO project. If successfully developed and trialled why shouldn't ASIMO's future successors offer 'The Right Trousers' and a full range of fully functioning prosthetics, for those who require them? Such a feat would be a prolific step in mankind's philosophical evolution.
[NB as an aside, it is interesting to recognise the visual similarity and 'machine' like characteristic of Top Gear's 'Stig'].
In the meantime there are other near-horizon advances that have and will continue to be utilised.
An obvious mobility platform is the gyroscopically balanced Segway. (which prompted Honda to create its gyroscopic unicycle) and its close cousin the iBOT powered wheelchair; which itself can lift the occupant to a near standing position.. Conceived by Dean Kaman, and the DEKA Corp, the Segway has enjoyed short-run novelty success, whilst the iBOT failed to reach breakeven in its business plan and was shelved by DEKA and business partner Johnson & Johnson in 2008. However the technology will no doubt be mothballed for a period until a new business plan with reduced cost parts and production can be achieved.
Beyond the single personal mobility pods seen at the Tokyo Motor show in recent years, GM has sought to duplicate such visionary efforts as part of its 'global catch-up' strategy. GM showcased the vehicle named PUMA in 2009, its main difference being that it seated 2 people, but still used Segway-like 'stabaliser' wheels with gyrosopic feed. The concept was developed further with China targeted and the creation of 3 themed visually different concepts.
These micro-vehicles then create a new dimension in single and dual person travel in urban areas, the single capacity models viewed as a more comfortable (wholly enclosed) interpretation of the now eponymous electric disability buggy.
These creations light the way for closer collaboration between what have been arguably underfunded specialists within the far reached of healthcare R&D and large corporations keen to serve and profit from an ageing and physically diverse Triad population.
However, investment-auto-motive's very basic view of the physical-needs sector indicates that much more needs to be done so as to make life more satisfying and 'fuller' for millions of people around the globe here and now, and well into the future.
The wheelchair, whilst evolved remains much as it has been since the beginning of the 20th century, its commodity status no doubt negating ergonomic and materials advancement. Whilst the modern pavement buggy, though visually different, is not too far removed from the electric and petrol 3 and 4-wheeler Bath-Chairs of Edwardian times that so frustrated the husband of Lady Chatterly.
Those Paralympians who inadvertently damaged their modern equipment sought to rely upon the creative 'metal-bashing' ways of a workshop titled 'The Pit Stop', run by the revered German mobility-aids supplier Ottobock; tools with which Douglas Barder would be well acquainted.
With the ideal of the NHS serving as a global consultant on healthcare issues, time perhaps that a collaboration between the UK government, UK-European private industry, a figurehead such as Frank Williams (of F1 fame), and the accrued intelligence of many others of those who 'living their lives' know best. A new channel by which to drive such creative and business energies.
Time for the UK to “inspire a generation” and engineer a new era towards “enlightenment for all”.
Post Script -
It must be said that the Paralympians and most of the physically and mentally impaired population put much of the able bodied, but petty minded, population to utter shame. Especially so those who knowingly falsely portray themselves as victims of prejudice, yet enjoy comfortable lives, and are clearly not down-trodden or marginalised, just complicit.
Though the ongoing battle is to close forever the social gap that has unfortunately existed between notionally 'normal' and 'different' people; ironically that gap has been much narrowed by demonstrations of super-human spirit, dedication and application. Whilst these are stories of individuals and teams wearing national colours, they reverberate with the a generally silent but increasingly powerful minority of society with similar physical traits, causing a ripple effect of understanding throughout the nation and the hopefully the world.
The impact of the Paralympics, that of “the 3rd Games”: the Special Olympics, and critically the demands of physically and mentally impaired people to live full, self determined, lives demonstrates that the very definition of 'abnormality' is being re-written, to demonstrate that if any true social gap exists, it is because many such impaired people should be viewed as better than the average person since they have had to overcome greater adversity.
Here in Britain the motto “Sport for All” seeped into the public consciousness during the late 1970s as a raft of new inner-city sports-centres were created. Beyond providing a weekend destination for young families, seeking to maintain the physical fitness of the post-WW2 baby-boomer generation (then the core of the workforce), the prime political agenda was to channel the energies of the mostly poor local area young away from dubious activities.
Such centres were at the vanguard of disability access, with ramps and specialist facilities, yet all too often these sporting hubs also conveyed a foreboding atmosphere which discouraged participation. Constructed in the archetypal modernist brutalist style of grey concrete, they often appeared more forboding than the institution in which a person may be resident. And moreover, people with disabilities tended to go, or were taken, mid-week when relatively deserted, yet that visiting time also brought with it a likelihood of far greater personal aggrevation. Periodocally having to withstand jeers and name-calling from groups of local 'latch-key kids' The very well know specific insults are better left in the past and do not require re-iteration. Yet also there was often little empathy either from the supposedly better brought-up 'nicer' middle-class kids who muttered those names between themselves. Unfortunately, many adults barely matured themselves, veering themselves and their children away from “those people” in public spaces - a donation to the annual Variety-Club Sunshine Minibus collection assuaged any lingering guilt, easily done from a safe-distance.
[It is suspected that the reported rise in disability hate crime is derives from the rise in numbers of people recognised disabled, given better general professional understanding in recent decades].
If you happened to be an impaired person in the 1970s and 1980s, no matter what the good municipal intent, the “Sport for All” motto was a hollow one.
[NB Physically and/or mental difference often brings with it far greater perceptional sensitivity of surroundings and personal inter-activity, from birth or post-trauma effects. This often fundamentally re-shapes the mental make-up of someone focused upon simple constructs of right and wrong, but thereafter required to live in a supposedly normal world which is anything but when objectively viewing the subtle but engrained norms of social behaviour. (Ranging from the disingenuous social interests of small-talk through to far more inciduous and so repellent group/gang behaviour intended to subtly target a non-conformist victim through subtle mental taunting. Often the far more acutely intelligent 'disabled' person (esp so 'learning difficulty' people) knowingly or unconsciously view such scenarios as 'untrue', so repels and may react angrily, at the negative social construct; which itself has been devised around power-constructs. Thereby causing an external viewer's re-affirmation of their problem (parent, assistant, doctor etc), when the supposedly different individual see it as society's problem, not his / her's].[And remember, basic group-think, whether from bullies or healthcare workers, comes from making the 'different' person their raison d'etre, so continuing the intended or unintended alienation of that 'different' person].
Hence during the 1970s/80s, attending such brutalist and brutalising sporting and recreation centres was for many anything but relaxing and life-affirming.
Today, decades later, those type of experiences seem far fewer, though no doubt still occur. Societal relations have been, and continue to be, improved. European, British and increasingly International Law, whilst periodically unjust in application and outcomes of individual cases, have been more successful in laying-down general templates for the behavioural expectation pertaining to the everyday human rights of those with reduced abilities. Social guidance which itself filters down into popular consciousness has been successful in raising broader understanding.
Much of this the result of campaign efforts by a host of representative and lobbying groups. Organisations with charitable status such as the RNIB, Mind and Scope have been the vanguard for, with latterly a massive growth of individual issue-specific groups, under broader umbrella contact points such as Disability Rights UK and UK Disabled People's Council
Relative to sporting interests, bodies include BBS (British Blind Sport), WheelPower, British Wheelchair Athletics Association, British Wheelchair Racing Association, CP Sport (Cerebral Palsy), DSA (limited growth persons), Mencap Sport & UKSA (learning difficulties), UK Deaf Sport & Deaf Athletics, all assisted by the English Federation of Disability Sports and other similar.
Whilst the start and end ceremonies of the 2012 Olympics centred upon the required nationalistic agenda to highlight Britain & London as leading commercial 'psycho-geographies' on the world stage, by retelling their historic and contemporary stories, the agenda for the 2012 Paralympics was a brilliantly humanitarian, global, and embracing one. It over-arching theme to reflect the drive of the human spirit to overcome adversity. This depicted by the 'flying' actions of chair-bound people across the arena. And with the shining example of Prof Stephen Hawking, more than ably demonstrated that the true depth of a disabled person has little to do with their physical or mental 'label'.
The achievements of the athletes is plain to see. And obviously it has been the evolution of various mobility aids - predominantly wheelchairs, hand-cycles, running blades, prosthetic limbs – that have enabled improved participation.
Each of these assistive instruments is hardly a generic item, each represents specialist and tailor-made articles that must both functionally perform to extremes and still fit like the proverbial glove. They represent the latest developments in bio-mechanical evolution, a long long way from the generic old wheelchair, Douglas Barder's 'tin legs' and the cosmetic prosthetics seen in generations past (which themselves were major advances). These aids have been designed as pure pieces of functional equipment, a truly positive modernist echo of form following function. The sociological impact of this 'substitutional mechanisation' of the human body has been played-down by disability groups, intending that the appearance of the athletes do not lead to a stereo-typing as feature enhanced comic book super-heroes.
[NB Though obviously any tendency to fetishise must be negated, the theme of David Kronenberg's film 'Crash' all too disturbing. The greater concern aired is that the depiction of such 'super-human' athletes creates a damaging fractures within the mass of disabled people, especially at such a critical time given the threat of government budget cuts].
To date disabled people have unfortunately been regarded by certain quarters as an unhelpful drain on the economic resources of the nation; offering little productivity in return for being “looked after”. This of course is a ridiculous, very malicious, mass generalisation. Only when completely 'locked-in' with severe disabilities are people unable to offer useful activity to their community or and industry, and even then their unfortunate circumstances demonstrates a socio-economic need for professional support services.
The fact is that the thousands of physically and mentally impaired people across the UK (spanning millions when seen in truest sense) and the multi-millions across the world are able to offer something of themselves and the economic vitality of nationhood. And the very fact that the internet and IT has 'freed' both body and mind of traditional travel and information access limitations indicates that this should be a golden age for the inclusion of impaired people, in whatever sense.
At a time when Britain seeks to re-energise its economy with the growth of new generation physical industries and services, centred around disciplines such as eco-tech and healthcare (ie “NHS International”), the unrecognised or untapped capabilities of people close to these subjects should be released, nurtured and directed.
Douglas Barder's progressive and perfectionist instinct to fettle his own 'tin legs' should serve as the encouraging example. No doubt there are many less well known others. The point being that those who have a specific impairment are often the best position to best understand the subject, and when given the 'tools' (spanning physiology to hi-tech engineering, or indeed perhaps even nuero-science to sociology) can create great leaps forward.
The specific arena investment-auto-motives wishes to spotlight is the potential opportunity to fast-forward the creation and commercialisation of bio-mechanical physical instruments and possibly bio-electro-mechanical devices.
This is a wholly unfamiliar topic to investment-auto-motives, but there exists examples of interest and influence from many disciplinary corners; from the 'imagineering' R&D activities of 'wide remit' automotive companies, to the visionary ideas of past and present science-fiction writers television and film productions.
As the UK government seeks to create a meaningful Olympics and Paralympics legacy, today is the right time to engineer such a future by interweaving such progress with general public consciousness..
Initially done so by surveying the rich cultural and industrial tapestry that exists across the imagined and existent worlds of “robotics”, “androidism”, “bio-morphism” and “cyborganism”. A few obvious examples are the two entertainment instances of the Bionic Man / Bionic Woman and Wallace & Grommitt, whilst from industry the amazing technical advances of Honda's 'Asimo'
The original 'Six Million Dollar Man' (a 'bionic' man, and later Bionic Woman) American TV series of the 1970s was inspired by a mixture of the NASA space programme as the story-line backdrop and the supposed highly secret research-work undertaken by the US government since the 1950s on 'mechanised soldiers' (with 'secret' projects which deployed various drugs to create uninhibited super-soldiers). The Steve Austin character is given 'bionically' improved body parts: eye, right arm and legs. Though such cyborg beings had existed before in comic books and films, the programme gained mass popularity, and offered a far more comfortable and humanised view of the mechanical-man idea, given his super-human attributes. .
Far more intentionally amateurish, in the psuedo-plasticine animation style allied with comic content, was Britain's 'Wallace & Gromit'. Wallace a well meaning Heath Robinson type inventor and Gromit his humanly-intelligent canine pet / friend. In 1993's “The Wrong Trousers” Wallace obtains a pair of ex-NASA autonomous robotic “Techno Trousers” intended as his personal substitute to undertake Gromit's dog-walking. The usual chaotic adventure ensues in which good overcomes evil, and the robotic trousers autonomously walk-off into the sunset.
These then just two of a myriad of film and TV productions which subtly acclimatise the masses to the idea of moving beyond simply mechanically assisted toward mechanically integrated human beings.
But it is in the laboratories of MIT, Cambridge and many other research institutes and the R&D of advanced technology companies that the truly transformative work is taking place; none more so than at Honda Motor Corporation in Japan.
Honda has for many years been developing robotics, furthering its original efforts in car plant robots. Since 2000 its ASIMO programme has been underway, the creation of a series of child-sized robots which have become increasingly sophisticated and capable, Designed as a personal helper, originally as a 'butler' to those people with mobility issues themselves, the robot is now able to recognise different people, pour drinks and other household tasks, is increasingly stable in its walking gait, can climb and descend stairs and even run up to 6km/h. Honda and its network suppliers then appears far ahead of other similar robotic efforts, and so sets Japan's in the forefront of physical impairment healthcare across the age-range, but perhaps initially tending to Japan's and the West's increasingly aged populations.
However, of critical importance, investment-auto-motives conjects that the fundamental robotic technology could be deployed in part-form, so attached as required to those with partial or full limb loss, and this may be the far-horizon vision for the ASIMO project. If successfully developed and trialled why shouldn't ASIMO's future successors offer 'The Right Trousers' and a full range of fully functioning prosthetics, for those who require them? Such a feat would be a prolific step in mankind's philosophical evolution.
[NB as an aside, it is interesting to recognise the visual similarity and 'machine' like characteristic of Top Gear's 'Stig'].
In the meantime there are other near-horizon advances that have and will continue to be utilised.
An obvious mobility platform is the gyroscopically balanced Segway. (which prompted Honda to create its gyroscopic unicycle) and its close cousin the iBOT powered wheelchair; which itself can lift the occupant to a near standing position.. Conceived by Dean Kaman, and the DEKA Corp, the Segway has enjoyed short-run novelty success, whilst the iBOT failed to reach breakeven in its business plan and was shelved by DEKA and business partner Johnson & Johnson in 2008. However the technology will no doubt be mothballed for a period until a new business plan with reduced cost parts and production can be achieved.
