Automotive Manger I 2012

I/2012

AUTOMOTIVE MANAGER TRENDS, OPPORTUNITIES AND SOLUTIONS ALONG THE ENTIRE VALUE CHAIN COVER STORY: CREATING DEMAND IN THE AUTO INDUSTRY

M=F x E

Many products are good. Few are magnetic.

“Magnetic”is defined by a simple equation: M = F×E. Magnetic equals best functionality times most powerful emotional connection with customers. Demand creators understand that very good functionality is not enough.

Cover story on creating demand in the auto industry, page 6

EDITORIAL

Dear Readers, The car is the symbol of unlimited personal freedom.Only very few people can go without this most commonly used form of transport. But personal mobility is currently facing a major upheaval. Although many customers continue to prefer to own a car, many are prepared to significantly change their mobility behavior because of rising fuel prices and growing regulation.

Innovative services and different modes of transport that can be flexibly combined are becoming an increasingly attractive alternative.This trend has led automotive executives to think of the car as more than a product— rather as part of a highly imaginative solution to the customer’s hassle map which defines all of the actual steps that characterize the negative experiences of the customer such as the emotional hot spots, irritations, frustrations, time wasted, etc.

AuguSt JOAS Head of the Oliver Wyman Automotive Practice

In his new book “Demand”, Adrian Slywotzky explores the critical role of demand creation in today’s economy and analyzes how some companies’ products are doing exponentially better than their competitors’by creating “magnetic”products and services. In an economy that’s increasingly demand-driven,understanding what Adrian calls the customer’s hassle map and creating a product that customers love, will be the key to a company’s success. For our title story, we applied his principles to the automotive industry and they have helped us to identify significant opportunities for reducing the customer’s hassle map when buying a new car, going for service and repair, and evaluating the evolving mobility services.

Another important topic in times of changing technologies: the growing relevance of electronics and software in cars.It is presenting the automotive industry—suppliers in particular—with major technical and strategic challenges. Although the suppliers’management has largely recognized this, many of them believe that there is a significant need for action if they want to keep pace with new technologies. We would like to offer you some food for thought and help you optimally exploit your opportunities.

Let yourself be inspired by our publication. Get in touch with us!

We look forward to beginning a dialog with you!

Best regards,

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CONTENTS ALONG THE ENTIRE VALUE CHAIN

CuStOMER

06 CREAtIng WHAt PEOPlE lOvE bEFORE tHEy KnOW tHEy WAnt It The demand for cars and the hassle maps of potential customers vary by region. Demand creation is a discipline.Like any other discipline, it can be learned and applied by any leader and by any team.

COvER StORy

R&D

11 In-CAR It IS REvOlutIOnIzIng SuPPlIERS The emerging role of electronics and software holds enormous opportunities for suppliers: with in-car IT, they can unlock new revenue sources and break out of their traditional role in the supply chain.

PROCuREMEnt SuPPlIER 14 gERMAn SuPPlIERS DESERvE tRuSt The automotive market is undergoing significant changes.

Many German suppliers are well-positioned to exploit these developments as an opportunity, but need sufficient financial power to do so.

PRODuCtIOn

SAlES

SERvICES

17 It IS All AbOut PEOPlE SyStEMS

23 SMARt PRICIng tO ACHIEvE tHE DESIRED RESultS

27 tHE ROlE OF tHE AutOMObIlE nEEDS tO bE REInvEntED

Until now, OEMs have rarely focused on optimizing their pricing strategy. But the professionalization of pricing offers much potential for securing and further increasing the manufacturers’profitability and future viability.

Many customers are prepared to significantly change their mobility behavior. If OEMs want to stay in the game, they must position the car as a key component of the mobility mix and combine the different modes of transport in a user-friendly way.

Lean’s systems and tools are valuable. But it is how a company executes them—supports their use—that makes the difference between success and failure.

It takes time and needs the right people systems.

20 SOutH AMERICAn AutO MAnuFACtuRIng As OEMs expand their footprint into South America’s rural areas, they are inventing new ways to address their most pressing challenge: building a supplier network that can deliver the same value the OEMs enjoy in other parts of the world.

25 COnnECtED CARS EnSuRE A HEAD StARt In CuStOMER REtEntIOn The ever stronger trend to complete vehicle networking presents a major opportunity for all OEMs in the lucrative after-sales business to retain vehicle users even after the warranty period has ended.

30 AutHORS In tHIS ISSuE

31 PublISHER’S InFORMAtIOn

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CREATING WHAT PEOPLE LOVE BEFORE THEY KNOW THEY WANT IT

Why do consumers disproportionately demand one product over a seemingly similar one, often by a factor of four or five to one? think Facebook versus MySpace, iPod versus Sansa, Eurostar versus british Air, iPad versus everybody, Amazon online versus everybody, nespresso versus Illy, toyota Prius versus Honda Hybrid, and many other head-to-head competitors with a strong number one and weak number two. Functionally and technically, the respective products are close; emotionally, they are worlds apart. Why do seemingly similar products produce radically different demand curves?

Demand creators, a special breed of people who design products that truly excite people, are obsessed with understanding the hassle map of the customer, and connecting the dots from multiple value chains to fix it (see“The Urbanite’s Dilemma”).They don’t assume that buying = wanting.

They use the hassle map to recognize the huge gaps between what people buy and what they really want—and use those gaps as a springboard to see differently. Demand creators crack the mystery of the demand equation by doing a radically better job answering a small set of critical questions:

1

What is the hassle map of my customer?

