General motors-EMD - Europe
A recent article in DSN Retailing Today (”Advance and Discount to form new No. 2,” Aug. 20, p. 1) incorrectly characterized the actions of Moody’s Investor Service. As it relates to the Advance/Discount merger, Moody’s confirmed Advance’s debt rating and changed its debt outlook to developing from stable. Also, Moody’s clarified that it is not dismissive of the aftermarket industry, but rather views it as a stable, though not a high-growth, industry at present.
1. It is truly a global industry: Products can [and do] flow around the world.
One of the advantages that the Big Two are able to parlay is the fact that of all of the automotive markets on the planet, the Kearney data show that only one is where any money is being made: North American light trucks. Simply put: “This makes the money.” He amplifies, “The rest of the world has no other market like this.” Which goes to explain why both European and Asian vehicle manufacturers are bringing in or building light trucks in an aggressive manner. Hoffecker warns that as there are more entries in a segment, two things typically Follow: a given company loses margin or marketshare [or both). Which could have serious repercussions for all involved.
Although many U.S. suppliers say their margins are getting too tight, Hoffecker believes that the DEMs will continue to look for reductions from their suppliers if for no other reason than the supply base makes up at least 50% of what goes into making a given vehicle. Things are likely to become even tougher.
2. Many countries provide their auto companies with quasi- or direct government support [more so than in the U.S.]
Hoffecker observes, “Put all of those factors together, then ask yourself what other industry do American companies compete in that is as demanding?”
5. Workers at the domestic automakers are unionized.