Beyond the single personal mobility pods seen at the Tokyo Motor show in recent years, GM has sought to duplicate such visionary efforts as part of its 'global catch-up' strategy. GM showcased the vehicle named PUMA in 2009, its main difference being that it seated 2 people, but still used Segway-like 'stabaliser' wheels with gyrosopic feed. The concept was developed further with China targeted and the creation of 3 themed visually different concepts.
These micro-vehicles then create a new dimension in single and dual person travel in urban areas, the single capacity models viewed as a more comfortable (wholly enclosed) interpretation of the now eponymous electric disability buggy.
These creations light the way for closer collaboration between what have been arguably underfunded specialists within the far reached of healthcare R&D and large corporations keen to serve and profit from an ageing and physically diverse Triad population.
However, investment-auto-motive's very basic view of the physical-needs sector indicates that much more needs to be done so as to make life more satisfying and 'fuller' for millions of people around the globe here and now, and well into the future.
The wheelchair, whilst evolved remains much as it has been since the beginning of the 20th century, its commodity status no doubt negating ergonomic and materials advancement. Whilst the modern pavement buggy, though visually different, is not too far removed from the electric and petrol 3 and 4-wheeler Bath-Chairs of Edwardian times that so frustrated the husband of Lady Chatterly.
Those Paralympians who inadvertently damaged their modern equipment sought to rely upon the creative 'metal-bashing' ways of a workshop titled 'The Pit Stop', run by the revered German mobility-aids supplier Ottobock; tools with which Douglas Barder would be well acquainted.
With the ideal of the NHS serving as a global consultant on healthcare issues, time perhaps that a collaboration between the UK government, UK-European private industry, a figurehead such as Frank Williams (of F1 fame), and the accrued intelligence of many others of those who 'living their lives' know best. A new channel by which to drive such creative and business energies.
Time for the UK to “inspire a generation” and engineer a new era towards “enlightenment for all”.
Post Script -
It must be said that the Paralympians and most of the physically and mentally impaired population put much of the able bodied, but petty minded, population to utter shame. Especially so those who knowingly falsely portray themselves as victims of prejudice, yet enjoy comfortable lives, and are clearly not down-trodden or marginalised, just complicit.
Tuesday, 28 August 2012
Micro-Level Trends – North American Bus & Coach (Part 2) – Evolving Producer & Operator Structures.
Further to the societal aspect of this topic seen in Part 1, this Part 2, provides insight into the internal dynamic of the industry. With critically, particular attention drawn to the lessons that have been, and still can be, learnt from Europe; where mass-mobility transport has typically been more advanced given its historical socio-economic construct regards public transport, and the greater geo-political integration since 1989, so boosting transcontinental and tour trades.
Part 2 – The Industrial Context -
The North American sphere has historically been divided into the prime constituent corner-stones of:
a) Chassis Providers
b) Bus-Body Producers
c) Bus & Coach Operators.
In its broad societal guise, the bus and coach system is a mode of public and semi-private transport that was historically viewed – especially by liberals - as intentionally under-funded throughout the 20th century. So as to promote the scale-based 'individualism' economic interests of US auto and oil industries; which thus provides a far more complex, far-reach basis as a national economic template, and underpinning the American ideology of personal freedom.
The 'Old Guard' Indigenous Producers –
Though of course operating far earlier, the 20th century American bus-age was effectively determined in the 'conglomeratisation' effect of the 1920s. The main auto-makers – then as now Detroit's 'Big 3' providing the vehicle 'running-gear' (mechanical platform) whilst a separate (though sometimes conglomerate connected) body-building specialist would furnish an attached body – series produced or singularly commissioned.
Periodic attempts were made to overcome this structure with the appearance of new entrants seeking to construct proprietary chassis and bodies – and indeed even in earlier years wholly integral monocoque type structures – with a choice of domestic engines; typically Detroit Diesel or Cummins.
But, by virtue of size and scale, reputation and commercial dependability the established players (GM, Ford and Chrysler-Dodge) along with other brand dedicated US truck-makers (eg Mack, International, Freightliner, Kenworth & Peterbilt [now under PACCAR]) maintained a stranglehold on the sector, with little change decade upon decade.
The basic construction method of “body on chassis” remained relatively technically unchanged for 80-90 years, that standard structure similar for both large bus (based on heavy trucks) and mid / small bus (based on van chassis). The former seeing a general re-positioning of the engine to the rear for improved vehicle passenger and luggage 'packaging' from the 1950s onwards. The buses today categorised as Types A, B, C & D. relative to dimensions, GVW and passenger capacity.
For many decades Detroit's “Big 3” and in later years a few close others such as Navistar and PACCAR (directly or indirectly) had a national strangle-hold on engine rolling chassis production. The end-user bus purchaser either bought directly from bus-builders who themselves sourced the rolling chassis and added a handling margin for doing so, or in order to save on costs, separately bought the rolling-chassis and fabrication services of the bus-builder, managing the former's delivery to the latter.
This basic but effective model, much the same as the early luxury-type 'coach-built' passenger car methods, stood in place for decades, ensuring the Big 3's dominance, that of domestic bus-builder. So creating a virtuous circle of activity reliant upon economies of scale, Greyhound, Trailways and mid-size firms like Peter Pan the expansionary demand base..
The (Intermediary) Body-Builders -
The emergence of motor-car and motor-truck saw competition for specialist body-building tasks, participants from across the traditional horse-drawn wagon/coach builders, the horse-drawn tramway builders and a new crop of industry dedicated start-ups.
Whilst many over the years have been absorbed into bigger concerns or failed during recessions, today the list of North American bus & coach body fitters – from what could be considered 'old guard' roots - appears as so:
US participants include:
Advanced Bus Industries [Worthington, Ohio]
Blue-Bird Corp, (Traxis Group, Cerberus Capital Mgmt) [Fort Valley Georgia].
Collins Industries (inc CollinsBus, MidBus, Corbeil)[Hutchinson, Kansas].
Forest River (inc Elkhart Coach, Glaval Bus, Starcraft Bus) (Berkshire Hathaway). [Elkhart, Indiana & Goshen, Indiana].
Gillig Corp (CC Industries) [Hayward, California].
Goshen Coach [Goshen, Indiana]
IC Bus (Navistar International Corp) [Warrenville, Illinois]
Midway Speciality Vehicles [Elkhart, Indiana]
North American Bus Industries (NABI) [Anniston, Alabama]
StarTrans (Supreme Corp) [Goshen, Indiana]
Thomas Built Buses (Freightliner, Daimler AG) [High Point, North Carolina].
Thor Industries (bus divisions: General / Champion / Eldorado National) [various]
Trans Tech (Transportation Collaborative Inc) [Warwick, New York].
Canadian participants include:
Lion Bus (Mssrs Bedard & Chartrand) [Saint-Jerome, Quebec].
MCI (Daimler AG and KPS Capital) [Winnipeg, Manitoba]
NewFlyer [Winnipeg, Manitoba]
Prevost (AB Volvo Group) [Sainte-Claire, Quebec]
A Renewed Battle for the Middle Ground -
Within this list there are telling signs of a sector under-going a new phase of transformation, recent years have witnessed a change in the parental ownership patterns of various firms. Whereas, with only a few anomolies, yesteryear saw distinct separation of chassis-provider and body-provider, the turn of the new 21st century brought a narrowing of that chasm.
The notables being IC Bus owned by Navistar, Thomas Built Buses owned by Freightliner / Daimler, MCI owned by Daimler and Prevost's relationship with AB Volvo.
Today we see that some domestic and foreign truck-makers have re-ignited their interests in absorbing and so controlling certain bus and coach body-building producing firms.
To better ensure that they can grasp a vital slice of this 'higher value' market and ensure extensional control across the sector's value-chain. Thereby able to ensure better access to this increasingly important intermediate-market, provide improved order book stability (assisted by improved pricing flexibility as necessary), enable shorter order lead-times, provide more soundly planned growth projections for both the high capex costs of primary platform operations and labour intensive secondary operations, and no doubt utilise the advantage of cross-divisional transfer pricing up and down its in-house value chain as required to meet strategically set divisional profitability targets. A long list of advantages from consolidation of the build process.
American domestic players do so in part to retain the dominance of their traditional rolling chassis production, so protecting the standard technical formula. Whilst the foreign players seek to ply their proven capabilities regards more advanced technical offerings, both as separate body on chassis guises (given powertrain efficiencies) and critically regards the integrated (monocoque) structure that has become favoured in European bus and coach – the former trickling-down from the latter. .
The only 'All American affair” is Navistar's ownership and amalgamation of IC Bus. At a far lower level, with tentative steps is Volvo's 'strategic partnership' with Prevost. But it is Daimler that is well ahead in the business integration stakes, and with powerful strategic force, given its total control of the traditionally constructed Thomas Built Bus (via its Freightliner subsidary), and part control of MCI (alongside KPS Capital), for increased deployment of monocoque structures.
Daimler then able to direct its efforts simultaneously toward both sub-sectors of the marketplace: the more traditional public-service transit client with primary aim of cost reduction, and the more demanding and so price-elastic coach operator.
This example, and the issues it raises, has set the beginning of a fundamental shift in the shape of production for North American Bus & Coach sector. As depicted above, it presently appears that the 'score' between the progressive Europeans and incumbent Americans, in the manufacturing battle, is presently 3-1, with Daimler scoring twice.
Whilst it has become evident that US and Canadian investment firms and private stock-holders have taken an increasingly large interests in European companies with technological edge (and so have vested interests in seeing the likes of Daimler continue to thrive domestically), there is a possibility that as part of a national re-strengthening effort, it seems likely that North American will seek to redress this glaring and growing 'industrial deficit'. And at some future point seek to absorb the strategic and technical lessons learnt from the Europeans to revive the internal capabilities of its own domestic industry.
Yes this is an age of industrial globalisation, North America shown as fertile ground for such by the numerous car company transplant factories. But how far will it allow its proprietary know-how to diminish?
Moreover, that threat is made all the more apparent given the much changed, new realm of foreign bus and coach operators.
Though typically historically separate, when deemed advantageous, an operator would seek to acquire a body-building company for its own ends to dramatically lower the cost of bus manufacture, especially if allotting a large order, and so deny a competitor. This was the case with Greyhound Lines in 1970, when it acquired one of the largest of those intermediate firms Motor Coach Industries; now MCI..
It could feasibly be the case again with the 'British Invasion' (soon explained).
The 'Old Guard' Indigenous Operators -
Both economic downturns and indeed upswings saw a working population effectively mobilised from city to city and from state to state by the low-cost bus, with now legendary names like Greyhound and Trailways. (Trailways devised as a co-ordinated multi-operator system to compete with Greyhound, but later acquired by Greyhound). These two prime actors and smaller independent firms offering easier access to trans-state and trans-national travel compared to a limited routes and organizationally fragmented railway system, even under Amtrac - which itself relies on bus operators to connect separate rail-stations with the ThruWay bus service.
With manufacturing focus on scale and operator focus on costs, as such the sector was only able to offer marginal and incremental improvements in basic levels of comfort, convenience and enjoyment; in seating, heating, and on plusher vehicles curtains, radio and later video/television, and (typically) stewardess service. A quicker and more dramatic pace of change was seen upon the exterior, led by Greyhound with aluminium & plastic skins, panoramic windows and airline-like logos this was primarily an (externalised) exercise to promote company branding and so inter-company competitive advantage.
Thus from the paying customer's perspective, little changed decade upon decade. This no doubt as a consequence of the need for basic utility furnishings for easy cleaning, little customer demand for change given his/her own 'low expectational' lifestyles and infrequent personal travel. And set against the understandable commercial imperative to only improve the product / service for profitable ends by reducing bus weight, improving engine efficiency (MPG & emissions), bettering aerodynamic drag, improving stability and aiding entry/egress access, and critically installing only 'paid for' services to provide additional income streams
End of the 20th Century and 'All Change' -
By the early 1990s the bus sector's cross-state and inter-state travel advantage had waned considerably, partly the result of changing social patterns, partly because of internal 'over-bloatedness' within the sector. The business models of both the operators and so intermediary fabricators and primary producers became increasingly squeezed:
'External Influences' :
- increase of personal wealth even amongst the 'bottom tier' provided non-bus travel options
- the continued growth of car ownership, especially via cheaper used cars.
- modern (shopping mall) consumer lifestyles increased basic service & delivery expectations.
- emergence of affordable and later low-cost domestic airlines and sub-divisions.
- the emergent desire for IT 'inter-connectedness' whilst travelling.
'Internal Events' -
- (Greyhound) bus drivers strike of 1984 with endemic employee malais thereafter
- Fred Currey leading re-structuring of both Trailways & Greyhound Lines.
- the merger of Trailways into Greyhound in 1987.
- 1990 long-term strike action by employees
- Greyhound's bankruptcy filing of 1990
- Greyhound's rebound acquisition of Continental Trailways (separate entity)
- Greyhound acquired by Laidlaw Inc. (already owners of Greyhound Canada)
- Laidlaw Inc's bankruptcy in 2001
- Laidlaw's rebound in 2003 (NYSE listed) now without loss-making routes
- the influence of 'advanced' European bus & coach travel.
Combined, these and other forces, meant that a customer-orientated and internally-necessary evolutionary change was on its way. The last 15 years or so has born testament to that change when viewing the fundamental operator's structure
This sector stall was re-started by the re-organisation of established players including Peter Pan Lines. The introduction of new entrants – or at least seeming new entrants - seeking to offer alternative travel experiences helped to revitalise flagging sales and passenger numbers. New names however variously owned by established players, semi-dependent upon them or in some cases truly new wholly independent players.
The MegaBus network (operated by the UK's Stagecoach plc) was established in 2006. Later in 2008 Bolt Bus was created to serve both the NW & NE regions, but its NW operation is wholly Greyhound owned and the NE operation a JV between Greyhound & Peter Pan. NeOn was also originated that year by Greyhound & Trailways, to bolster Bolt and compete head-on with MegaBus (though apparently its service differentiation has been increasingly diluted, substituted with standard Trailway buses).