2

Is my product good, very good, or magnetic?

3

How strong is the backstory behind my product?

4

What are the most productive triggers that will catalyze customers to try and buy?

5

Is our improvement trajectory 5 percent, or 45 percent?

6

How cost effectively do we respond to customer variation?

7

How special and excited is my team?

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Adrian Slywotzky, August Joas, Rémi Cornubert

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tHE 7 lEvERS OF DEMAnD The answers to those questions create a framework of seven demand levers—and provide a path to creating products and total offers customers can’t resist and competitors cannot copy.

Draw the Customer’s Hassle Map Most products and buying processes are flawed, generating hassles that include time- or money-wasters—unclear instructions, needless risks, and other annoying bugs.The best demand creators map these hassles—and proceed to fix them one by one.That process can lead to explosive demand.

Progressive Insurance, for example, radically simplified the process of filing an auto-insurance claim and picking up a rental car, turning a multi-step hassle into an easy, convenient turnkey operation.

Make the Product Magnetic Many products are good. Few are magnetic.“Magnetic”is defined by a simple equation: M = F × E. Magnetic equals best functionality times most powerful emotional connection. Most products fail to create an extraordinary emotional connection with customers. Demand creators understand that very good functionality is not enough.Their products need a powerful, emotional component that makes them magnetic. When it comes to creating demand, it is not the first mover that wins; it is the first to create and capture the emotional space (ergonomics, aesthetics, message, affect, feel, the total experience) in the market.

Write a Strong Backstory Unseen“backstory”elements often make or break a product. Demand creators obsess about infrastructure (can I get it to the customer cheaply and efficiently?), ecosystem and alliances (can I engage others in my demand process?), and business design (how do I structure my organization to serve and learn from customers?).Then they connect all the dots needed to fix the hassle map of the customer. Take the market for e-readers. The Amazon Kindle provided instant, wireless access to the world’s biggest bookstore.

The Sony Reader—released 10 months before the Kindle and technically superior—offered wired access to only 20,000 titles. No contest.

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Find the Trigger(s) to Demand Most people who hear about a product, even a great product, remain fence-sitters, unwilling to try or buy until a trigger moves them to act. Some great products, like tap-and-go credit cards, failed to take off because their creators did not figure out how to overcome consumer inertia. Great demand creators constantly search for the right triggers, always experimenting until they get a response. Nespresso, for example, increased uptake six-fold when it opened mini boutiques that not only demonstrated the machine, but also offered customers a chance to taste its pod coffees. Finding the right trigger helped turn Nespresso into Europe’s leading coffee brand. And Eurostar uncorked demand when it cut the London-Paris travel time from three hours to two hours and 15 minutes, making a one-day there-and-back-home-fordinner trip a reality.

Build a Steep Trajectory of Improvement A product’s launch is merely the first step in a series of attacks on the indifference of the market. On launch day, great demand creators jump into the next phase by asking themselves: How fast can we get better? While rivals might focus on technical improvements, demand creators know that there are at least three other dimensions that matter: Emotional (see “Magnetic,”above), affordability (productivity enhancements, lower price, better value), and content/ecosystem (new add-ons, plug-ins, deeper library). Every improvement they make will unlock new layers of demand, and leave less open space for imitative competitors.

De-Average the Customer “One size fits all” is an idea that great demand creators have discarded— because it does not work. Instead, they “de-average”complex markets, recognizing that the “average customer” is a myth, and that different customers (and even the same customers at different times) have widely varying hassle maps. Then they find efficient, cost-effective ways to create product variations that more perfectly match the varying needs of customers.

Apple offers seven variations of the iPod, ranging in price from $49 to $399.

Apple did a terrible job of variation with the iPhone, however, leaving market opportunities for multiple Android competitors.

Build a Special Team Demand creators are skilled at conveying the notion of demand to many other people. They build self-replicating teams that are obsessed with customers and their needs, obsessed with that magical difference between what customers buy and what they really want, and excited about building products that will inspire.

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CREAtIng DEMAnD In tHE AutOMOtIvE InDuStRy The demand for cars and the hassle maps of potential customers vary by region, but the global automotive industry faces some fundamental barriers to demand. With increasing urbanization, more people are looking for practical mobility solutions, which includes car-sharing. Young people, who used to breathlessly await their18th birthday and hope for a set of car keys, are more taken by iPads and iPhones than the latest new cars.

For the under-30 generation in Europe, usage is more important than ownership. Car owners in general worry about long-term maintenance costs even as they wonder about the upfront cost of purchase.The automotive industry clearly has significant opportunities to reduce the customer hassle map when buying new cars, getting service and repairs, and evaluating the evolving mobility services (see“Holistic Optimization Approach”).

Automotive executives have the latitude to think of the car as more than a product—rather as part of a highly imaginative solution to the customer’s hassle map.

Think of Zipcar, the U.S. car-sharing service.The company focused on people in need for short-term, individual mobility solutions. Even though these customers had chosen other modes of mobility (public transportation, car rentals, bikes, walking, etc.), this was not what they really wanted.

Zipcar analyzed the hassles surrounding the existing mobility products and offered a comprehensive, hassle-free solution to customers. Instead of worrying about vehicle purchase costs, maintenance requirements, gas consumption, insurance, full-day rental fees or simply getting to the next rental location, customers can simply pick up the nearest car in their neighborhood and use it at a rate of $8 an hour. In a recent survey, 80 percent of Zipsters said they“loved”Zipcar and 88 percent had recommended Zipcar to a friend in the last month.That is magnetic.

