Beer and Automobiles Do Mix

TRAVERSE CITY, MI – It seems alcohol and cars do mix.

When it comes to the manufacturing of the two products, anyway.

The auto industry needs to take a lesson from new-age beer makers, says Chris Theodore, vice chairman, ASC Inc.

Theodore says microbreweries, which sometimes make a staggering variety of beers in tiny batches, are the business model that auto makers had better examine if they want to succeed in North America. Just as discriminating ale-lovers have moved to microbrews to suit tastes that have evolved past the million-gallon vats of Budweiser, so too are U.S. automotive customers shifting toward fewer bread-and-butter choices.

Theodore cites a couple of amazing figures to support the contention auto factories need to transform themselves to look more like microbreweries.

First, the number of sales per nameplate is rapidly dwindling toward the surprising figure of 40,000 units annually. Last year, sales per nameplate in the U.S. reached just 48,636.

Moreover, Theodore says, the number of nameplates selling less than 10,000 units has doubled since 1999.

“The new reality is quickly coming to pass,” Theodore tells the audience at the Center for Automotive Research Management Briefing Seminars here. “It’s a niche world.”

Chris Theodore

Theodore, who before coming to ASC oversaw development programs for two of today’s seminal niche cars, the Ford GT and the Dodge Viper, envisions “micro-niche” auto assembly plants in which a variety of low-volume models could be produced for several different auto makers.

He says auto makers would need to share such a plant’s capacity because it is difficult to sustain production of a niche vehicle in a traditional assembly plant.

Theodore says such a plant might have annual capacity of about 250,000 units and make perhaps five models. There would be a continual phase-in of new models, so as the sales of one begin to taper off, another would launch to assume the manufacturing capacity the fading model is losing.

For years, ASC and competitor Magna Steyr Fahrzeugtechnik AG & Co KG have expressed interest in building and operating a low-volume, niche-vehicle assembly plant. Theodore refers to the strategy as “one of our dreams” at ASC. “No, I can't say anybody has bit yet." A customer commitment is necessary for the initiative to move forward, Theodore says.

"We're starting to look for a plant that might be appropriate," he says.

Theodore says it is conceivable several manufacturers could "share" production in a micro-niche plant, and that Magna Steyr already has proven it can be done, in Graz, Austria.

"What we're offering is a different business model,” he says. “It's going to happen – I hope that it's with us."

Theodore says an auto maker or brand needs only one or two “halo” models, so incorporating their production into a traditional assembly plant often is not a sustainable production plan.

Auto makers soon will need to begin adapting their manufacturing philosophy to accommodate the trend toward more models produced in lower volumes, he says.

“Management must support risk-taking, not risk aversion,” Theodore says.

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