To name but a few independent operators, there are: Vamoose Bus which runs between NYC and Washington DC; and Fung Wah Bus, Chinatown Bus and associated lines (Apex, New Century, Lucky Star) which operate along the Eastern and Western sea-boards serving each city's Chinese community and the large numbers of mobile Chinese workers and more budget travellers such as students.
Needless to say there has been friction between the established incumbents and the newcomers, resulting in accusations of Chinese gangland activities, from laundering money to violent acts against persons and property, with in return Chinese buses appearing to incur high numbers of vehicle problems, possibly stemming from either poor maintenance or sabotage or both.
“The British Operator Invasion” -
As part of their own high growth expansion ambitions, three competing UK transportation companies assessed the American potential toward the end of last century and at the beginning of this century. Assisted by a mix of stock-market and fixed income funds, their American assault started.
Initially, Stagecoach plc acquired Coach USA and Coach Canada in mid 1999 for $1.8bn; but when hit by the economic aftershock of the 9-11 attacks in 2001, it divested many of those interests in 2003 to Peter Pan Lines and the PE firm Kohlberg & Co which itself formed Coach America). Stagecoach thus retrenched to operate within the subsidy protected scheduled service of the NE region. As part of its re-expansion plan, it used its back-office capabilities to create the web-friendly MegaBus.com, its own flailed 2006 expansion into the West Coast re-energised in mid 2012 by way of re-purchasing many of the divested divisions previously sold when Coach America itself filed for bankruptcy; thereby spanning much of the nation.
Also in 1999 the Rail and Bus operator FirstGroup plc purchased 2 divested divisions of Ryder Systems: the transit-bus sections and school-bus section, re-naming them 'First Transit' and 'First Student'. It then later acquired Greyhound Lines Inc in Q3 2007 for $3.6bn (£1.9bn). First Student UK (the British arm) has used yellow buses imported from both the USA and Turkey (BMC).
The business model of Go-Ahead plc is heavily biased to serving the UK, but it operates a self-proclaimed “small” joint venture yellow school-bus contract in North America.
The remaining large UK transport companies – Arriva (a holding of Deutsch Bahn) and National Express Group plc - have no American divisions.
“The European Product Invasion” -
As a result of the private car's dominance in North America decade upon decade. and the technical stagnation of indigenous chassis and body producers, it was inevitable that the recently arrived foreign bus and coach operators would look outside the US and Canada when assessing and purchasing it new vehicle fleets.
The familiarity of British and European sourced vehicles meant that with such established and strong commercial relations, and the technical chasm between typical European and N. American vehicles grew all the more apparent; and that almost inevitably US regulation adapted 'Euro' buses would be appearing on Americas highways.
That product shift had a broader sector domino effect.
Having seen this new wave trend set in place by the British operators, from 2000 onwards the domestic municipal operators, with responsibility for state-wide and city-wide public transport, started to test, lease and buy foreign-made buses. Increasing specific interests lay with double-decker buses for city-centre and inner-suburbs routes, so as to reduce vehicle fleet numbers required (so reducing storage and maintenance costs), maximise passenger capacity per route and streamline mass transit services.
In turn, that local-effect caught the attention of smaller regional private operators.
As an example of the trend, in 2004 the UK's Alexander Dennis first started to explore the North American market for its adapted Enviro500: since providing demonstrator, lease and fleet vehicles to 10 municipal transit companies, and 2 private sightseeing/ tour companies. The popularity of the bus underpinned an initial manufacturing deal with ElDorado International. More recently, in May 2012, Alexander Dennis and America's New Flyer Industries announced a new joint-venture to design and manufacture a medium-duty low-floor 'midi bus', with the UK firm undertaking engineering and testing and its US counterpart providing assembly and marketing.
Having listed the American chassis and body makers, a similar list is provided regards European manufacturers.
Traditional Chassis Providers :
Daimler EvoBus [Germany]
DAF (engine supply only) (PACCAR) [Netherlands / USA]
Enterprise Bus [United Kingdom]
IVECO [Italy]
MAN [Germany]
Scania {Sweden]
Volvo [Sweden]
Traditional Body Constructors:
Advanced Vehicle Builders [United Kingdom]
Alexander-Dennis (Mayfair Group) [United Kingdom]
BUSiness [The Netherlands]
Cacciamali [Italy]
Carrus [Finland]
Caetanobus [Portugal]
Castrosua [Spain]
De Simon Group SpA [Italy]
Hess [Switzerland]
Ikarus [Hungary]
Irizar [Spain]
Laden Autokori [Finland]
Libertybus [Germany]
NEOPLAN [Germany]
Optare [United Kingdom]
RedKite [United Kingdom]
Sfakianakis [Greece]
Sitcar [Italy]
Solaris [Poland]
Van Hool [Belgium]
VDL Bus & Coach (VDL Groep) [Eindhoven, Netherlands]
Wrightbus [Northern Ireland, United Kingdom]
Amalgamated Chassis & Body Supply
IVECO + Irisbus [Italy-France]
MAN + NEOPLAN [Germany]
Daimler + SETRA [Germany]
Integrated Mono-Structure:
Alexander-Dennis (Mayfair Group) [United Kingdom]
Van Hool (engine choice) [Belgium]
VDL Groep [Netherlands]
Wrightbus [United Kingdom]
As highlighted previously, of particular note is the manner in which the European sector has evolved, and impacted the US & Canada:
1) the increasing bus amalgamation interests of volume truck-makers
2) the defensive consolidation reaction of larger hi-tech body-builders
3) the increasing adoption of integrated monocoque construction techniques*
4) the very powerful strategic and industrial competitive capabilities of advanced truck & car
manufacturers (ie Daimler and VW Group)
[NB * ironically first pioneered in the public realm by the London Routemaster in 1958]
Hence the reasons are clear as to why investment-auto-motives labels the European sector as 'Avante-Garde' in relation to the 'Old Guard' American sector.
As is now apparent, it is the larger VM type companies spanning both traditional and new formats that has the commercial advantage.
Importantly, American industry well recognises the commercial power and commercial prowess that has evolved from the number of 'Euro-EM' alliances formed, and indeed as a consequence, the very real low-cost threat posed by a new raft of ever improving EM players that have replicated and arguably moved beyond the NA model. The fact that Mexican company DINA previously acquired a large stake-hold in Canada's MCI in order to improve its own vehicle engineering capabilities speaks volumes.
The Euro-EM and EM players include:
Ashok Leyland [India]
BMC [Turkey]
Busscar [Brazil]
Caio Induscar [Brazil]
DINA Camiones [Mexico]
Eicher Motor [India]
Encava [Venezuela]
GolAZ [Russia]
Golden Dragon [China]
Guleryuz [Turkey]
Higer [China]
Imeca [Argentina]
Karsan [Turkey]
Marcopolo [Brazil]
Mercedes-Benz Turk (Daimler EvoBus) [Turkey]
Mahindar-Navistar [India]
Marz [Russia]
MAZ [Belarus]
MWM-Navistar (engine supply) [Brazil]
PAZ [Russia]
TATA [India]
TEMSA [Turkey]
Tezeller [Turkey]
Zhengzhou Yutong Group [China]
The “Big Picture” -
The accompanying diagram (located top right for the duration of this two-part web-log) provides a contemporary contextual 'big picture' of North America's Bus & Coach sector.
The section above depicts the American vs European industrial spheres. Whilst obviously separated by geography and history, they could be said to respectively represent 'inward' vs 'outward' market environments, which effectively hindered vs helped industrial progress. Furthermore, it could be argued that differing perspectives of what constitutes 'value creation' has had an enormous affect: the near term profit motive of the US (as deployed by Chapter 11 quick turnaround restructuring) vs European (ie German) philosophy (for organisational longevity underpinned by technical capability).
Thus illustrating what may be seen as two very different indutrial micro-climates with very different levels of commercial, industrial and technical integration. So evolving the 'Avant-Garde' scenario that sets an ideology of “European Future-Forwardism”, bound to the eco-driven profit imperative; itself led by Germany, Netherlands, Scandinavia and United Kingdom. Whilst under American 'Old Guard' is shown the transitional effect that the Europeans are having upon North America, and the reaction by Navistar to follow a 'capabilities consolidation' as set by Daimler, VW Group (MAN & Scania) and AB Volvo.
European 'Future-Forwardism' -
So whilst we see low level progression in the North American sector, thanks to the 'Euro-bus' evolution, much of the sector is still effectively decades behind Europe. The cause suspected being a fiscally powerful yet technically antiquated business model of Ford-JMC doing little to drive change because of the transit-bus business platform that could be argued as negating fundamental change.
The internet-conveyed official marketing pictures of the Euro producers, with a greater bias toward less utilitarian coach-travel type offerings demonstrate a host of comfort and safety features such as hi-style cabins and high-visibility floor-level aisle LED-lighting for use in (smoke related) emergency situations, but also used to welcome boarding passengers with knowing reference to aircraft related feel and functionality.
Such interior appointments only the last of a long history of Euro bus and coach design advancement, a world away from an 'era-trapped' US industry.
The creation of a new generation 'Trolley Bus' has emerged by the likes of Hess.
[NB the term 'Trolley-Bus has been modified by the industry since its origins as an electrified, pantograph linked, single body vehicle, now applied to alternative bus architectures].
The Hess version is that of a multi-sectioned bendy-bus which snakes as per a train, thus a true road-train. Whilst no doubt adaptable to electric motor installation and pantograph 'hook-up' for original Trolley-Bus operation, the real interest seems to lay in being conventionally ICE powered but guided by road-surface installed magnets route which can automatically or semi-automatically steer the vehicle.
Other versions of the modern 'Trolley-Bus' – pertaining to short or long multi-linked sections - has been developed by Van Hool. This time with hybrid-drive system that couples an ICE motor with pantograph-fed electric motor. Van Hool also exploring continuation of standard hybrid power-trains (ie non pantograph fed) and on-board Fuel-Cell electrical generation for true zero emissions power. This the case across all the major European producers: Daimler, MAN, Scania, Volvo, Iveco.
An oft forgotten instance is the creation of the Jumbo-Cruiser: a very high capacity vehicle in the form of a double-decker bendy-bus. Conceived in the mid 1970s in reaction to the '73-'74 oil crisis and the heavy contraction of the US aviation sector, it went into limited European operation in the 1990s, but stalled itself with the growth of low-coat airlines. Whilst this example undoubtedly demonstrated short-falls relative to a latter-day airline boom in both Europe and the US, it does demonstrate a progressive fusion of micro-level solutions to macro-level problems.
The Ripple Effect -
The precursors to these examples did have a rub-off effect in North America, but ultimately only a small one, with little real world outcome. Bigger players have undertaken various evolutionary and revolutionary R&D paths to seemingly evolve the generic bus.
Reaction came from the likes of NewFlyer, NABI (North American Bus Industries), and far smaller ABI (Advanced Bus Industries).
NewFlyer with use of plastic exterior body panels to reduce weight, introduction of LED external lighting packs for purer light and reduced electrical drain and introduction of the Bus Rapid Transit BRT model which is essentially a 'styled' bendy-bus. NABI similarly introduced a BRT bendy-bus, with also a Low Floor 'LFW' model so offering basic regulatory provision and more interestingly the CompoBus model, combining chassis and shell using lightweight composite materials And of course vehicle adaption to LNG & CNG powered engines requiring high-pressure tank installations.
Elements of learning and improvement have come with the growth of the specialist 'coach-conversion' sub-segment. Which sees coaches being originally commissioned or converted to mobile homes, for 'on the road' clients with luxury demands moving from event to event; such as: touring music singers and bands, touring entertainers, the general film industry and race-car sector requiring plush motor-homes.
ABI is an example of such. It was originally established to serve the specialist niche of highly-styled midi-sized luxury coaches, consisting of fibre-glass bodies and heavily feature packed for comfort and convenience. The company was taken over by ex-transit management with a view to offering the advanced vehicle to metro transit clients. But durability and reliability problems from the advanced windscreen and suspension systems plagued the operators, so were discarded in favour of conventional 'old guard' vehicles from well known manufacturers.
Whilst American-devised advanced technologies have been explored in a few specific cases, the prototyping, development and testing regimes were deemed to be wholly inadequate; thereby creating the commercially untenable situation where the risk-averse operator ultimately acts as project test-bed.
No surprise then that the few examples of notional vehicle design progress stalled quickly, highlighting the need for true R&D professionalism in the NA sector. This perhaps the greatest historical difference between North American vs Northern European industrial practice.
For Appearances Sake -
Given the general desire for modernity by most end-users, private and public operators, so believing that their funds have been well spent, it is little surprise that the American producers provide that appearance, even if vehicle platforms are little evolved.
This perhaps especially the case when municipal regions seek to differentiate themselves as part of broader regeneration efforts toward suburban expansion, brown-field reclamation and dense urban-living initiatives; with the attraction of private enterprise a high agenda item, so necessitating good mobility infrastructure.
As such a number of public operators adopted the higher capacity bendy-bus, had it re-styled (often poorly) and re-naming it the 'BRT (Bus Rapid Transit) system'. But this supposedly an innovative new mass transit philosophy was little more than “mutton dressed as lamb”.
Such a resistance to true progress has meant that the medieval towns of 'olde worlde' Europe often have far more advanced transit vehicles (and systems) than the skyscraper towns of 'new world' America.
Unfortunately, for 21st century America, little looks set to change.
The “American Renaissance” Thesis -
As the accompanying graphic displays, investment-auto-motives seeks to highlight the possibility that Ford (and its investment bank backers) may seek to re-join the party, so as to rebalance the 'industrial deficit' now seen within North American.
However, if the thesis is correct, it only serves to fulfil half the modern industrial agenda requirement, and only re-traces the past steps of the 'Old Guard'.
Ford looks to be in the position of being able to create a powerful value-chain which connects its low-cost truck-making interests in China's JMC to a lesser known Canadian used-truck retail business also named JMC based in Winnipeg, this city the production heartland where both MCI and NewFlyer are based
Given that MCI and Thomas Built Bus are respectively under direct and indirect Daimler control, Provost with Volvo and Navistar with IC Bus, it then indicates that NewFlyer is a natural target for Ford seeking to expand its heavy vehicle interests..