Adrian Slywotzky, Karl Weber: Demand—Creating What People love before they Know they Want It Crown business, 2011

Marketers need that kind of connection between customers and their products to build a meaningful brand.Today’s consumer is more swayed by the sum of his or her experiences—and what they read on the internet— than advertising messages. Consumers “see it when they believe it,” but not before. What advertisers say is far less important than what customers say to each other. As Amazon’s CEO Jeff Bezos once noted: “Brand is what they say about you when you leave the room.”

Adrian Slywotzky’s new book Demand explores the critical role of demand creation in today’s economy and analyzes how some companies’ products are doing exponentially better than their competitors’by creating “magnetic”products and services. In an economy that is increasingly demand-driven, understanding what Adrian calls the customer’s hassle map and creating a product that customers love, will be the key to success for both B2B and B2C companies.

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IN-CAR IT IS REVOLUTIONIZING SUPPLIERS

the growing relevance of electronics and software in cars is presenting suppliers with technical and strategic challenges.their importance can be compared with that of electromobility or lightweight construction. However, this development also offers enormous opportunities: with in-car It, suppliers can unlock new revenue sources and break out of their traditional role in the supply chain.

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Juergen Reiner, Fabian Brandt

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Embedded computer systems are taking control of the car. Up to 90 percent of the innovations for future car generations would not be possible without IT. Electronics, software and associated services in and around the car will account for a considerable share of the car’s value in the years to come.

The number of networked vehicles will increase to 210 million by 2016.

More than 80 percent of all new cars sold will then be“connected”. Moreover, car ITsystems make it possible to implement new safety and comfort functions, innovative operating concepts and information services which, in turn, open up new business opportunities—provided the industry manages to adjust itself to the software industry's market mechanisms.

In-CAR It AS An IMPORtAnt CAPAbIlIty AREA The industry’s top decision-makers participated in a study on the strategic evaluation of in-car IT by automotive suppliers.The survey showed that the large majority of the respondents has recognized the enormous importance of in-car IT for their business and they hope to tap new revenue sources with software and IT services. Compared with other important automotive technology trends, embedded IT is high up on the priority lists of CEOs, CIOs, head strategists and R&D heads.Only cost pressure,globalization and innovation pressure take higher priority. This means that in-car IT is strategically almost as important as electromobility and lightweight construction— in which it also plays an important part as an enabler. Suppliers believe that developments in in-car infotainment, telematics and driving safety hold promising business opportunities.

In-car IT is considered to be a major opportunity, both for the respondents’ own company and for the industry as a whole OPPORtunIty-RISK RAtIO OF In-CAR It FOR tHE AutOMOtIvE SuPPlIER InDuStRy

According to the suppliers, the greatest benefits can be derived from the shift of hardware functionalities to software functionalities. A rationalization effect is achieved by modularizing the product concepts and reusing already developed modules. Almost 90 percent of the respondents believe that this makes it possible to reduce unit costs. However, first and foremost, it is a question of technological leadership. Because a company that develops its own IT platform, which is so attractive that it is adopted by OEMs, can define its position in the supply chain all by itself. Expanding the product portfolio by adding innovative solutions such as the provision of softwarerelated aftersales services is also believed to offer major new opportunities.

Functions can be activated afterwards or offered as a download for a fee, and processes can run via app infrastructures.

nEW PlAyERS IntEnSIFy COMPEtItIOn 87%

Opportunity Risk

13%

OPPORtunIty-RISK RAtIO OF In-CAR It FOR tHE RESPOnDEntS‘ OWn COMPAny

78%

Opportunity Risk

12

22%

It is important not to underestimate the business and technical risks.

The automotive suppliers who participated in the study are concerned about the commoditization of hardware and software functions, as this can further increase the pressure on traditional component and system suppliers’profit margins. In addition, the structure of the innovation and value-adding contributions in the supply chain appears to be shifting toward content,data and service—i.e. areas, in which operation and configuration management play an important role. New players from outside the automotive industry are already entering the market, increasing the competitive pressure.

Suppliers are also concerned that the growing share of in-car IT in value creation will reduce the individual participants’value contribution.

Besides,car systems are becoming more and more complex, and development costs continue to rise. In addition, system integration is becoming more difficult. The number of malfunctions and breakdowns is increasing and delaying or preventing market launches. Despite the many risks, suppliers believe that they are far outweighed by the opportunities.

Of the managers interviewed, 87percent believe that in-car IT offers attractive opportunities for their company and for the industry as a whole. Because in-car IT is so important for their business, many companies have already initiated activities aimed at strengthening their position in this segment.

The measures primarily serve to intensify research and development, followed by the development of appropriate innovation management, and the expansion of the product portfolio. Many companies have also begun to look for suitable partners in industry and research.

87% believe that in-car It offers attractive opportunities for their company and for the industry as a whole.

It MInDSEt StIll unDERDEvElOPED Overall, there is considerable need for action, especially regarding the transformation of market players from component suppliers to software and service providers. The majority of the suppliers believe that their innovation management and IT scouting still lack focus. Although many of them have formed working groups and development partnerships within their industry, partnerships with research facilities are rare. To date, large-scale, comprehensive partnerships with leading IT and software companies are equally difficult to find. Suppliers say that they need to catch up when it comes to developing active portfolio management and professional requirements management. But they are right if they say that they are excellently positioned in the traditional development business.

