Listen to IHS Automotive's Michael Robinet for a few minutes, and you may start to realize something about your own business.  As you listen to his reports on where the industry is headed, you will quickly start to realize that if your company is not already a global player, then you are already behind the game.

"There really is no more 'American' auto industry," he will say.  Just as there is no Japanese industry, no European industry, no Brazilian industry.  The idea of regional auto industries is a concept whose time has come and gone with the globalization of nearly every facet of the car making business.  Sourcing, component manufacturing, assembly, customer service, logistics, even marketing and parts distribution have become global businesses.

This slow creep toward complete global interconnectedness has been ongoing for some time, but made more relevant with the advent of the Internet, and the ability of people to now share huge quantities of information instantaneously.  This has allowed developing countries to use human resources to take on information technology roles for all manner of businesses, and it has enabled consumers to see product offerings in other markets with little more than a whim and a click of their fingers.  The cost benefits that are being realized are huge, which only makes the push toward globalization happen with that much more enthusiasm.
|
Just how interconnected the global industry is was proven earlier this year with the tragic Japanese earthquake and tsunami that devastated a (comparatively speaking) small part of world, yet impacted people in faraway lands and the effects of which are still being felt.  One small region of the world disappears, and plants around the world shut down, people stop working to build cars, sales of certain manufacturers tumble, earnings are impacted and lives are affected globally.  And interestingly enough, the solution to prevent such occurrences from having such a widespread impact in the future is to further globalize and diversify everything from design and sourcing to manufacturing and supply chains.

Yet globalization is occurring in different ways for different manufacturers.  The U.S. automakers are just now beginning to find their global legs, utilizing resources around the world to create products that will be largely common irrespective of sales region.  Ford's "One Ford" plan epitomizes this, and products like the latest Focus (in which well over three-quarters of the parts are common in all markets) are excellent examples of the trend.  General Motors has started to leverage its global design centers to start offering common vehicles around the world, rebadging as necessary, but eliminating a lot of duplication of efforts and the subsequent costs associated with them.  But bucking the trend toward globalization are the European and Japanese automakers; Volkswagen has embraced the idea that in order to grow, it needs to tailor vehicles to the regions in which it sells, as evidenced by the new American-style mid-size Passat.  While this may seem to buck the trend and fly against the newfound global conventional wisdom, it seems to be working for VW, which is experiencing substantial sales gains through the strategy.

The limit to what can be accomplished through the push for globalization has yet to be discovered.  Ford is even using common marketing materials and themes for nearly all of the markets in which it sells the new global Focus.  These are activities that other international automakers have performed for years now.  With the Americans finally catching wind of the strategy and implementing it successfully thus far, the time to contemplate whether your own business should be a global player is quite likely overdue.

Aaron Bragman can be contacted at Aaron.Bragman@ihs.com.