BIRMINGHAM, MI – Despite high-profile failures such as the Chrysler Corp.-Daimler AG marriage, the cost advantages presented by mergers and partnerships will be too lucrative for most auto makers to pass up, consulting firm A.T. Kearney says.
These cost advantages likely will come via increased use of global platforms, Dan Cheng, partner and vice president-A.T. Kearney’s North American practice, says here during a presentation of the firm’s 14th annual survey of OEM and supplier executives.
“We do think the cost advantages of global platforms could be one of the catalysts to potentially another wave of mergers and acquisitions or alliances,” Cheng says. “We all know that certain mergers were disasters, so we make this (statement with) some trepidation.
“But the cost savings you get from global platforms, just globalization in general, are extremely compelling.”
A.T. Kearney predicts the top 30 global-vehicle platforms will see a 38%, or 12 million-unit, increase in production volume from 2010 to 2015.
Today, the top 30 platforms account for about 25 million units of all global light-vehicle production.
By 2015, that number will jump to more than 40 million, A.T. Kearney predicts.
Auto makers that can squeeze 1 million units of annual production out of a global platform will realize a $700 per-vehicle cost advantage over lower-volume competitors, A.T. Kearney says.
The cost savings stem from the ability to obtain better pricing on higher volumes from suppliers, increased use of common tools, higher plant utilization and fewer prototypes.
Cheng notes the cost savings of global platforms diminish after an auto maker hits the 2 million-unit mark, with only a $100 per-vehicle additional savings between 2 million and 3 million units.
Today, 12 platforms – all from Asian and European auto makers – boast an annual production volume of more than 1 million units.
Honda Motor Co. Ltd. now is No.1, producing 90% of its annual volume from global platforms.
But by 2015, A.T. Kearney sees General Motors Co. and Ford Motor Co. making significant inroads.
Toyota Motor Corp.’s MC platform, underpinning the Camry midsize sedan, still is expected to hold the top spot in five years, going from an annual volume of 2.8 million units in 2010 to 3.7 million in 2015.
But in 2015, Ford’s C2 platform, which provides the base for the Focus and several other vehicles, is seen having annual production volume of 2.4 million, good for the No.3 spot on A.T. Kearney’s list.
GM’s Delta2 (Cruze) platform places fourth in 2015, with a forecasted 2.1 million units annually, up from No.18 in 2010.
Volkswagen AG’s PQ37 (Golf) architecture is projected at No.2 in 2015, with 2.5 million units annually. Hyundai Motor Co. Ltd.’s J3 Elantra platform, currently second with 1.8 million vehicles, ties GM’s Delta 2 for fourth place in 2015, with 2.1 million.
The cost savings from global platforms is seen equaling $7 billion for Toyota and $4.3 billion for GM in 2015, up from $4.4 billion and $1.1 billion, respectively, in 2010.
That means OEMs producing only 300,000-400,000 from a single platform will have little choice but to merge or align if they wish to compete in certain vehicle segments, Cheng says.
The volume cost savings will be critical particularly in the price-sensitive B- and C-segments, which are expected to grow in the U.S.
“Everybody’s gearing up to make small cars,” Cheng says. “Not everybody is going to be successful in that marketplace. There’s just too many entrants.”
A.T. Kearney predicts U.S. light-vehicle sales will hit 11.7 million units this year, but go back to historical levels by 2012 with a baseline forecast of 16.1 million.
A pessimistic projection, which excludes pent-up demand for new cars, calls for 11.4 million sales this year and 12.9 million in 2012. The company’s best-case scenario, based on a faster economic recovery and free-flowing credit, calls for 12.3 million units this year and 16.8 million by 2012.
A.T. Kearney’s optimistic 2014 forecast of 18.6 million-unit sales in the U.S. is eyebrow-raising, Cheng admits. He says it is based on long-term trends showing 2% sales growth per year for the last 30 years and new-car demand coming back to historic levels.
Cheng notes, for many Americans, a car likely will be the only realistic form of transportation in 2014, as mass transit is nowhere near as efficient in the U.S. as in Europe, and U.S. consumers still will favor commuting from suburbs to living in urban centers.
“I don’t see there being a really good alternative (to a new car),” he says, noting used cars are likely to be nearly as expensive.