However, they must become active in the field of software—regarding capabilities, processes, tools and configuration management as well as regarding business designs that include services and operation. Suppliers consider that the urgency for them to introduce adequate IT project organizations is even greater: in particular, elements of IT-appropriate cost-benefit management of new functions from a customer perspective are largely lacking. The same is true for the management of IT service sales.

No concrete distribution models for apps and online functionalities have been developed yet.

tHOSE WHO COntInuE lEARnIng WIll tAKE tHE lEAD It is important to continue to build up comprehensive IT capabilities for product development. Besides professionalizing innovation management, suppliers must enhance portfolio management and align it with the best practices of established companies in the IT industry. These companies have already achieved a very high level of maturity thanks to their high agility and distinct customer orientation. Suppliers must critically review their product portfolio management, the management and evaluation of their products across their life cycle, their partnership portfolio, and their development processes. Then they must initiate appropriate measures. The company that manages to position itself as an end-to-end operator for IT solutions in cars will win in the end.

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GERMAN SUPPLIERS DESERVE TRUST the automotive market is expected to continue on its growth path. At the same time, it is undergoing significant changes: the shift toward new markets and technologies, ever stronger Asian players, growing consolidation, and increasing cost pressure. Many german suppliers are well-positioned to exploit these developments as an opportunity but need sufficient financial power to do so. because of uncertainty about the capital markets, it is important to proactively draw the investors’attention to possible risks, and to present a convincing strategy for the next years.

Lars Stolz, Lutz Jaede

76.8 million vehicles were produced worldwide in 2011, which corresponds to an increase of almost 10 percent over the pre-crisis year 2007.

The global automotive industry recovered surprisingly quickly from its historic low in 2009. In 2011, some 76.8 million vehicles were produced worldwide, which corresponds to an increase of almost 10 percent over the pre-crisis year 2007, which saw the production of 70.4 million vehicles.

However, the global market has changed since then. There has been a clear shift toward China, India, or Indonesia and, consequently, toward simpler vehicle classes. Overall, Asia increased its vehicle production from 2007 to 2011 by about 31 percent to 36.5 million vehicles. During the same period, output in western Europe and North America shrank by 13 percent.

Besides German premium manufacturers, Chinese and South Korean automakers, in particular, benefited from this development, increasing their revenue even during the crisis. From 2007 to 2010, their annual growth rates amounted to 23 percent and 17percent respectively. In the same period, many European manufacturers, on the other hand, had only just reached the 2007 level again after the massive revenue losses in 2009. The growth rate of U.S. and Japanese OEMs is still as much as 9 percent below the 2007 level.

The supplier industry has experienced a similar development. Chinese and South Korean competitors have achieved inflation-adjusted growth of 55 percent and 45 percent respectively over 2007. During the same period, many suppliers from Europe, the United States, and Japan were only able to compensate for the revenue losses incurred in 2009, or just barely reach the 2007 level again. Moreover, in the meantime, Asian suppliers are on average much more profitable. Thus, in 2010, Chinese suppliers for example, on average realized an EBIT margin of 11percent whereas European competitors, on average, only achieved 6 percent. However, the success of Asian manufacturers and suppliers is not the Western suppliers’only problem.

The total market is threatened by an economic downturn, and OEMs have overcapacities as severe as before the crisis.

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unDERStAnDIng MARKEt tREnDS AS An OPPORtunIty It is also possible to anticipate other important developments in the worldwide automotive market in the coming years.The shift of production to new markets will persist, increasing competitive pressure and redefining the rules of the game.The period of M&A stagnation as a result of the crisis will come to an end, and industrial structures will undergo changes. In addition,alternative powertrain concepts will present new technological and strategic challenges. Moreover, rising factor costs and the increased cost pressure on OEMs will affect the suppliers’ margins. And, last but not least, many modules of new series will have a smaller value share per vehicle.

These developments are, nevertheless, an opportunity for many automotive suppliers. Although there is a strong shift of the markets to Asia, many German suppliers are still very well-positioned to be successful outside of Europe. Particularly companies that are innovative and have a good strategic position will be able to assert themselves when competing against players from the Far East.

Oliver Wyman’s current study identified the key factors of future success.

Among these are a global business design combined with appropriate value creation in growth markets, independence from individual OEMs from Europe, the United States, and Japan, as well as a strong technology position or even a niche status. Additional factors are cost efficiency based on operational excellence, a competitive cost structure, and the opportunity to actively participate in the consolidation of the segment as a result of the refueling of M&A activities and new partnerships.

Sales Development 2007-2010 Index 2007 = 100, adjusted for inflation

Sales

CAGR 2007-2010

Lehman collapse

160 + 28 %

140

China

+15.6 %

South Korea

+13.3 %

+ 24 % 120

100

+15 % -8% +11%

80

Europe u.S.

-1.5 % -4.7 %

Japan

-5.4 %

60 2007

2008

2009

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2010

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CREAtIng SuFFICIEnt FInAnCIAl POWER The order of the day for suppliers is thus to understand this upheaval in the market as an opportunity, and to profit from it by implementing targeted measures. For this purpose, management and owners should align their companies with a Supplier Agenda 2015. To obtain a holistic view, it is important to systematically address the following topics: cost efficiency, market focus, innovations, distribution networks, partnerships, leadership and organization. Ultimately, this will require significant investments.

To secure the necessary financing, it is crucial to clearly communicate the overall strategy and measures to banks.The reason is that banks tend to consider every change in the market as a risk because of the recent financial crisis and the new requirements stipulated by Basel III. This means that many banks are reluctant to grant loans, especially if they don’t have a detailed knowledge of the industry’s development. The more informative the dialog with banks, the easier it is for suppliers to obtain loans or follow-up financing with the help of convincing strategies.

