Battling through an economic collapse triggered by a subprime mortgage crisis is different from dealing with one set off by a virus. Yet in some ways, the challenges are similar.
So it's helpful to reflect on what industry leaders were saying 11 years ago, the final year of the Great Recession, when U.S. auto sales sank to a nearly three-decade low of 10.4 million. The words that follow came from 11 executives — automaker CEOs and North America chiefs — who were in charge then.
We hear echoes of their concerns and strategies in what today's leaders are saying. And that provides some measure of hope for a repeat of the efforts that set the industry on a streak of recovery leading to record sales and profits over the past decade.
Their thoughts, blended here, as spoken to Automotive News in 2009:
This was a really tough year. We are barely making a profit. We have an increasing number of signs that the worst could be over.
There could be a setback. The more likely scenario is that we are at the beginning of a slow but long and consistent recovery. In China, the worst that happened is the growth rate fell, and it is bouncing back. The U.S. is at a pretty bad level. In Europe, it is different from country to country.
The most important thing for us is having a viable supplier network. We have a core number of critical suppliers, and we depend on them for the majority of our business. Some suppliers are of greater concern than others.
The supply base is very fragile. Their challenge is to bring back the production. A lot of them have been down. It is really a stressful situation. This next two or three months is going to be critical. We have dramatically increased our cooperation and are working together with every key part — because any part can stop you.
Right now, our production is not enough to satisfy all our dealers. We have to focus on supplying the dealerships with the cars they want.
Some dealers are making money, and some are losing money. Those who are losing money are a larger percentage than we would like.
Cash flow in this environment is key. Dealers will go out of business for cash-flow problems rather than because the business is innately unprofitable.
We need to be predictable from a dealer perspective. We need to fulfill the dreams of our customers. By changing direction every five years, we will not get there.
We haven't blown our brains out with incentives. We've been aggressive, but nothing that would damage customer value or residual value.
We've been able to keep our product plan generally intact. We've had some selective deferrals, nothing earth-shattering.
Our R&D budgets were not cut, our cycle times not extended. We're talking engine technology where gas engines get diesel mileage and diesels get hybrid mileage. We're talking a 30 percent improvement by 2015.
We're going to continue to work on EVs, but we need to resolve the issue of economies of scale and storage of energy. In the absence of a technically viable solution to this problem, I think that this technology will have a limited purview. If you want to drive from Chicago all the way down to Florida, you are not going to be able to do it in an electric vehicle unless you intend to stop and recharge as you go.
We also have been aggressive in fighting for our share of a declining market. My job is not to lose market share. It's not share at any cost. We'll always be cautious that we're not destroying brand value. But I have no intention of going backward.
We will continue with an increase in used cars. What we are doing with the used-car buyer is attracting some of the people who can't quite make it to a new car.
We are now generating a few new fleet sales, but we are continuing with our strategy to keep fleet sales below 10 percent.
My priority is sustainable profitability. We can achieve that with lower volumes.
A decent business on the car side which is run efficiently can produce a 7 to 7.7 percent return on capital in the United States. Is that number possible in the European marketplace, given what exists as an industrial landscape? The answer is no.
We hope a scrapping program could stimulate consumer demand.
The 15 to 15.5 million area is probably a good estimate of what will be considered healthy in the first half of the next decade.
For planning purposes, we're assuming the U.S. market won't get back to 16 million or 17 million. For a number of reasons: lower fuel prices, lower interest rates, lower savings rates in the past, and the cars are becoming even more reliable.
One of the things that has happened during this recession is consumers are thinking more about living within their means, and I think that's a good thing.
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June 22, 2020 at 11:00AM
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Auto executives' words during Great Recession offer hope today - Automotive News
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