Such a move would then mimic the efforts of Navistar, which beyond presently having IC Bus as a synergistic sub-holding also operates a Chinese JV with Anhui Jianghuai, aswell as with India's Mahindra.
Under this scenario it should be noted that investment-auto-motives believes Ford would not create a hi-tech type of bus/coach product. Instead intentionally utilise the traditional body on chassis 'easy build / easy maintain' construction methods that suit China's inland bus operators on poorer semi-rural roads, and the opposite-side of the Pacific, maintain a technical corollary to NewFlyer's traditional client-base of public transit companies, who likewise seek conventional engineering.
However, whilst tried and tested 'old-tech' undoubtedly has its place, and can offer sizeable profit margins on large scale order volumes, the North American industry must also manifestly progress to catch-up with “the best of the rest” so as to climb the bus and coach value ladder.
That means investment in making a technology leap, which today sees lightweight monocoque construction solutions commercially interwoven with IT enabled intelligent networks and route-planning.
Required Evolution of the American Breed -
However, a danger exists that sees the US & Canada continue to slip behind.
There is a likelihood that, because of military -backed US economic domination through the latter half of the 20th century, now effectively replaced by newly generated QE liquidity which acts as the 21st century 'soft power' (eg GM's 7% of Peugeot), that America will not seek to self develop its industrial capabilities. It may have asked itself why it should develop new types of “Menlo Park” in old industries when interests in leading others (such as Peugeot's low CO” engines) can now be bought?). Why indeed go backwards when even Silicon Valley appears to be faltering with poor performing IPOs?
It is today able to re-run the template of the 'American century' elsewhere around the globe, especially in Asia, with remote industrial direction of Japan, Vietnam & S.Korea, pushing each to become respective leaders in eco-tech, mass manufacture and IT, with of course its growing merged industrial interests in China.
Today, those niche to mass-scale, low-value to high-value interests across the world means the US could replay its 20th century global industrial play-book, but whereas before it was the smokestack industries leading to GM & Ford domination, the 21st century sees the US network of interest create more complex and dynamic industrial and commercial webs connected by the internet.
Yet the ironically the investment and returns attraction (ie replay) of 'dinosaur technologies' exemplified by 'body on chassis' vehicles, with business models based upon low capex outlays and ever present low cost labour, means that for all the rhetoric about industrial and commercial progress, the impetus is to re-run the successful formula.
Changing Global Winds -
But the world has changed, from the milestone markers that were the original Rio & Kyoto eco-summits to the subtle manner in which China seeks industrial domination, able to adopt and utilising learning from its own domesticated Europeans to do so.
North America must recognise itself in the industrial and commercial middle-ground, sat between that 'European Future-Forwardism' that is increasingly well received by wealthy EM nations and China's remarkable capability to replay the American 'dinosaur-tech' capitalist model on its own terms.
The old American heavyweight single-deck bus with varying wheel-base and rear overhang - and indeed its “RBT” close cousin - is reliant upon little more than cost-averse engineering alterations. This historically an understandable ploy given the economic cycles of bus building and so aversion to heavy capex exposure. So vehicle updates are ostensibly cosmetic rather than technical, in the 1950s Detriot idiom that 'new' in fact simply means restyled.
Such heavyweight simple construction (which promoters call 'over-engineered' has undoubtedly assisted the fixed cost operations of producers but at the detriment of far heavier variable in-service costs of operators, most notably fuel consumption (and related emissions), especially during times of surging oil prices. This is now well recognised by those operators, especially the more enlightened such as Stagecoach and FirstGroup.
21st Century Macro Drivers for Change -
The following points highlight the trends that the North American industry must satisfy, or be overtaken on home territory by the European vehicle providers and operating companies.
- an ageing indigenous population with reduced self-driving patterns
- greater mobility expectations of specialist groups (esp less able-bodied).
- the demographic corollary of the two former trends
- less wealthy young indigenous population unable to run a car
- less % of the young seeking driving licences
- greater immigration flows to replenish society
- assisted by increasing 'open border' policies across NAFTA (esp US & Central America)
- reduced reliance and prohibition of private cars in certain areas
- increased 're-urbanisation' of specific city centres
- growth of cycling cities and 'car-free' inhabitants (Portland, Oregan etc)
- fewer cars per family (or indeed individual)
- present sense of greater American 'inwardness' (akin to 1930s)
- reduced federal and state general transportation and community travel budgets
- needs filled by private enterprise
-continual process of upgrading of state and national road network via PFI or wholly private
- expected rise of travel-systems infrastructure, private companies using 'intelligent network' capacity allocation
- increased adoption of road-toll highways and federally induced 'travel pricing'
[NB the private American passenger car will of course maintain its popularity, and indeed very probably grow in production and overall car-parc numbers, by way of increased population size and the desire for personal freedom and status expression; albeit the era of the SUV and full-size car may be over as American 'enormity' is gradually down-sized to global norms].
Conclusion -
The North American bus and coach industry had an early wake-up call in the early 1990s with the creation of the aforementioned Jumbo-Bus concept (by NEOPLAN), seen at the time by industrialists as a distant but very real threat both domestic bus industry and the resurging airline sector, from new carriers to Boeing.
In reaction, Hollywood (care of Wall Street) played its hand to subtly defend the status quo with the 1976 spoof-disaster movie 'The BigBus”, the story of a super-fast, bendy-double-decker, nuclear powered trans-national bus, which encounters various technical problems because of sabotage time-bombs. By not so mocking the idea of true Mega-Bus in the populat consciousness, the film subtly assisting the regeneration process of the domestic airline sector by wooing people back to 'safer and quicker' aircraft.
The emergence of low-cost internal airlines and commercial reaction from the larger, established carriers has had an undoubted effect upon the likes of Greyhound and its smaller rivals, and many of those dedicated internal airlines did well from the mid 1980s onwards to 2001 and again over the last decade.
But the fact remains that North America is facing a very different future to the recession rebounds of the past, one in which an unprecedented macro-economic shift has and will affect the lives and travelling habits of millions over the coming years.
The recent MegaBus crash on 08.08.2012 in Lichfield (NE St Louis) when en route between Chicago to Kansas, has of course drawn momentary negative attention, with the death of a young Asian-Indian lady. That incident adds short-lived public perception pressures on the bus-sector, and specifically the “MegaBus” service run by the UK's Stagecoach plc.
But the required remedial action of one operational incident does not undermine the very real potential of the sector into the future, one which even with renewed airline expansion, looks set to rise.
North American bus and coach can unthinkingly replay its past.
But by doing so exposes itself yet further to the very real threat of global competitive pressures taking an ever greater slice of the homeland manufacturing and travel-service markets.
Daimler Leads the Pack -
The efforts by the German company to cross-breed its technical prowess with Thomas Built's and MCI's renowned in-market names reflects the growing “Europeanisation” of North America's bus and coach fleets and overall car-parc. That Europeanisation itself created by the increasingly changed and ever greater demands of the sector's fleet operators customers.
From the ambitious producer's perspective – as per Daimler – it is able to offer its conventional trucks to trucking companies across the world, use the basic modules from those trucks to create front and rear 'chassis-mounted' sections for a transit bus range, and in turn utilise those modules (adapted as required) for the module elements within an integrated monocoque structure.
This then extends the basic business model raison d'etre yet again, from the basic counter-cyclicity of truck vs bus production - given respective private vs public funding sources and schedules - to now include and interweave an additional, now very distinct coach business stream. A simple metaphor drawn from electrical engineering sees an evolving a business model that moves from 2-phase to 3-phase streams, which ideally even-out and stabalise capex 'inputs' and revenue 'outputs'.
All the remaining American producers should take note of the German advantage.
Deploying American Private Equity -
International free markets have demonstrated that better foreign ideas have had right success. America must now follow those tracks..
To this end the large and mid-size asset managers of the PE community, along with various investment bank interests, seek to deploy the present low cost, possibly additionally QE3 fueled liquidity environment. And are presently re-building their respective coffers. Yet core elements of an American eco re-industrialisation process and outcome should not be to try and simply mimic the best international efforts, but to recognise the desperate need to physically embrace the best of the rest.
As seen previously with the American commercial capture of the European industrial leaders in 1880s and1920s..."it's all just a little bit of history repeating".
Dinosaurs, Mammals and Birds -
An overtly simplistic, but all to true synopsis, is to compare the technical and so commercial offerings as the “American Dinosaur” set against the far more intelligent “European Mammal”, both suited to their own environments. However, situational change saw the lumbering dinosaur become extinct. Mammals thrived. But, a few dinosaur species evolved into multi-faceted flyers and so 'took to the blue' to become birds.
Part 2 – The Industrial Context -
The North American sphere has historically been divided into the prime constituent corner-stones of:
a) Chassis Providers
b) Bus-Body Producers
c) Bus & Coach Operators.
In its broad societal guise, the bus and coach system is a mode of public and semi-private transport that was historically viewed – especially by liberals - as intentionally under-funded throughout the 20th century. So as to promote the scale-based 'individualism' economic interests of US auto and oil industries; which thus provides a far more complex, far-reach basis as a national economic template, and underpinning the American ideology of personal freedom.
The 'Old Guard' Indigenous Producers –
Though of course operating far earlier, the 20th century American bus-age was effectively determined in the 'conglomeratisation' effect of the 1920s. The main auto-makers – then as now Detroit's 'Big 3' providing the vehicle 'running-gear' (mechanical platform) whilst a separate (though sometimes conglomerate connected) body-building specialist would furnish an attached body – series produced or singularly commissioned.
Periodic attempts were made to overcome this structure with the appearance of new entrants seeking to construct proprietary chassis and bodies – and indeed even in earlier years wholly integral monocoque type structures – with a choice of domestic engines; typically Detroit Diesel or Cummins.
But, by virtue of size and scale, reputation and commercial dependability the established players (GM, Ford and Chrysler-Dodge) along with other brand dedicated US truck-makers (eg Mack, International, Freightliner, Kenworth & Peterbilt [now under PACCAR]) maintained a stranglehold on the sector, with little change decade upon decade.
The basic construction method of “body on chassis” remained relatively technically unchanged for 80-90 years, that standard structure similar for both large bus (based on heavy trucks) and mid / small bus (based on van chassis). The former seeing a general re-positioning of the engine to the rear for improved vehicle passenger and luggage 'packaging' from the 1950s onwards. The buses today categorised as Types A, B, C & D. relative to dimensions, GVW and passenger capacity.
For many decades Detroit's “Big 3” and in later years a few close others such as Navistar and PACCAR (directly or indirectly) had a national strangle-hold on engine rolling chassis production. The end-user bus purchaser either bought directly from bus-builders who themselves sourced the rolling chassis and added a handling margin for doing so, or in order to save on costs, separately bought the rolling-chassis and fabrication services of the bus-builder, managing the former's delivery to the latter.
This basic but effective model, much the same as the early luxury-type 'coach-built' passenger car methods, stood in place for decades, ensuring the Big 3's dominance, that of domestic bus-builder. So creating a virtuous circle of activity reliant upon economies of scale, Greyhound, Trailways and mid-size firms like Peter Pan the expansionary demand base..
The (Intermediary) Body-Builders -
The emergence of motor-car and motor-truck saw competition for specialist body-building tasks, participants from across the traditional horse-drawn wagon/coach builders, the horse-drawn tramway builders and a new crop of industry dedicated start-ups.
Whilst many over the years have been absorbed into bigger concerns or failed during recessions, today the list of North American bus & coach body fitters – from what could be considered 'old guard' roots - appears as so:
US participants include:
Advanced Bus Industries [Worthington, Ohio]
Blue-Bird Corp, (Traxis Group, Cerberus Capital Mgmt) [Fort Valley Georgia].
Collins Industries (inc CollinsBus, MidBus, Corbeil)[Hutchinson, Kansas].
Forest River (inc Elkhart Coach, Glaval Bus, Starcraft Bus) (Berkshire Hathaway). [Elkhart, Indiana & Goshen, Indiana].
Gillig Corp (CC Industries) [Hayward, California].
Goshen Coach [Goshen, Indiana]
IC Bus (Navistar International Corp) [Warrenville, Illinois]
Midway Speciality Vehicles [Elkhart, Indiana]
North American Bus Industries (NABI) [Anniston, Alabama]
StarTrans (Supreme Corp) [Goshen, Indiana]
Thomas Built Buses (Freightliner, Daimler AG) [High Point, North Carolina].
Thor Industries (bus divisions: General / Champion / Eldorado National) [various]
Trans Tech (Transportation Collaborative Inc) [Warwick, New York].
Canadian participants include:
Lion Bus (Mssrs Bedard & Chartrand) [Saint-Jerome, Quebec].
MCI (Daimler AG and KPS Capital) [Winnipeg, Manitoba]
NewFlyer [Winnipeg, Manitoba]
Prevost (AB Volvo Group) [Sainte-Claire, Quebec]
A Renewed Battle for the Middle Ground -
Within this list there are telling signs of a sector under-going a new phase of transformation, recent years have witnessed a change in the parental ownership patterns of various firms. Whereas, with only a few anomolies, yesteryear saw distinct separation of chassis-provider and body-provider, the turn of the new 21st century brought a narrowing of that chasm.
The notables being IC Bus owned by Navistar, Thomas Built Buses owned by Freightliner / Daimler, MCI owned by Daimler and Prevost's relationship with AB Volvo.
Today we see that some domestic and foreign truck-makers have re-ignited their interests in absorbing and so controlling certain bus and coach body-building producing firms.
To better ensure that they can grasp a vital slice of this 'higher value' market and ensure extensional control across the sector's value-chain. Thereby able to ensure better access to this increasingly important intermediate-market, provide improved order book stability (assisted by improved pricing flexibility as necessary), enable shorter order lead-times, provide more soundly planned growth projections for both the high capex costs of primary platform operations and labour intensive secondary operations, and no doubt utilise the advantage of cross-divisional transfer pricing up and down its in-house value chain as required to meet strategically set divisional profitability targets. A long list of advantages from consolidation of the build process.
American domestic players do so in part to retain the dominance of their traditional rolling chassis production, so protecting the standard technical formula. Whilst the foreign players seek to ply their proven capabilities regards more advanced technical offerings, both as separate body on chassis guises (given powertrain efficiencies) and critically regards the integrated (monocoque) structure that has become favoured in European bus and coach – the former trickling-down from the latter. .