EBIT margin 2007 vs. 2010 in % For selected suppliers per region

11.1

8.2 7.6 7.0 6.6

6.5 6.0

5.9

5.8

2.5

Europe China

However, it also is important to explain to other investors which strategies are suitable for transforming risks into opportunities. In 2005 and 2006, financial investors acquired many automotive suppliers at prices that assumed strong growth. These companies are now up for sale, but many of them have been unable to achieve their growth plans because of the crisis.

Consequently, the suppliers must make sure that they either achieve the maximum sales value, or that the discounts of potential buyers are at least kept within limits to avoid problems when paying back acquisition loans.

This means proving that no risks exist or, if they do exist, that appropriate countermeasures have already been planned or initiated. Suppliers need the right story. If they are able to clearly demonstrate that they can control the risks in the market and competition, and to convincingly present their strategy, they will be able to win over banks and financial investors.

And then the money they need will flow in.

South Korea Japan

U.S.

FutuRE-ORIEntED APPROACHES ARE nEEDED 2007 2010

Thanks to their strong position, German suppliers have a good chance to use the significant change in the market to their advantage, provided they make suitable preparations. Therefore, investors should evaluate companies in their investment or loan portfolio based on their chances of success in the light of these changes,because assessments using classical rating systems will not work. It is important to use a future-oriented approach that links market developments to the companies’ positioning and performance.

Furthermore, the commitment of suppliers positioned in attractive markets needs to be strengthened. If it turns out that the market development and positioning of a company contain both opportunities and risks, it is imperative to intensify the dialog with management concerning the appropriate strategy.

In the event that the market shows high risks and that suppliers are badly prepared, investors should push for restructuring measures. If banks and financial investors financially support well-positioned German suppliers, it is likely that many of them will be able to assert themselves in the global market in the future.

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IT IS ALL ABOUT PEOPLE SYSTEMS too many companies view lean manufacturing as merely a set of business systems and tools that can be applied immediately and that should begin generating results promptly. lean’s systems and tools are valuable, to be sure. but it is how a company executes them—supports their use— that makes the difference between success and failure.

Executing these systems and tools properly takes time.

Most important, it takes the right people systems—including clearly defined roles and responsibilities as well as sound training programs.

A manufacturer can have a brilliant layout and cutting-edge technologies in its plants, but these will have little value if the company does not also have the right people systems in place. Moreover, establishing the appropriate people systems calls for a cultural and organizational transformation that must involve shop-floor workers. And people constitute the most misunderstood aspect of lean. People systems run through all four phases of what we call the Lean Implementation Curve, though people play an especially critical role in the earlier phases. All four of these phases must be implemented in the sequence shown in the figure. It is especially critical for an organization to get Phase 1 right: Doing so builds a solid foundation for the remainder of the process. Moreover, a manufacturing business cannot expect to see cost, quality, or productivity improvements during Phase1; such outcomes occur during the later phases if the first phase has been managed correctly.

However, if the enterprise neglects Phase1activities, it is unlikely to ever see the results promised by lean. With this in mind, let is take a quick look at the four phases.

Ron Harbour

HEnRy FORD’S PHIlOSOPHy As long as a century ago, Henry Ford embodied lean manufacturing philosophy. He believed that by controlling every link in his industry’s value chain,he could minimize the time it took to transform raw materials into manufactured vehicles. He could thus cut costs and create cars that could be sold at prices accessible to virtually everyone. Ford owned iron ore mines for the production of steel, beaches where sand could be gathered to make glass,even cattle ranches to serve as sources of leather for his autos’upholstery. In today’s world of fractured value chains, where different entities own different links, few people remember Ford’s approach to taking time and cost out of the auto manufacturing process. These days, owing to value-chain fragmentation, cost is added to each step in the process—whether it takes the form of time, mark-ups, or materials-transportation expenses.

Reflecting these higher costs, all new cars are purchased by only 20 percent of the population.

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The Lean Implementation Curve™ Operating Systems

Supplier development

PHASE Iv Continuous Improvement and Collaboration

PD linkage via DFA/DFM and QFD Continuous improvement/waste elimination Flexible workforce Quality circles JIt (Just in time)

PHASE III Lean Tools For Quality, Delivery and Cost Improvement

One piece flow Andon Kanban level production continuous QCO (Quick Change Over) Error proofing In station process control tPM (total Productive Maintenance) value stream mapping Empowered work force

PHASE II Discipline Building

Problem solving visual management Standardized work/job instruction training Feedback and communication system 5S/workplace organization go see it management system Core competencies linked to performance

PHASE I Organizational Development

Roles and responsibilities Strategic alignment and development

vision, mission, values PDCA

Material

People

Partnering

Workplace

Quality

Phase I—Organizational Development: In this phase, the manufacturer clarifies its vision, mission, values (“Who are we? What do we stand for?”); establishes key performance indicators (“How will we know we are succeeding?”); and determines team structure (“Who will work with whom?”) and span of control (“How many direct reports will each manager have?”).

(See “Spotlight on Span of Control.”) It also defines roles and responsibilities (“Who will do what? When?”). Involving all workers, unionized or not, is essential during this phase.

Phase II—Discipline building: During this phase, the organization begins implementing lean’s basic disciplines, such as 5S, visual management, TPM and basic maintenance. It may start seeing results in the form of lower costs, higher quality and greater productivity.

