Unique Alt Cause – Europe

Alt Cause – Supplier

Although automakers continue to focus on shifting their production facilities to new regions driven by cost and demand factors, developing the supplier networks remains one of the greatest challenges they face. Existing suppliers to automakers often lack the financial background to expand capacity in new markets. On the other hand, auto market suppliers are sensitive to technology transfers to local third parties, which may result in new and lower-cost competitors. Since 1999, more than 20 of the largest global auto parts suppliers have filed for bankruptcy. The financial condition of the majority of auto market suppliers continues to deteriorate, resulting from a historically weak demand and higher dependence on automakers. According to the Original Equipment Suppliers Association, 12% of the auto industry suppliers do not have sufficient working capital to support a 10%–25% expansion in production. Thus, despite the government’s sizable investment in the automakers, it is likely that there will be auto market suppliers who are unable to restart operations due to working capital shortfalls even as automaker production resumes. Higher dependence on automakers makes the auto market suppliers vulnerable to several maladies, primarily pricing pressure and production cuts. Pricing pressure from automakers is constricting auto market suppliers’ margins. On the other hand, production cuts by automakers driven by frequent market adjustments are negatively affecting their operations. Some of the auto industry suppliers who have a high reliance on a few automakers such as General Motors, Ford, Chrysler and Volkswagen include American Axle and Manufacturing (NYSE:AXL), ArvinMeritor Inc. (NYSE:ARM), Goodyear Tire and Rubber (NYSE:GT), Magna International (NYSE:MGA), Superior Industries (NYSE:SUP), Tenneco Inc. (NYSE:TEN) and TRW Automotive (NYSE:TRW). The shift in auto market consumer preferences towards hi-tech, fuel-efficient, environment-friendly vehicles, such as small cars/hybrids/EVs, is another issue. Auto market suppliers are expected to quickly adapt to the new technologies by investing in research and development, putting heavy capital burdens on them. The automakers also face significant challenges in transforming the existing powertrain technologies into the new versions, as far as marketability is concerned. They are adapting the internal combustion engines to alternative energy, including ethanol and bio-fuels. Ultimately, a time may come when they switch to the all-electric powertrain as their sole powertrain solution. However, the shift in powertrain solution technology needs to be supported by adequate charging outlets in order to recharge batteries.

Unsustainable – Future Generations

The next generation won’t use cars anyways

Eisenstien 9 (Paul, “Will Gen Y Destroy the Auto Industry?” http://www.thedetroitbureau.com/2009/02/will-gen-y-destroy-the-auto-industry/)//RK
Will Gen Y kill the auto industry? That’s the provocative question posed by a new study from AutoPacific. And before you write that off as preposterous, consider that the generation just entering the automotive market has already driven the nail in the coffin of the newspaper business, all but destroyed the recording industry, and forever changed the way the telecommunications industry functions. In some parts of the world, we’re already seeing the impact young consumers can have on the auto industry. In Japan, for example, many potential Gen Y motorists are foreswearing the automobile, insisting they’d rather walk, ride a bike, or stick to mass transit. What happens here, in the U.S., is a critical question considering this is the largest potential market in automotive history, larger than the legendary Baby Boomers. Last year, Gen Y accounted for just 9 percent of the automotive market, but by 2012, AutoPacific predicts, that will jump to a sizable 13 percent, and keep growing from there. Equally significant, 57 percent of this generation are women. Considering their youth, there’s little surprise that Gen Y buyers have less disposable income to spend on cars than their parents’ and grandparents’ generation. But even so, there are obvious shifts in their early automotive buying habits. Gen Yers are buying more compact and midsize cars than SUVs, especially women in that group. That reflects the fact that this is a generation that questions authority, the AutoPacific study finds. They’re socially and environmentally conscious. And they demand respect. As you might expect, they dismiss old media, like newspapers and network TV. Their primary influence is what they see and read on the Web. At a time when Detroit’s automakers are struggling for survival, the Gen Y buyers hold out little hope for salvation. They’re even less likely than Baby Boomers to own a domestic car. Honda, Nissan, Volkswagen and Mitsubishi are brands that play for them. In fact, even some traditional import brands have reason to worry. Toyota seems to be struggling to connect with these young buyers, far more than Honda – and despite the youth-oriented Scion brand. Price is obviously a big concern for Gen Y, yet image is even more important. Fuel economy matters, as you might expect, but surprisingly, not as much as exterior styling. That said, expect these buyers to be looking for the latest and greatest in green powertrain technology. A whopping 73 percent would like some form of hybrid-electric vehicle, even better if its capable of using alternative fuels, like E85. The study suggests American Gen Y consumers aren’t ready to walk away from the automobile, like their cohorts, in Japan. But it seems very likely that their buying habits will be very different from their parents and grandparents, and that could be bad news for Detroit, if not the rest of the auto industry.

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