The only 'All American affair” is Navistar's ownership and amalgamation of IC Bus. At a far lower level, with tentative steps is Volvo's 'strategic partnership' with Prevost. But it is Daimler that is well ahead in the business integration stakes, and with powerful strategic force, given its total control of the traditionally constructed Thomas Built Bus (via its Freightliner subsidary), and part control of MCI (alongside KPS Capital), for increased deployment of monocoque structures.
Daimler then able to direct its efforts simultaneously toward both sub-sectors of the marketplace: the more traditional public-service transit client with primary aim of cost reduction, and the more demanding and so price-elastic coach operator.
This example, and the issues it raises, has set the beginning of a fundamental shift in the shape of production for North American Bus & Coach sector. As depicted above, it presently appears that the 'score' between the progressive Europeans and incumbent Americans, in the manufacturing battle, is presently 3-1, with Daimler scoring twice.
Whilst it has become evident that US and Canadian investment firms and private stock-holders have taken an increasingly large interests in European companies with technological edge (and so have vested interests in seeing the likes of Daimler continue to thrive domestically), there is a possibility that as part of a national re-strengthening effort, it seems likely that North American will seek to redress this glaring and growing 'industrial deficit'. And at some future point seek to absorb the strategic and technical lessons learnt from the Europeans to revive the internal capabilities of its own domestic industry.
Yes this is an age of industrial globalisation, North America shown as fertile ground for such by the numerous car company transplant factories. But how far will it allow its proprietary know-how to diminish?
Moreover, that threat is made all the more apparent given the much changed, new realm of foreign bus and coach operators.
Though typically historically separate, when deemed advantageous, an operator would seek to acquire a body-building company for its own ends to dramatically lower the cost of bus manufacture, especially if allotting a large order, and so deny a competitor. This was the case with Greyhound Lines in 1970, when it acquired one of the largest of those intermediate firms Motor Coach Industries; now MCI..
It could feasibly be the case again with the 'British Invasion' (soon explained).
The 'Old Guard' Indigenous Operators -
Both economic downturns and indeed upswings saw a working population effectively mobilised from city to city and from state to state by the low-cost bus, with now legendary names like Greyhound and Trailways. (Trailways devised as a co-ordinated multi-operator system to compete with Greyhound, but later acquired by Greyhound). These two prime actors and smaller independent firms offering easier access to trans-state and trans-national travel compared to a limited routes and organizationally fragmented railway system, even under Amtrac - which itself relies on bus operators to connect separate rail-stations with the ThruWay bus service.
With manufacturing focus on scale and operator focus on costs, as such the sector was only able to offer marginal and incremental improvements in basic levels of comfort, convenience and enjoyment; in seating, heating, and on plusher vehicles curtains, radio and later video/television, and (typically) stewardess service. A quicker and more dramatic pace of change was seen upon the exterior, led by Greyhound with aluminium & plastic skins, panoramic windows and airline-like logos this was primarily an (externalised) exercise to promote company branding and so inter-company competitive advantage.
Thus from the paying customer's perspective, little changed decade upon decade. This no doubt as a consequence of the need for basic utility furnishings for easy cleaning, little customer demand for change given his/her own 'low expectational' lifestyles and infrequent personal travel. And set against the understandable commercial imperative to only improve the product / service for profitable ends by reducing bus weight, improving engine efficiency (MPG & emissions), bettering aerodynamic drag, improving stability and aiding entry/egress access, and critically installing only 'paid for' services to provide additional income streams
End of the 20th Century and 'All Change' -
By the early 1990s the bus sector's cross-state and inter-state travel advantage had waned considerably, partly the result of changing social patterns, partly because of internal 'over-bloatedness' within the sector. The business models of both the operators and so intermediary fabricators and primary producers became increasingly squeezed:
'External Influences' :
- increase of personal wealth even amongst the 'bottom tier' provided non-bus travel options
- the continued growth of car ownership, especially via cheaper used cars.
- modern (shopping mall) consumer lifestyles increased basic service & delivery expectations.
- emergence of affordable and later low-cost domestic airlines and sub-divisions.
- the emergent desire for IT 'inter-connectedness' whilst travelling.
'Internal Events' -
- (Greyhound) bus drivers strike of 1984 with endemic employee malais thereafter
- Fred Currey leading re-structuring of both Trailways & Greyhound Lines.
- the merger of Trailways into Greyhound in 1987.
- 1990 long-term strike action by employees
- Greyhound's bankruptcy filing of 1990
- Greyhound's rebound acquisition of Continental Trailways (separate entity)
- Greyhound acquired by Laidlaw Inc. (already owners of Greyhound Canada)
- Laidlaw Inc's bankruptcy in 2001
- Laidlaw's rebound in 2003 (NYSE listed) now without loss-making routes
- the influence of 'advanced' European bus & coach travel.
Combined, these and other forces, meant that a customer-orientated and internally-necessary evolutionary change was on its way. The last 15 years or so has born testament to that change when viewing the fundamental operator's structure
This sector stall was re-started by the re-organisation of established players including Peter Pan Lines. The introduction of new entrants – or at least seeming new entrants - seeking to offer alternative travel experiences helped to revitalise flagging sales and passenger numbers. New names however variously owned by established players, semi-dependent upon them or in some cases truly new wholly independent players.
The MegaBus network (operated by the UK's Stagecoach plc) was established in 2006. Later in 2008 Bolt Bus was created to serve both the NW & NE regions, but its NW operation is wholly Greyhound owned and the NE operation a JV between Greyhound & Peter Pan. NeOn was also originated that year by Greyhound & Trailways, to bolster Bolt and compete head-on with MegaBus (though apparently its service differentiation has been increasingly diluted, substituted with standard Trailway buses).
To name but a few independent operators, there are: Vamoose Bus which runs between NYC and Washington DC; and Fung Wah Bus, Chinatown Bus and associated lines (Apex, New Century, Lucky Star) which operate along the Eastern and Western sea-boards serving each city's Chinese community and the large numbers of mobile Chinese workers and more budget travellers such as students.
Needless to say there has been friction between the established incumbents and the newcomers, resulting in accusations of Chinese gangland activities, from laundering money to violent acts against persons and property, with in return Chinese buses appearing to incur high numbers of vehicle problems, possibly stemming from either poor maintenance or sabotage or both.
“The British Operator Invasion” -
As part of their own high growth expansion ambitions, three competing UK transportation companies assessed the American potential toward the end of last century and at the beginning of this century. Assisted by a mix of stock-market and fixed income funds, their American assault started.
Initially, Stagecoach plc acquired Coach USA and Coach Canada in mid 1999 for $1.8bn; but when hit by the economic aftershock of the 9-11 attacks in 2001, it divested many of those interests in 2003 to Peter Pan Lines and the PE firm Kohlberg & Co which itself formed Coach America). Stagecoach thus retrenched to operate within the subsidy protected scheduled service of the NE region. As part of its re-expansion plan, it used its back-office capabilities to create the web-friendly MegaBus.com, its own flailed 2006 expansion into the West Coast re-energised in mid 2012 by way of re-purchasing many of the divested divisions previously sold when Coach America itself filed for bankruptcy; thereby spanning much of the nation.
Also in 1999 the Rail and Bus operator FirstGroup plc purchased 2 divested divisions of Ryder Systems: the transit-bus sections and school-bus section, re-naming them 'First Transit' and 'First Student'. It then later acquired Greyhound Lines Inc in Q3 2007 for $3.6bn (£1.9bn). First Student UK (the British arm) has used yellow buses imported from both the USA and Turkey (BMC).
The business model of Go-Ahead plc is heavily biased to serving the UK, but it operates a self-proclaimed “small” joint venture yellow school-bus contract in North America.
The remaining large UK transport companies – Arriva (a holding of Deutsch Bahn) and National Express Group plc - have no American divisions.
“The European Product Invasion” -
As a result of the private car's dominance in North America decade upon decade. and the technical stagnation of indigenous chassis and body producers, it was inevitable that the recently arrived foreign bus and coach operators would look outside the US and Canada when assessing and purchasing it new vehicle fleets.
The familiarity of British and European sourced vehicles meant that with such established and strong commercial relations, and the technical chasm between typical European and N. American vehicles grew all the more apparent; and that almost inevitably US regulation adapted 'Euro' buses would be appearing on Americas highways.
That product shift had a broader sector domino effect.
Having seen this new wave trend set in place by the British operators, from 2000 onwards the domestic municipal operators, with responsibility for state-wide and city-wide public transport, started to test, lease and buy foreign-made buses. Increasing specific interests lay with double-decker buses for city-centre and inner-suburbs routes, so as to reduce vehicle fleet numbers required (so reducing storage and maintenance costs), maximise passenger capacity per route and streamline mass transit services.
In turn, that local-effect caught the attention of smaller regional private operators.
As an example of the trend, in 2004 the UK's Alexander Dennis first started to explore the North American market for its adapted Enviro500: since providing demonstrator, lease and fleet vehicles to 10 municipal transit companies, and 2 private sightseeing/ tour companies. The popularity of the bus underpinned an initial manufacturing deal with ElDorado International. More recently, in May 2012, Alexander Dennis and America's New Flyer Industries announced a new joint-venture to design and manufacture a medium-duty low-floor 'midi bus', with the UK firm undertaking engineering and testing and its US counterpart providing assembly and marketing.
Having listed the American chassis and body makers, a similar list is provided regards European manufacturers.
Traditional Chassis Providers :
Daimler EvoBus [Germany]
DAF (engine supply only) (PACCAR) [Netherlands / USA]
Enterprise Bus [United Kingdom]
IVECO [Italy]
MAN [Germany]
Scania {Sweden]
Volvo [Sweden]
Traditional Body Constructors:
Advanced Vehicle Builders [United Kingdom]
Alexander-Dennis (Mayfair Group) [United Kingdom]
BUSiness [The Netherlands]
Cacciamali [Italy]
Carrus [Finland]
Caetanobus [Portugal]
Castrosua [Spain]
De Simon Group SpA [Italy]
Hess [Switzerland]
Ikarus [Hungary]
Irizar [Spain]
Laden Autokori [Finland]
Libertybus [Germany]
NEOPLAN [Germany]
Optare [United Kingdom]
RedKite [United Kingdom]
Sfakianakis [Greece]
Sitcar [Italy]
Solaris [Poland]
Van Hool [Belgium]
VDL Bus & Coach (VDL Groep) [Eindhoven, Netherlands]
Wrightbus [Northern Ireland, United Kingdom]
Amalgamated Chassis & Body Supply
IVECO + Irisbus [Italy-France]
MAN + NEOPLAN [Germany]
Daimler + SETRA [Germany]
Integrated Mono-Structure:
Alexander-Dennis (Mayfair Group) [United Kingdom]
Van Hool (engine choice) [Belgium]
VDL Groep [Netherlands]
Wrightbus [United Kingdom]
As highlighted previously, of particular note is the manner in which the European sector has evolved, and impacted the US & Canada:
1) the increasing bus amalgamation interests of volume truck-makers
2) the defensive consolidation reaction of larger hi-tech body-builders
3) the increasing adoption of integrated monocoque construction techniques*
4) the very powerful strategic and industrial competitive capabilities of advanced truck & car
manufacturers (ie Daimler and VW Group)
[NB * ironically first pioneered in the public realm by the London Routemaster in 1958]
Hence the reasons are clear as to why investment-auto-motives labels the European sector as 'Avante-Garde' in relation to the 'Old Guard' American sector.
As is now apparent, it is the larger VM type companies spanning both traditional and new formats that has the commercial advantage.
Importantly, American industry well recognises the commercial power and commercial prowess that has evolved from the number of 'Euro-EM' alliances formed, and indeed as a consequence, the very real low-cost threat posed by a new raft of ever improving EM players that have replicated and arguably moved beyond the NA model. The fact that Mexican company DINA previously acquired a large stake-hold in Canada's MCI in order to improve its own vehicle engineering capabilities speaks volumes.
The Euro-EM and EM players include:
Ashok Leyland [India]
BMC [Turkey]
Busscar [Brazil]
Caio Induscar [Brazil]
DINA Camiones [Mexico]
Eicher Motor [India]
Encava [Venezuela]
GolAZ [Russia]
Golden Dragon [China]
Guleryuz [Turkey]
Higer [China]
Imeca [Argentina]
Karsan [Turkey]
Marcopolo [Brazil]
Mercedes-Benz Turk (Daimler EvoBus) [Turkey]
Mahindar-Navistar [India]
Marz [Russia]
MAZ [Belarus]
MWM-Navistar (engine supply) [Brazil]
PAZ [Russia]
TATA [India]
TEMSA [Turkey]
Tezeller [Turkey]
Zhengzhou Yutong Group [China]
The “Big Picture” -
The accompanying diagram (located top right for the duration of this two-part web-log) provides a contemporary contextual 'big picture' of North America's Bus & Coach sector.
The section above depicts the American vs European industrial spheres. Whilst obviously separated by geography and history, they could be said to respectively represent 'inward' vs 'outward' market environments, which effectively hindered vs helped industrial progress. Furthermore, it could be argued that differing perspectives of what constitutes 'value creation' has had an enormous affect: the near term profit motive of the US (as deployed by Chapter 11 quick turnaround restructuring) vs European (ie German) philosophy (for organisational longevity underpinned by technical capability).
Thus illustrating what may be seen as two very different indutrial micro-climates with very different levels of commercial, industrial and technical integration. So evolving the 'Avant-Garde' scenario that sets an ideology of “European Future-Forwardism”, bound to the eco-driven profit imperative; itself led by Germany, Netherlands, Scandinavia and United Kingdom. Whilst under American 'Old Guard' is shown the transitional effect that the Europeans are having upon North America, and the reaction by Navistar to follow a 'capabilities consolidation' as set by Daimler, VW Group (MAN & Scania) and AB Volvo.
European 'Future-Forwardism' -
So whilst we see low level progression in the North American sector, thanks to the 'Euro-bus' evolution, much of the sector is still effectively decades behind Europe. The cause suspected being a fiscally powerful yet technically antiquated business model of Ford-JMC doing little to drive change because of the transit-bus business platform that could be argued as negating fundamental change.