Phase III—lean tools of Quality, Delivery and Cost Improvement: This is the phase where the company implements lean systems and tools, such as andon cords and kanban systems.

Phase Iv—Continuous Improvement and Collaboration: In this final phase, the organization spreads its lean systems to suppliers,requiring them to follow the same direction.It also works with its own engineers to develop new mechanical systems on which to build production. And it creates easier-tobuild designs. This is the phase during which the lean system is deployed to all areas of the organization and to all of its partners. Lean thus becomes a way of life. As with learning a new language, when one eventually begins thinking in that language, all stakeholders in a lean organization begin “thinking in lean”.

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What happens if an organization fails to establish the required people systems during Phase 1? Employees will not know how to use the systems and tools the company equips them with later. For example, suppose management has given employees permission to pull an andon cord if something goes wrong—but it has not spelled out roles and responsibilities regarding this lean tool. An employee pulls the cord when he spots a problem.

But then he is forced to stand there, asking himself questions such as, “Now what? Who’s supposed to show up and help me? When is it okay to start the line again? Should I get the plant manager involved?”To avoid such uncertainty, managers must establish the appropriate team structure, determine the correct span of control, and provide the right training before “empowering” employees to use lean tools and systems. By setting the stage in this way, managers enable workers to use the tools effectively and thus gain confidence and trust in the tools. Manufacturers that establish these foundational elements also send a clear and vital message to workers: “We are serious about lean. We believe you can adopt these practices. We will support you.”As a result,workers embrace lean, back up lean’s principles with effective behaviors and experience true empowerment.

In too many companies, executives see the enterprise’s manufacturing function as a necessary evil. But manufacturing is like a mirror that reflects all of the company’s decisions, actions and values. Everything the organization does and believes culminates in what goes on in its manufacturing function.

A company that is lean and efficient in product and process development will lay the foundation for achieving much greater manufacturing success.

To ensure that manufacturing depicts what executives want it to depict, executives must build the right foundation for implementing lean. Their reward? A manufacturing function that delivers a handsome return on the company’s investment in lean—and that produces the benefits promised by lean, in terms of cost, quality and productivity.Take Harley-Davidson. By mastering lean, the U.S. motorcycle company turned around manufacturing plants in Pennsylvania, Wisconsin and Kansas—some of which might have closed or sent jobs to Mexico or China.The savvy use of lean practices and principles thus burnished this iconic American brand.

SPOtlIgHt On SPAn OF COntROl Span of control is the ratio of supervisors to hourly people.The right span can depend on a manufacturing facility’s layout and density of the line. For example, an assembly line that uses automation extensively and spreads workers over relatively long distances calls for a smaller span,perhaps a 1:2 or 1:3 ratio.

A densely packed line with numerous manual operations may require a 1:8 or 1:9 ratio. If a manufacturer’s definition of roles and responsibilities does not include arrangements for a team leader to step in for an absent employee, the span might be 1:10. A typical assembly line is 1:5 or 1:6.

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SOUTH AMERICAN AUTO MANUFACTURING Attracted by explosive economic growth in South America, OEMs from around the globe have stepped up their investment and operations in the region. As OEMs expand their footprint into South America’s rural areas, they are inventing new ways to address their most pressing challenge: building a supplier network that can deliver the same value the OEMs enjoy in other parts of the world.

Chris Powers, John Lucci

5.2 million units were sold by OEMs in brazil and Argentina in 2010. their CAgR has hit 20 percent.

During 2005 and 2010, combined sales for OEM operations in Brazil and Argentina showed double-digit volume increases, jumping from 2.1 million units to 5.2 million. And their compound annual growth rate (CAGR) has hit 20 percent.The industry’s remarkable growth in this region stems from newly available credit that the growing middle class is quickly putting to use. Moreover, an influx of foreign investment on the assurance of recent macroeconomic stability as well as a rich diversity of natural resources is driving unprecedented purchasing power in the region.The wave of OEM investment in new manufacturing facilities is simultaneously creating and capitalizing on growing demand. Following the global economic crisis of 2008, companies are taking advantage of newly found liquidity to enlarge their manufacturing footprint in South America’s Mercosur region—including modernizing older plants, building additional ones and increasing plant capacity and output. Some are establishing a footprint for the first time.

Manufacturers that continue to pursue the antiquated model of hand-medown equipment and past-generation vehicles for their South American operations will quickly be left behind.

CAllIng All lOCAl SuPPlIERS In Brazil and Argentina state and local governments have lured foreign investors by providing auto manufacturing and other industries with a variety of incentives. As local governments compete for new projects with offers of cheap or free land, tax incentives, government-funded education programs and promises of infrastructural investment, OEMs have expanded their manufacturing footprint beyond traditional manufacturing zones in search of the best possible offering. As vehicle manufacturers establish operations in increasingly remote locations, they are counting on their suppliers to provide the same value delivered in other regions—whether that value consists of modules,logistics services or general and preventive maintenance services. However, constrained infrastructure in these countries’ rural areas can imperil on-time delivery.

