These past few years have been particularly tough on the automotive industry in the United States, for each one of the “Big 3.” In addition to ripples that are still being felt by Chrysler Group LLC and General Motors, in the wake of their $85 billion dollar government bailout in 2009, both of these companies have gone through some major changes in the past five years. Chrysler Group LLC has now officially become a subsidiary of the Italian automaker Fiat under the name Fiat Chrysler Automobiles. This major merger of two of the largest automobile manufacturers in the country is not the only challenge that the Big 3 have had to face in recent years, as General Motors is still dealing with the fallout of their ignition switch problems, which has been linked to at least twelve deaths on the road and has led to many lawsuits that General Motors now has to defend against, as well as two congressional investigations.
Yet, however bleak the recent years have looked for the automotive industry, it seems that there may be some hope for these corporations to regain some ground. In last Thursday’s Wall Street Journal, an article stated that U.S. consumers are contributing to renewal with their refreshed taste for sports utility vehicles and trucks. I found this surprising because just a few years ago, the U.S. automotive companies were being chastised for their dependence on the sales of these vehicles. But now, just last month there was an astonishing 9% rise in sales compared to this time last year, largely due to SUV and pickup sales. The exception is Ford, who just recently changed their truck lineup, which went in the opposite direction of the rise other companies enjoyed. It was here where I began to see the parallels between our operation management class and the actions of these companies in the wake of this rise in sales.
As any company whose main business is the sale of higher valued products like cars, it is only natural that these firms would begin to perform demand forecasts so that they can attempt to predict the increasing sales in the coming months. In this example of SUVs and pickups, the product life cycle is an important facet, since the models and designs of vehicles seem to change every few years. And now as these redesigns of models hit the markets as we transfer into 2015, these goods are in the midst of the growth portion of the cycle, making it essential for them to develop an effective short-term forecast. An appropriate forecast would allow them to modify their capacity if necessary for the remainder of this year. Also an effective forecast will help them determine if changes need to be made, as the product life cycle of vehicles is fairly short lived, due to the fact that new concepts and designs come out every few years.
What kind of effect do you think that the recent changes in the American automotive industry will have on their sales?
Do you think that a rise in one month’s sales compared to the past year’s numbers constitutes enough change for an optimistic forecast?
What do you think is the best way for the Big 3 to become more successful in automotive market?
Bennett, Jeff, Joseph B. White, and Christina Rogers. “U.S. Buyers Keep Auto Makers Busy.” Wall Street Journal 2 October 2014: B1. Print.