The internet-conveyed official marketing pictures of the Euro producers, with a greater bias toward less utilitarian coach-travel type offerings demonstrate a host of comfort and safety features such as hi-style cabins and high-visibility floor-level aisle LED-lighting for use in (smoke related) emergency situations, but also used to welcome boarding passengers with knowing reference to aircraft related feel and functionality.
Such interior appointments only the last of a long history of Euro bus and coach design advancement, a world away from an 'era-trapped' US industry.
The creation of a new generation 'Trolley Bus' has emerged by the likes of Hess.
[NB the term 'Trolley-Bus has been modified by the industry since its origins as an electrified, pantograph linked, single body vehicle, now applied to alternative bus architectures].
The Hess version is that of a multi-sectioned bendy-bus which snakes as per a train, thus a true road-train. Whilst no doubt adaptable to electric motor installation and pantograph 'hook-up' for original Trolley-Bus operation, the real interest seems to lay in being conventionally ICE powered but guided by road-surface installed magnets route which can automatically or semi-automatically steer the vehicle.
Other versions of the modern 'Trolley-Bus' – pertaining to short or long multi-linked sections - has been developed by Van Hool. This time with hybrid-drive system that couples an ICE motor with pantograph-fed electric motor. Van Hool also exploring continuation of standard hybrid power-trains (ie non pantograph fed) and on-board Fuel-Cell electrical generation for true zero emissions power. This the case across all the major European producers: Daimler, MAN, Scania, Volvo, Iveco.
An oft forgotten instance is the creation of the Jumbo-Cruiser: a very high capacity vehicle in the form of a double-decker bendy-bus. Conceived in the mid 1970s in reaction to the '73-'74 oil crisis and the heavy contraction of the US aviation sector, it went into limited European operation in the 1990s, but stalled itself with the growth of low-coat airlines. Whilst this example undoubtedly demonstrated short-falls relative to a latter-day airline boom in both Europe and the US, it does demonstrate a progressive fusion of micro-level solutions to macro-level problems.
The Ripple Effect -
The precursors to these examples did have a rub-off effect in North America, but ultimately only a small one, with little real world outcome. Bigger players have undertaken various evolutionary and revolutionary R&D paths to seemingly evolve the generic bus.
Reaction came from the likes of NewFlyer, NABI (North American Bus Industries), and far smaller ABI (Advanced Bus Industries).
NewFlyer with use of plastic exterior body panels to reduce weight, introduction of LED external lighting packs for purer light and reduced electrical drain and introduction of the Bus Rapid Transit BRT model which is essentially a 'styled' bendy-bus. NABI similarly introduced a BRT bendy-bus, with also a Low Floor 'LFW' model so offering basic regulatory provision and more interestingly the CompoBus model, combining chassis and shell using lightweight composite materials And of course vehicle adaption to LNG & CNG powered engines requiring high-pressure tank installations.
Elements of learning and improvement have come with the growth of the specialist 'coach-conversion' sub-segment. Which sees coaches being originally commissioned or converted to mobile homes, for 'on the road' clients with luxury demands moving from event to event; such as: touring music singers and bands, touring entertainers, the general film industry and race-car sector requiring plush motor-homes.
ABI is an example of such. It was originally established to serve the specialist niche of highly-styled midi-sized luxury coaches, consisting of fibre-glass bodies and heavily feature packed for comfort and convenience. The company was taken over by ex-transit management with a view to offering the advanced vehicle to metro transit clients. But durability and reliability problems from the advanced windscreen and suspension systems plagued the operators, so were discarded in favour of conventional 'old guard' vehicles from well known manufacturers.
Whilst American-devised advanced technologies have been explored in a few specific cases, the prototyping, development and testing regimes were deemed to be wholly inadequate; thereby creating the commercially untenable situation where the risk-averse operator ultimately acts as project test-bed.
No surprise then that the few examples of notional vehicle design progress stalled quickly, highlighting the need for true R&D professionalism in the NA sector. This perhaps the greatest historical difference between North American vs Northern European industrial practice.
For Appearances Sake -
Given the general desire for modernity by most end-users, private and public operators, so believing that their funds have been well spent, it is little surprise that the American producers provide that appearance, even if vehicle platforms are little evolved.
This perhaps especially the case when municipal regions seek to differentiate themselves as part of broader regeneration efforts toward suburban expansion, brown-field reclamation and dense urban-living initiatives; with the attraction of private enterprise a high agenda item, so necessitating good mobility infrastructure.
As such a number of public operators adopted the higher capacity bendy-bus, had it re-styled (often poorly) and re-naming it the 'BRT (Bus Rapid Transit) system'. But this supposedly an innovative new mass transit philosophy was little more than “mutton dressed as lamb”.
Such a resistance to true progress has meant that the medieval towns of 'olde worlde' Europe often have far more advanced transit vehicles (and systems) than the skyscraper towns of 'new world' America.
Unfortunately, for 21st century America, little looks set to change.
The “American Renaissance” Thesis -
As the accompanying graphic displays, investment-auto-motives seeks to highlight the possibility that Ford (and its investment bank backers) may seek to re-join the party, so as to rebalance the 'industrial deficit' now seen within North American.
However, if the thesis is correct, it only serves to fulfil half the modern industrial agenda requirement, and only re-traces the past steps of the 'Old Guard'.
Ford looks to be in the position of being able to create a powerful value-chain which connects its low-cost truck-making interests in China's JMC to a lesser known Canadian used-truck retail business also named JMC based in Winnipeg, this city the production heartland where both MCI and NewFlyer are based
Given that MCI and Thomas Built Bus are respectively under direct and indirect Daimler control, Provost with Volvo and Navistar with IC Bus, it then indicates that NewFlyer is a natural target for Ford seeking to expand its heavy vehicle interests..
Such a move would then mimic the efforts of Navistar, which beyond presently having IC Bus as a synergistic sub-holding also operates a Chinese JV with Anhui Jianghuai, aswell as with India's Mahindra.
Under this scenario it should be noted that investment-auto-motives believes Ford would not create a hi-tech type of bus/coach product. Instead intentionally utilise the traditional body on chassis 'easy build / easy maintain' construction methods that suit China's inland bus operators on poorer semi-rural roads, and the opposite-side of the Pacific, maintain a technical corollary to NewFlyer's traditional client-base of public transit companies, who likewise seek conventional engineering.
However, whilst tried and tested 'old-tech' undoubtedly has its place, and can offer sizeable profit margins on large scale order volumes, the North American industry must also manifestly progress to catch-up with “the best of the rest” so as to climb the bus and coach value ladder.
That means investment in making a technology leap, which today sees lightweight monocoque construction solutions commercially interwoven with IT enabled intelligent networks and route-planning.
Required Evolution of the American Breed -
However, a danger exists that sees the US & Canada continue to slip behind.
There is a likelihood that, because of military -backed US economic domination through the latter half of the 20th century, now effectively replaced by newly generated QE liquidity which acts as the 21st century 'soft power' (eg GM's 7% of Peugeot), that America will not seek to self develop its industrial capabilities. It may have asked itself why it should develop new types of “Menlo Park” in old industries when interests in leading others (such as Peugeot's low CO” engines) can now be bought?). Why indeed go backwards when even Silicon Valley appears to be faltering with poor performing IPOs?
It is today able to re-run the template of the 'American century' elsewhere around the globe, especially in Asia, with remote industrial direction of Japan, Vietnam & S.Korea, pushing each to become respective leaders in eco-tech, mass manufacture and IT, with of course its growing merged industrial interests in China.
Today, those niche to mass-scale, low-value to high-value interests across the world means the US could replay its 20th century global industrial play-book, but whereas before it was the smokestack industries leading to GM & Ford domination, the 21st century sees the US network of interest create more complex and dynamic industrial and commercial webs connected by the internet.
Yet the ironically the investment and returns attraction (ie replay) of 'dinosaur technologies' exemplified by 'body on chassis' vehicles, with business models based upon low capex outlays and ever present low cost labour, means that for all the rhetoric about industrial and commercial progress, the impetus is to re-run the successful formula.
Changing Global Winds -
But the world has changed, from the milestone markers that were the original Rio & Kyoto eco-summits to the subtle manner in which China seeks industrial domination, able to adopt and utilising learning from its own domesticated Europeans to do so.
North America must recognise itself in the industrial and commercial middle-ground, sat between that 'European Future-Forwardism' that is increasingly well received by wealthy EM nations and China's remarkable capability to replay the American 'dinosaur-tech' capitalist model on its own terms.
The old American heavyweight single-deck bus with varying wheel-base and rear overhang - and indeed its “RBT” close cousin - is reliant upon little more than cost-averse engineering alterations. This historically an understandable ploy given the economic cycles of bus building and so aversion to heavy capex exposure. So vehicle updates are ostensibly cosmetic rather than technical, in the 1950s Detriot idiom that 'new' in fact simply means restyled.
Such heavyweight simple construction (which promoters call 'over-engineered' has undoubtedly assisted the fixed cost operations of producers but at the detriment of far heavier variable in-service costs of operators, most notably fuel consumption (and related emissions), especially during times of surging oil prices. This is now well recognised by those operators, especially the more enlightened such as Stagecoach and FirstGroup.
21st Century Macro Drivers for Change -
The following points highlight the trends that the North American industry must satisfy, or be overtaken on home territory by the European vehicle providers and operating companies.
- an ageing indigenous population with reduced self-driving patterns
- greater mobility expectations of specialist groups (esp less able-bodied).
- the demographic corollary of the two former trends
- less wealthy young indigenous population unable to run a car
- less % of the young seeking driving licences
- greater immigration flows to replenish society
- assisted by increasing 'open border' policies across NAFTA (esp US & Central America)
- reduced reliance and prohibition of private cars in certain areas
- increased 're-urbanisation' of specific city centres
- growth of cycling cities and 'car-free' inhabitants (Portland, Oregan etc)
- fewer cars per family (or indeed individual)
- present sense of greater American 'inwardness' (akin to 1930s)
- reduced federal and state general transportation and community travel budgets
- needs filled by private enterprise
-continual process of upgrading of state and national road network via PFI or wholly private
- expected rise of travel-systems infrastructure, private companies using 'intelligent network' capacity allocation
- increased adoption of road-toll highways and federally induced 'travel pricing'
[NB the private American passenger car will of course maintain its popularity, and indeed very probably grow in production and overall car-parc numbers, by way of increased population size and the desire for personal freedom and status expression; albeit the era of the SUV and full-size car may be over as American 'enormity' is gradually down-sized to global norms].
Conclusion -
The North American bus and coach industry had an early wake-up call in the early 1990s with the creation of the aforementioned Jumbo-Bus concept (by NEOPLAN), seen at the time by industrialists as a distant but very real threat both domestic bus industry and the resurging airline sector, from new carriers to Boeing.
In reaction, Hollywood (care of Wall Street) played its hand to subtly defend the status quo with the 1976 spoof-disaster movie 'The BigBus”, the story of a super-fast, bendy-double-decker, nuclear powered trans-national bus, which encounters various technical problems because of sabotage time-bombs. By not so mocking the idea of true Mega-Bus in the populat consciousness, the film subtly assisting the regeneration process of the domestic airline sector by wooing people back to 'safer and quicker' aircraft.
The emergence of low-cost internal airlines and commercial reaction from the larger, established carriers has had an undoubted effect upon the likes of Greyhound and its smaller rivals, and many of those dedicated internal airlines did well from the mid 1980s onwards to 2001 and again over the last decade.
But the fact remains that North America is facing a very different future to the recession rebounds of the past, one in which an unprecedented macro-economic shift has and will affect the lives and travelling habits of millions over the coming years.
The recent MegaBus crash on 08.08.2012 in Lichfield (NE St Louis) when en route between Chicago to Kansas, has of course drawn momentary negative attention, with the death of a young Asian-Indian lady. That incident adds short-lived public perception pressures on the bus-sector, and specifically the “MegaBus” service run by the UK's Stagecoach plc.
But the required remedial action of one operational incident does not undermine the very real potential of the sector into the future, one which even with renewed airline expansion, looks set to rise.
North American bus and coach can unthinkingly replay its past.
But by doing so exposes itself yet further to the very real threat of global competitive pressures taking an ever greater slice of the homeland manufacturing and travel-service markets.
Daimler Leads the Pack -
The efforts by the German company to cross-breed its technical prowess with Thomas Built's and MCI's renowned in-market names reflects the growing “Europeanisation” of North America's bus and coach fleets and overall car-parc. That Europeanisation itself created by the increasingly changed and ever greater demands of the sector's fleet operators customers.
From the ambitious producer's perspective – as per Daimler – it is able to offer its conventional trucks to trucking companies across the world, use the basic modules from those trucks to create front and rear 'chassis-mounted' sections for a transit bus range, and in turn utilise those modules (adapted as required) for the module elements within an integrated monocoque structure.
This then extends the basic business model raison d'etre yet again, from the basic counter-cyclicity of truck vs bus production - given respective private vs public funding sources and schedules - to now include and interweave an additional, now very distinct coach business stream. A simple metaphor drawn from electrical engineering sees an evolving a business model that moves from 2-phase to 3-phase streams, which ideally even-out and stabalise capex 'inputs' and revenue 'outputs'.
All the remaining American producers should take note of the German advantage.
Deploying American Private Equity -
International free markets have demonstrated that better foreign ideas have had right success. America must now follow those tracks..
To this end the large and mid-size asset managers of the PE community, along with various investment bank interests, seek to deploy the present low cost, possibly additionally QE3 fueled liquidity environment. And are presently re-building their respective coffers. Yet core elements of an American eco re-industrialisation process and outcome should not be to try and simply mimic the best international efforts, but to recognise the desperate need to physically embrace the best of the rest.
As seen previously with the American commercial capture of the European industrial leaders in 1880s and1920s..."it's all just a little bit of history repeating".
Dinosaurs, Mammals and Birds -
An overtly simplistic, but all to true synopsis, is to compare the technical and so commercial offerings as the “American Dinosaur” set against the far more intelligent “European Mammal”, both suited to their own environments. However, situational change saw the lumbering dinosaur become extinct. Mammals thrived. But, a few dinosaur species evolved into multi-faceted flyers and so 'took to the blue' to become birds.