In a world of just-in-time manufacturing,this presents a significant challenge to manufacturers who set up shops in more out-of-the-way locations. Rural areas seeing expanded OEM footprints have historically lacked an existing

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local supply base.To ensure that their rising expectations will be met, manufacturers have sought to draw their supplier base to them. In South America, for example,17 percent of major modules are assembled in supplier parks within minutes of the vehicle assembly sites.Take Ford’s operation in Camaçari, on Brazil’s east coast, a region that had no history of auto manufacturing. Ford arranged for 26 suppliers to establish operations in and around its manufacturing site, promising them a larger share of vehicle work content as incentive. Protectionist policies in Brazil and Argentina are giving local suppliers further competitive advantage in the region over suppliers located abroad. For instance, import tariffs on passenger cars are 35 percent in Brazil and 21.5 percent in Argentina; for auto parts, the tariffs are 16.5 percent and 17.5 percent, respectively. And thanks to local content requirements, as much as 30 percent to 60 percent of a vehicle’s components must be sourced from within the South American country stipulating the requirements.This becomes a major challenge if a high-cost component is sourced from abroad. To illustrate, a manufacturer choosing to source an engine and transmission from overseas could run through the majority of its foreign-content allotment from only two components. Though the current value of the Brazilian real has offset some cost barriers for importers, the net impact still favors sourcing of local content.

In addition to governments, consumers have played a role in heightening South American OEMs’need for a local supply base. Like members of the expanding middle classes in other regions around the world, up-and-coming South Americans want modern, high-quality products tailored to their lifestyles. And they want them available when and where it is most convenient for them. As these consumers have pushed for such offerings, automakers have increasingly relied on their suppliers for on-time delivery of high-quality parts, especially for new-product launches. Capable suppliers are critical to these companies’ success. Indeed, a disappointing product launch can often be attributed to a weak supplier network. But establishing a strong network to support a new offering developed in South America can be challenging, because the manufacturing process has not been tested and proved first at overseas facilities.

lEAn IMPlEMEntAtIOn AnD OEM SuPPlIERS Lean implementation methods among South America-based auto OEMs will further influence how localization of their supplier base evolves. Some OEMs in South America are still in the early stages of lean implementation.

Others perform at benchmark levels. These exemplars of lean production are also collaborating with suppliers to ensure that they meet the same high standards on cost, quality and productivity metrics. Such manufacturers tend to maintain integrated supplier relationships—pushing lean learning across their industry’s value chain.

Suppliers developing their own lean systems will be better prepared to serve OEM customers across the full spectrum of lean maturity. Indeed, the degree of lean implementation will play a major role in OEMs’ expectations of their suppliers. This is particularly challenging because inter- and intraregional differences in lean maturity mean that suppliers may not be serving

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to more than 50 hours per unit produced can be the range of labour productivity, within South America alone.

a uniform customer across the operations of a single OEM. To illustrate, older OEM facilities in traditional manufacturing zones might differ dramatically from more recently developed sites. Within South America alone, labor productivity can range from 20 to more than 50 labor hours per unit produced.

tO In-SOuRCE OR OutSOuRCE? As conditions continue to evolve in the South American auto manufacturing industry, OEMs will have to carefully consider their in-sourcing/outsourcing balance. An OEM may decide to outsource more when it lacks capacity, when suppliers are in convenient locations and have the required capabilities, and when the OEM wants to optimize its main-line work force. In some cases, OEM and supplier integration reaches such levels that suppliers working within an OEM facility might be virtually indistinguishable from the core OEM operation. It has become more common than ever for suppliers to provide logistics and maintenance support, module subassembly and even main-line assembly within the four walls of their client’s plant.

Labor regulation also informs such decisions. While auto manufacturing unions have ceded some control in North America, unions still constitute a major force in Argentina and Brazil. And while uncompetitive wage rates in North America led to outsourcing, the opposite is true in South America.

Labor contracts at many South American manufacturing facilities dictate that OEMs must bring in new workers even when work force reductions occur naturally through attrition. Moreover, OEMs believe that labor freed through productivity improvements can be redeployed within a plant.

Thus more OEMs in South America are self-funding in-plant initiatives with such freed-up labor. In some cases, suppliers looking for additional work must compete with a paid-for work force already trained in the OEM’s manufacturing techniques.

Service providers may find opportunities to work with OEMs seeking to optimize their main-line work force to increase output. As manufacturers strive to increase line speed, they must increase the ratio of value-added versus non-value-added work at each station. Logistics solutions that improve main-line optimization are particularly important in the post-downturn era, when OEMs are still leery of capital expansion unless absolutely necessary.

Providers of logistics solutions can help manufacturers lower walk and pick time so operators can enhance line speed. OEMs that have begun producing multiple vehicle models in one facility may find sophisticated logistics solutions even more attractive.To make these relationships work, suppliers must understand and be privy to an OEM’s core-parts strategy and integrate themselves into its manufacturing system.

A number of powerful forces are driving localization of automotive OEM suppliers in South America. As the auto manufacturing landscape continues to shift in the region, OEMs and their suppliers are finding new ways to structure their working relationship so that, together, they can serve customers’ ever-increasing demand for quality vehicles. In this brave new world, OEMs and suppliers that partner in innovative ways will be those most likely to pull ahead of rivals—and stay there.

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SMART PRICING TO ACHIEVE THE DESIRED RESULTS

Pricing directly impacts a company’s profit, revenue, and market share. However, until now, automotive manufacturers have rarely focused on optimizing their pricing strategy. Other industries such as, for example, retail, are much better organized in this area. Holistic approaches to determining the prices of vehicles and options appropriate for the respective brand and for achieving optimum profit are only slowly gaining ground. Frequently, the key aspect—the customers’willingness to pay—only plays a subordinate role in this.the professionalization of pricing offers much potential for securing and further increasing the manufacturers’profitability and future viability.