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.
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.
Monday, 13 August 2012
The London 2012 Olympic Games - Run Full Circle
The opening ceremony set the historical backdrop to Britain for the world absorb. A contextual roadmap of Britain's socio-economic evolution: from the romantic idyl of an agricultural land, through the conquests of the industrial revolution, the horror of war, the development of 'care for all', the emergence of youth culture, the soundtrack of peoples lives, the birth of the internet, today's stream of media-connected social- consciousness and the age old story of love.
Two weeks of sporting competition saw Britain provide an unrivaled backdrop for the events, from Greenwich Park's equestrian events to Box Hill's snaking roads in cycling to the Serpentine Lake of Hyde Park to the final exhausting 'home stretch' of The Mall.
Amongst the joy of the triumphant and tears of the the vanquished were the far subtler human stories, such as the unveering self-knowledge of injustice that saw a Japanese contender sit hour after hour in protest.
The closing ceremony provided a contrasting spectacle to the former. It centered on a London with an oval perimeter road that exists in reality. Its streets represented the arms of the Union Flag, Westminster Bridge and Big Ben the core, those streets wrapped in a 'papier-mache' newsprint that gave torn snippets of famous quotations.
On those streets paraded all types of people and vehicles, from the cockney-cabbie to carnival parade floats to tractor towed fashion bill-boards to chauffeur driven convertible limousines to a swarm of scooters. Those vehicles transported celebrities whose songs and imagery transported the minds of the audience.
It set the stage to demonstrate that Britain will continue to play a vital global socio-economic role on the global stage well into the future. London itself a microcosm of the world, the world in many ways a macrocosm of London.
The words of those 2oth & 21st century populist songs by the likes of The WHO, Queen, George Micheal, Oasis, The Spice Girls, Take That and Tinie Tempa perhaps holding as much real-life resonance for people as the emphatically stirring music
of the 19th century.
Britain hosted with verve and aplomb.
Two weeks of sporting competition saw Britain provide an unrivaled backdrop for the events, from Greenwich Park's equestrian events to Box Hill's snaking roads in cycling to the Serpentine Lake of Hyde Park to the final exhausting 'home stretch' of The Mall.
Amongst the joy of the triumphant and tears of the the vanquished were the far subtler human stories, such as the unveering self-knowledge of injustice that saw a Japanese contender sit hour after hour in protest.
The closing ceremony provided a contrasting spectacle to the former. It centered on a London with an oval perimeter road that exists in reality. Its streets represented the arms of the Union Flag, Westminster Bridge and Big Ben the core, those streets wrapped in a 'papier-mache' newsprint that gave torn snippets of famous quotations.
On those streets paraded all types of people and vehicles, from the cockney-cabbie to carnival parade floats to tractor towed fashion bill-boards to chauffeur driven convertible limousines to a swarm of scooters. Those vehicles transported celebrities whose songs and imagery transported the minds of the audience.
It set the stage to demonstrate that Britain will continue to play a vital global socio-economic role on the global stage well into the future. London itself a microcosm of the world, the world in many ways a macrocosm of London.
The words of those 2oth & 21st century populist songs by the likes of The WHO, Queen, George Micheal, Oasis, The Spice Girls, Take That and Tinie Tempa perhaps holding as much real-life resonance for people as the emphatically stirring music
of the 19th century.
Britain hosted with verve and aplomb.
Monday, 6 August 2012
Companies Focus – Global 11 VMs – Q2 2012 Results
The Q2 earnings season saw a raft of mixed results spanning the good, bad and ugly; thus creating a sense of disturbance. Even historically defensive sectors such as banking and oil/gas providing lesser safe-harbours than the case in the past, given high P/Es, low yields and their own PESTEL headwinds. All adding to the 'risk-on, risk-off volatility in the search for value.
Contradictory Signs -
So an an unsure and erratic milieu providing a reduced rational structure for general interpretation. Created by the contrasting “pro and con” results of now globally inter-connected continental macro-level surveys, together with at the micro-level the affect of highly managed earnings guidance from companies (to reflect or boost release sentiment), and critically, the market reliant announcements of influential administrators and politicians. All combine to generate what was predicted and became a sideways moving market with 'snap' sentiment swings of the market – propelled by high-frequency algorithmic auto-trading – and best benefiting short-hold weekly and monthly traders who seek-out the opportunities of 'trough-point' and 'peak-point' stock dynamics, or those long-term participants slowly and cautiously building up holdings when prices (even in low P/E companies) appear attractive.
Being cyclical in nature, auto manufacturers have been forced to ride the heavy weather sentiment of the markets, perhaps more so than most given the demands of heavy capex and working capital requirements.
This now most evidently seen in North America, as the previous short-term financial markets' optimism provided by QE1, QE2 and Operation Twist and the successful lean running of large-caps and SME companies runs into the headwind of revived but still relatively anaemic consumer spending, forcing companies to remain cautious, even in the low-interest (often corporate bond secured) lending environment.
So, whilst America solved its 'capacity obesity' problem with Chapter 11, whilst there may be very real regional structural concerns in Europe, history demonstrates that it is often the case that national economies and auto companies seem to prefer to maintain what could be regarded as 'fallow' capacity (even after the 2 plant closures in Italy and Belgium): for either future job creation or factory disposal (trade-sale or otherwise), whilst awaiting the eventual future economic upswing
Mid and long-term offer a distinct value creation promise in an ever expanding worldwide market, where the BRICS & CIVETS offer so much proven potential. But given Europe's familiarity, still relatively wealthy demographic, cultural links and easily influenced governments – especially now given the economic corporate advantage - an auto-executive's mind still no doubt thinks the company that conquers a now much enlarged Europe (and critically vie against strong Japanese and S.Korean competitors) then has the political and technical lead to conquer the world.
[NB Though FIAT's Marchionne calls for cross-continent European capacity reduction, most other CEOs well recognise the liquidity firing power that GM and FIAT-Chrysler have (intrinsically backed by US foreign policy and a fiscally enabled eased “US$”) to industrially 're-acquire' Europe].
Comparative Q2 2012 Results -
The accompanying graphic (data table) provides an overview of the Q2 results for the prime 'global 11' automakers, GM, Ford, VW, BMW, Daimler, FIAT-Chrysler, Renault-Nissan, Peugeot, Toyota, Honda and Hyundai.
[NB data sourced directly from Q2 / H1 company reports. It appears that for VW, Renault-Nissan, Peugeot and Hyundai, the exact details of a weaker April, May & June sales period have been intentionally absorbed into a general H1 depiction. For the purposes of basic calculation / assumption, the Q2 figures presented are half the H1 numbers presented].
To best provide direct comparison each of the primary accounting lines is examined on a company versus company basis. This across: Revenue / Net Profit / EPS / Liquidity vs Q2 2011 standing.
Revenue -
GM : $37.6bn vs $39.4 (-4.6%)
Ford : $33.3bn vs $35.5bn (-6%)
VW : €47.7bn vs €38.85 (+22%)
BMW : €19.2bn vs €17.9bn (+7%)
Daimler : €28.9bn vs €26.3bn (+10%)
FIAT-Chrysler : €21.5bn vs €13.2bn (+63%)
Renault-Nissan : €10.467bn vs €10.55bn (-0.8%)
Peugeot : €14.77bn vs €15.56bn) (-5%)
Toyota : Y5,501bn vs Y3,438bn (+60%)
Honda : Y2,435.9bn vs Y1,714.5bn (+42%)
Hyundai : KRW21,052bn vs 19,162bn (+9.9%)
Of these, it is apparent that the notional 'winners' regards Revenue improvement are FIAT-Chrysler, Toyota, Honda, and VW & Hyundai. But it must be noted that the Italian-American and Japanese producers come from respectively low bases, so 'easing' their improvement. Whilst the German and Korean producers maintains traction from their record high sales base.
Net Profit -
GM : $1.5bn vs $2.5bn (-40%)
Ford : $1.04bn vs $2.4bn (-56%)
VW : €4.4bn vs €3.25bn (+35%)
BMW : €1.28bn vs €1.77bn (-27.7%)
Daimler : €1.51bn vs €1.7bn (-11.17%)
FIAT-Chrysler : €358m vs €1.2bn (-70%)
Renault–Nissan : €393m vs €626.5m (-37%)
Peugeot : €-409.5m vs €403m (-200%)
Toyota : Y290.3bn vs Y1.1bn (+26,300%)
Honda : Y131.7bn vs Y31.7bn (+415%)
Hyundai : KRW2,550bn vs 2,310bn (+10.4%)
The 'winners' here are Toyota (by a massive degree), Honda, VW and Hyundai. The above remarks pertaining to the Japanese industrial / commercial 'bounce-back' are reflected here at the bottom line. This much contrasted the American duo's foundering as profitability is surpressed to build-up cash reserves and fund capex projects.
EPS -
GM : $0.90 vs $1.54 (-41%)
Ford : $0.26 vs $0.59 (-56%)
VW : €12.05 vs €10.04 (+20%)
BMW : €1.94 vs €2.07 (-6.3%)
Daimler : €1.34 vs €1.51(-11%)
FIAT-Chrysler :not stated
Renault-Nissan : €1.37 vs €2.24 (-39%)
Peugeot : €-1.365 vs €1.77 (-177%)
Toyota : Y91.67 vs Y0.37 (+24,770%)
Honda :Y73.09 vs Y17.64 (+414%)
Hyundai : not stated
Correlated to the outcome of the previous section, the 'winners' here are Toyota (by that massive leap), Honda, VW (and expectantly Hyundai, though not indicated by the company). Once again the reduced profitability of the Detroit 2 is viewed through still positive but much reduced EPS.
Operating Cash Flow -
GM : $3.8bn vs $5.0bn (-24%)
Ford : $0.8bn vs $2.3bn (-65.2%)
VW : €3.35bn vs €4.2bn (-20%)
BMW : €1.84bn vs €3.0bn (-39%)
Daimler : not stated
FIAT-Chrysler :€1.08bn vs €0.52bn (+300%)
Renault-Nissan : €541m vs €767m (-29.5%)
Peugeot : not stated
Toyota : Y702bn vs Y316bn (+222%)
Honda : Y737.43bn vs Y1,070bn (-31%)
Hyundai : not stated
Here FIAT-Chrysler and Toyota win by very wide margins, with Ford seen to suffer most.
Free Cash Flow -
GM : $1.7bn vs $3.8bn (-56%)
Ford : $1.77bn vs $0.46bn (+384%) estimated
VW : €0.995bn vs E1.46bn (-31.5%)
BMW : €853m
Daimler : €1.0bn vs €1.13bn (-11.51%)
FIAT-Chrysler : €0.39bn vs €0.11bn (+354%) estimated
Renault-Nissan : €-100m vs €60.5m (-265%)
Peugeot : €224.5m
Toyota : Y49bn vs 51bn (-3.9%)
Honda : Y64.36bn vs Y339.44bn (-81%)
Hyundai : not stated
The apparent 'winners' here seen to be Ford (in stark contrast to its OCF) and FIAT-Chrysler with more than a tripling of FCF YoY. These figures are only simplistic guestimates, but may have been officially unreleased to build-up greater 'rolled-up' FCF figures for a later Q3/Q4 release, given the power of the indicator to tempt investors. Suffering most is Renault (and presumably Peugeot) given their greatest exposure to Eurozone market troubles.
Liquidity -
GM : $38.5bn
Ford : $33.9bn
VW : €14.9bn vs €17bn (-14%) [$18.47bn]
BMW : €8.01bn vs €7.46bn (+7.5%) [$9.93bn]
Daimler : €12.09bn vs €9.84bn (+23%) [$15bn]
FIAT-Chrysler : €22.7bn vs €21.4bn (+6.5%) [$28.14bn].
Renault-Nissan : E11.1bn [$13.76bn]
Peugeot : €12.08bn [$15bn]
Toyota : Y1,728bn vs Y2,132bn (-19%) [$17.8bn]
Honda : Y1,247.1bn (cash & equiv) [$12.85bn].
Hyundai : KRW17,180bn (cash & equiv) [$15.15bn]
And finally, the importance of 'fiscal fire-power' during this transformative period is seen by the large reserves build-up by GM, Ford and FIAT-Chrysler, with VW and Toyota holding near equal value lower sums and Daimler, Hyundai and Peugeot close behind, with Renault-Nissan, Honda and BMW on lower levels.
Automakers' Positioning -
By the overtly simplistic indications of a) Revenue Increase, b) Net Profit, c) Earnings Per Share, d) Operating Cash Flow, e) Free Cash Flow and f) Liquidity, we see the dominant players per measure:
a) Revenue Increase: FIAT-Chrysler, Toyota, Honda, VW, Hyundai
b) Net Profit: Toyota, Honda, VW, Hyundai
c) EPS : Toyota, Honda, VW, (Hyundai assumed)
d) OCF : FIAT- Chrysler, Toyota
e) FCF: Ford, FIAT-Chrysler (estimated results)
f) Liquidity : GM, Ford, FIAT-Chrysler, VW, Toyota
Consistency goes to Toyota (5 of 6 placings), followed by VW & FIAT-Chrysler (4 of 6 placings), then Honda & Hyundai (3 of 6 placings), Ford (2 of 6 placings), GM (1 of 6 placings).
Unsurprisingly Renault-Nissan and Peugeot lagged heavily, but also too seemingly have BMW and Daimler failed to make a showing. This investment-auto-motives believes because of the BoD's operational consistency which provides slower but ongoing organic value creation, instead of the 'falter and rebound' growth opportunity seen by the aforementioned identified players.
Automaker's Context -
It became apparent some time ago that the dire effects of the credit crunch would most impact western mass market players with heavy exposure to their domestic markets, hence the experiences of previously GM and Chrysler, and now PSA, Renault and FIAT; with the premium/quality type producers with high export market exposure, demonstrated by BMW destined to fair far better, with the 'diversified premium' of Volkswagen and Daimler arguably on even more solid ground spanning B2C and B2C customers. The 'intermediates' of Toyota, Honda and Nissan were destined to sit between the two former groups, but themselves required internal re-structuring to remain competitive; this latterly ironically achieved as a consequence of the 'Great Eastern Japanese' disaster and the Thailand floods.
[NB The recent pan-Indian electrical power failures may induce a far smaller but significant force for auto-producer restructuring as companies seek to relocate to regions of assured power; aswell as obviously providing consulting and installation opportunities for major infrastructure players such as GE, Siemens etc]
As illustrated previously, perhaps the very obvious automotive beneficiary of the global downturn has been the strategically perfectly positioned Hyundai Motor Co with a balanced global sales and production foot-print and ever more attractive and price-compelling vehicle range. Whilst inside western markets for decades, its prime focus over the last decade was in BRIC and EM countries offering small cars and small trucks, then concentrating upon globally credible passenger vehicles as consumer expectations of the 'old-industrial' and 'emerged-industrial' countries began to merge.
However, as seen with the previous focus on Ford, western producers are positioned in course to return to strength if able to set their own paths: either through manifest strategic re-alignment of the intra-national business model (Ford), or through the deployment of large cash reserves via M&A and alliances (GM) or seeking - at smaller level – a combination of both (FIAT-Chrysler). The lessons learned within the US no doubt sought to be deployed by European companies / divisions.
The German corporates have remained strong thanks largely to the success born from the western boom years, their EM exporting models of 'visible' and 'invisible' products and services, the cautious retention of those cash cushions up until recently with now impressive CapEx programmes. These designed to secure industrial dominance domestically...in EM regions...and by virtue of the German 'home improvement plan' re-emphisising its historic role as Europe's industrial hub with powerful spokes now eminating north, west, south and east. .
Outlook -
So beneath the very apparent surface of the 2008-10 financial crisis, the EU sovereign debt and banking crisis, the natural disasters in Asia, the spectre of a technical or real double-dip recession, and so 'in turn' the outcome of heavily afflicted stock prices amongst many 'consumer cyclicals'... the necessary process of business re-invention has been under-way to re-position individual companies and the sector at large into the second decade of the 21st century and beyond.
Contradictory Signs -
So an an unsure and erratic milieu providing a reduced rational structure for general interpretation. Created by the contrasting “pro and con” results of now globally inter-connected continental macro-level surveys, together with at the micro-level the affect of highly managed earnings guidance from companies (to reflect or boost release sentiment), and critically, the market reliant announcements of influential administrators and politicians. All combine to generate what was predicted and became a sideways moving market with 'snap' sentiment swings of the market – propelled by high-frequency algorithmic auto-trading – and best benefiting short-hold weekly and monthly traders who seek-out the opportunities of 'trough-point' and 'peak-point' stock dynamics, or those long-term participants slowly and cautiously building up holdings when prices (even in low P/E companies) appear attractive.
Being cyclical in nature, auto manufacturers have been forced to ride the heavy weather sentiment of the markets, perhaps more so than most given the demands of heavy capex and working capital requirements.
This now most evidently seen in North America, as the previous short-term financial markets' optimism provided by QE1, QE2 and Operation Twist and the successful lean running of large-caps and SME companies runs into the headwind of revived but still relatively anaemic consumer spending, forcing companies to remain cautious, even in the low-interest (often corporate bond secured) lending environment.
So, whilst America solved its 'capacity obesity' problem with Chapter 11, whilst there may be very real regional structural concerns in Europe, history demonstrates that it is often the case that national economies and auto companies seem to prefer to maintain what could be regarded as 'fallow' capacity (even after the 2 plant closures in Italy and Belgium): for either future job creation or factory disposal (trade-sale or otherwise), whilst awaiting the eventual future economic upswing
Mid and long-term offer a distinct value creation promise in an ever expanding worldwide market, where the BRICS & CIVETS offer so much proven potential. But given Europe's familiarity, still relatively wealthy demographic, cultural links and easily influenced governments – especially now given the economic corporate advantage - an auto-executive's mind still no doubt thinks the company that conquers a now much enlarged Europe (and critically vie against strong Japanese and S.Korean competitors) then has the political and technical lead to conquer the world.
[NB Though FIAT's Marchionne calls for cross-continent European capacity reduction, most other CEOs well recognise the liquidity firing power that GM and FIAT-Chrysler have (intrinsically backed by US foreign policy and a fiscally enabled eased “US$”) to industrially 're-acquire' Europe].
Comparative Q2 2012 Results -
The accompanying graphic (data table) provides an overview of the Q2 results for the prime 'global 11' automakers, GM, Ford, VW, BMW, Daimler, FIAT-Chrysler, Renault-Nissan, Peugeot, Toyota, Honda and Hyundai.
[NB data sourced directly from Q2 / H1 company reports. It appears that for VW, Renault-Nissan, Peugeot and Hyundai, the exact details of a weaker April, May & June sales period have been intentionally absorbed into a general H1 depiction. For the purposes of basic calculation / assumption, the Q2 figures presented are half the H1 numbers presented].
To best provide direct comparison each of the primary accounting lines is examined on a company versus company basis. This across: Revenue / Net Profit / EPS / Liquidity vs Q2 2011 standing.
Revenue -
GM : $37.6bn vs $39.4 (-4.6%)
Ford : $33.3bn vs $35.5bn (-6%)
VW : €47.7bn vs €38.85 (+22%)
BMW : €19.2bn vs €17.9bn (+7%)
Daimler : €28.9bn vs €26.3bn (+10%)
FIAT-Chrysler : €21.5bn vs €13.2bn (+63%)
Renault-Nissan : €10.467bn vs €10.55bn (-0.8%)
Peugeot : €14.77bn vs €15.56bn) (-5%)
Toyota : Y5,501bn vs Y3,438bn (+60%)
Honda : Y2,435.9bn vs Y1,714.5bn (+42%)
Hyundai : KRW21,052bn vs 19,162bn (+9.9%)
Of these, it is apparent that the notional 'winners' regards Revenue improvement are FIAT-Chrysler, Toyota, Honda, and VW & Hyundai. But it must be noted that the Italian-American and Japanese producers come from respectively low bases, so 'easing' their improvement. Whilst the German and Korean producers maintains traction from their record high sales base.
Net Profit -
GM : $1.5bn vs $2.5bn (-40%)
Ford : $1.04bn vs $2.4bn (-56%)
VW : €4.4bn vs €3.25bn (+35%)
BMW : €1.28bn vs €1.77bn (-27.7%)
Daimler : €1.51bn vs €1.7bn (-11.17%)
FIAT-Chrysler : €358m vs €1.2bn (-70%)
Renault–Nissan : €393m vs €626.5m (-37%)
Peugeot : €-409.5m vs €403m (-200%)
Toyota : Y290.3bn vs Y1.1bn (+26,300%)
Honda : Y131.7bn vs Y31.7bn (+415%)
Hyundai : KRW2,550bn vs 2,310bn (+10.4%)
The 'winners' here are Toyota (by a massive degree), Honda, VW and Hyundai. The above remarks pertaining to the Japanese industrial / commercial 'bounce-back' are reflected here at the bottom line. This much contrasted the American duo's foundering as profitability is surpressed to build-up cash reserves and fund capex projects.
EPS -
GM : $0.90 vs $1.54 (-41%)
Ford : $0.26 vs $0.59 (-56%)
VW : €12.05 vs €10.04 (+20%)
BMW : €1.94 vs €2.07 (-6.3%)
Daimler : €1.34 vs €1.51(-11%)
FIAT-Chrysler :not stated
Renault-Nissan : €1.37 vs €2.24 (-39%)
Peugeot : €-1.365 vs €1.77 (-177%)
Toyota : Y91.67 vs Y0.37 (+24,770%)
Honda :Y73.09 vs Y17.64 (+414%)
Hyundai : not stated
Correlated to the outcome of the previous section, the 'winners' here are Toyota (by that massive leap), Honda, VW (and expectantly Hyundai, though not indicated by the company). Once again the reduced profitability of the Detroit 2 is viewed through still positive but much reduced EPS.
Operating Cash Flow -
GM : $3.8bn vs $5.0bn (-24%)
Ford : $0.8bn vs $2.3bn (-65.2%)
VW : €3.35bn vs €4.2bn (-20%)
BMW : €1.84bn vs €3.0bn (-39%)
Daimler : not stated
FIAT-Chrysler :€1.08bn vs €0.52bn (+300%)
Renault-Nissan : €541m vs €767m (-29.5%)
Peugeot : not stated
Toyota : Y702bn vs Y316bn (+222%)
Honda : Y737.43bn vs Y1,070bn (-31%)
Hyundai : not stated
Here FIAT-Chrysler and Toyota win by very wide margins, with Ford seen to suffer most.
Free Cash Flow -
GM : $1.7bn vs $3.8bn (-56%)
Ford : $1.77bn vs $0.46bn (+384%) estimated
VW : €0.995bn vs E1.46bn (-31.5%)
BMW : €853m
Daimler : €1.0bn vs €1.13bn (-11.51%)
FIAT-Chrysler : €0.39bn vs €0.11bn (+354%) estimated
Renault-Nissan : €-100m vs €60.5m (-265%)
Peugeot : €224.5m
Toyota : Y49bn vs 51bn (-3.9%)
Honda : Y64.36bn vs Y339.44bn (-81%)
Hyundai : not stated
The apparent 'winners' here seen to be Ford (in stark contrast to its OCF) and FIAT-Chrysler with more than a tripling of FCF YoY. These figures are only simplistic guestimates, but may have been officially unreleased to build-up greater 'rolled-up' FCF figures for a later Q3/Q4 release, given the power of the indicator to tempt investors. Suffering most is Renault (and presumably Peugeot) given their greatest exposure to Eurozone market troubles.
Liquidity -
GM : $38.5bn
Ford : $33.9bn
VW : €14.9bn vs €17bn (-14%) [$18.47bn]
BMW : €8.01bn vs €7.46bn (+7.5%) [$9.93bn]
Daimler : €12.09bn vs €9.84bn (+23%) [$15bn]
FIAT-Chrysler : €22.7bn vs €21.4bn (+6.5%) [$28.14bn].
Renault-Nissan : E11.1bn [$13.76bn]
Peugeot : €12.08bn [$15bn]
Toyota : Y1,728bn vs Y2,132bn (-19%) [$17.8bn]
Honda : Y1,247.1bn (cash & equiv) [$12.85bn].
Hyundai : KRW17,180bn (cash & equiv) [$15.15bn]
And finally, the importance of 'fiscal fire-power' during this transformative period is seen by the large reserves build-up by GM, Ford and FIAT-Chrysler, with VW and Toyota holding near equal value lower sums and Daimler, Hyundai and Peugeot close behind, with Renault-Nissan, Honda and BMW on lower levels.
Automakers' Positioning -
By the overtly simplistic indications of a) Revenue Increase, b) Net Profit, c) Earnings Per Share, d) Operating Cash Flow, e) Free Cash Flow and f) Liquidity, we see the dominant players per measure:
a) Revenue Increase: FIAT-Chrysler, Toyota, Honda, VW, Hyundai
b) Net Profit: Toyota, Honda, VW, Hyundai
c) EPS : Toyota, Honda, VW, (Hyundai assumed)
d) OCF : FIAT- Chrysler, Toyota
e) FCF: Ford, FIAT-Chrysler (estimated results)
f) Liquidity : GM, Ford, FIAT-Chrysler, VW, Toyota
Consistency goes to Toyota (5 of 6 placings), followed by VW & FIAT-Chrysler (4 of 6 placings), then Honda & Hyundai (3 of 6 placings), Ford (2 of 6 placings), GM (1 of 6 placings).
Unsurprisingly Renault-Nissan and Peugeot lagged heavily, but also too seemingly have BMW and Daimler failed to make a showing. This investment-auto-motives believes because of the BoD's operational consistency which provides slower but ongoing organic value creation, instead of the 'falter and rebound' growth opportunity seen by the aforementioned identified players.
Automaker's Context -
It became apparent some time ago that the dire effects of the credit crunch would most impact western mass market players with heavy exposure to their domestic markets, hence the experiences of previously GM and Chrysler, and now PSA, Renault and FIAT; with the premium/quality type producers with high export market exposure, demonstrated by BMW destined to fair far better, with the 'diversified premium' of Volkswagen and Daimler arguably on even more solid ground spanning B2C and B2C customers. The 'intermediates' of Toyota, Honda and Nissan were destined to sit between the two former groups, but themselves required internal re-structuring to remain competitive; this latterly ironically achieved as a consequence of the 'Great Eastern Japanese' disaster and the Thailand floods.
[NB The recent pan-Indian electrical power failures may induce a far smaller but significant force for auto-producer restructuring as companies seek to relocate to regions of assured power; aswell as obviously providing consulting and installation opportunities for major infrastructure players such as GE, Siemens etc]
As illustrated previously, perhaps the very obvious automotive beneficiary of the global downturn has been the strategically perfectly positioned Hyundai Motor Co with a balanced global sales and production foot-print and ever more attractive and price-compelling vehicle range. Whilst inside western markets for decades, its prime focus over the last decade was in BRIC and EM countries offering small cars and small trucks, then concentrating upon globally credible passenger vehicles as consumer expectations of the 'old-industrial' and 'emerged-industrial' countries began to merge.
However, as seen with the previous focus on Ford, western producers are positioned in course to return to strength if able to set their own paths: either through manifest strategic re-alignment of the intra-national business model (Ford), or through the deployment of large cash reserves via M&A and alliances (GM) or seeking - at smaller level – a combination of both (FIAT-Chrysler). The lessons learned within the US no doubt sought to be deployed by European companies / divisions.
The German corporates have remained strong thanks largely to the success born from the western boom years, their EM exporting models of 'visible' and 'invisible' products and services, the cautious retention of those cash cushions up until recently with now impressive CapEx programmes. These designed to secure industrial dominance domestically...in EM regions...and by virtue of the German 'home improvement plan' re-emphisising its historic role as Europe's industrial hub with powerful spokes now eminating north, west, south and east. .
Outlook -
So beneath the very apparent surface of the 2008-10 financial crisis, the EU sovereign debt and banking crisis, the natural disasters in Asia, the spectre of a technical or real double-dip recession, and so 'in turn' the outcome of heavily afflicted stock prices amongst many 'consumer cyclicals'... the necessary process of business re-invention has been under-way to re-position individual companies and the sector at large into the second decade of the 21st century and beyond.
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