The mood of the automotive industry is good. Customers are buying more vehicles again, and manufacturers are breaking one sales record after the other. However, today’s euphoria should not mask the enormous challenges automotive manufacturers will face in the years to come.To master issues such as stricter consumption-efficiency goals, additional safety and comfort requirements, or electromobility, manufacturers need to fulfill one prerequisite: they must have sufficient funds.

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Jan Sickmann, Jochen Gast

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Besides competitive products and a highly efficient sales system, pricing is one of the key levers that manufacturers can use to continue to secure and increase their high profitability in the future. But finding the right price is not an easy task.To achieve this, it is important to understand the perceived value of one’s own products and the willingness of traditional and new customer groups to pay. At the same time, the overall price system must be consistent across models, variants, and types of engine—and this in view of the ever growing complexity of the manufacturers’ offerings. The very dynamic market environment and different life-cycle phases call for a holistic, dynamic pricing approach.

ADJuStMEntS ACROSS tHE PRODuCt lIFE CyClE In practice, many manufacturers focus too strongly on the initial pricing for market launches and facelifts, very one-sidedly taking their competitors’ prices, adjusted for options, as their guideline. Although these figures are helpful for finding a basic value, the latter should be dynamically adjusted along the product life cycle to obtain an optimum result—in particular, keeping an eye on one’s own customers’willingness to pay. Moreover, it is essential to have a good understanding of the competitors’ expected response and to take this into account in pricing decisions.

Methods based on market research such as the Strategic Choice Analysis© developed by Oliver Wyman help to identify those points along the respective price-sales function that promise maximum profit. At the same time, it is important to attach special importance to so-called signal prices for options.

Customers pay particular attention to these prices, which strongly influence their price feeling. Furthermore, knowing a segment’s price elasticity is essential for pricing the basic vehicle and engine type. And price elasticity plays an even more important role when pricing the options offering.This is because, although customers often compare competitors’prices when choosing a vehicle or engine type, the combination of options is frequently a subsequent, separate purchasing decision.

DEvElOPIng A HOlIStIC PRICE SyStEM

5

percentage points are the margin improvements a professional and holistic price system can lead to.

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In order to systematically and firmly establish fact-based price decisions, automotive manufacturers must develop an integrated pricing model that takes all of the above-mentioned factors into account. Subsequently, this model must be further optimized for each specific market. Quantitative parameters must always be taken as the key basis for price decisions.

At the same time, it may also be important to take strategic goals, e.g. regarding market penetration and market positioning, into account in the final price decision. Oliver Wyman’s project experience has shown that a professional and holistic price system leads to margin improvements of the order of up to five percentage points. Only manufacturers that have optimally mastered the art of pricing will be able to assert themselves in the tough competitive environment.

CONNECTED CARS ENSURE A HEAD START IN CUSTOMER RETENTION

the fight for customers is entering a new round in the lucrative after-sales business.the ever stronger trend to connected cars presents a major opportunity for all automotive manufacturers to gain ground against independent providers in the highly competitive environment, and to retain customers even after the warranty period has ended.

Competition between automotive manufacturers and independent providers in the potentially highly profitable after-sales business is as intense as ever—particularly after the warranty periods have expired. Independent repair shops lure customers of authorized repair shops with aggressive fixed-price offerings for car servicing and repairs. However, with profit contributions ranging from 30 to 50 percent, service and spare parts still rank among the OEMs’and their dealers’major sources of income. But in the upcoming era of connected cars, the manufacturers’and authorized dealers’prospects for stabilizing their after-sales market shares in the younger car segment and reconquering lost ground in the older vehicle segment in the longer term look much more promising. Market analysts forecast that in 2016, around 210 million vehicles will already be connected worldwide, compared to 45 million in 2011. Western Europe, in particular, will make a significant leap forward in this area. And eCall legislation will be an important driver of this development. In the EU, this automatic emergency call system will probably become mandatory from 2015 onwards. After this date, all new vehicles must then be equipped with an eCall system.

Sven Wandres, Matthias Bentenrieder, Marc Boilard

HIgH CuStOMER ACCEPtAnCE In the foreseeable future, powerful on-board diagnostic systems as well as technologies such as the new mobile communication standard LTE will ensure total transparency of a vehicle’s operating data. Monitoring systems will inform the authorized dealer not only about the wear and tear

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of components, but also about the degree of engine stress,or the condition of the oil. Based on this data, the authorized dealer can, for example, schedule the best and least expensive maintenance date for the customer.

If the vehicle is at risk of damage,he can immediately notify the vehicle owner and make him a preventive maintenance or repair offer.The manufacturers, on the other hand, can recognize how their vehicles respond in the field, or which fault patterns occur. Moreover, in future, it will be possible to carry out software updates via the Internet and thus execute field updates at the push of a button, saving the car owner from driving to a repair shop.

210 million vehicles will already be networked worldwide in 2016. In 2011, it was 45 million.

Customer acceptance is high. Surveys reveal that car users are very willing to pay for Internet functions which transmit vehicle data to repair shops for remote diagnosis.Furthermore, the first pilot tests such as BMW’s TeleServices in the U.S. show that car owners are more likely to go to authorized repair shops if it is the dealers who are informed about due maintenance dates or service needs, and then suggest dates and repair shops to the customer.

Manufacturers have clear advantages, if they act quickly.The new car business puts them in pole position. They are in possession of the customer, the vehicle data, and the networking, and can thus, for the time being, hold the independent repair shops at bay in the private customer business.

SPEED IS tHE KEy However, this requires OEMs to already set the course today. The aim must be to quickly incorporate the necessary technology in the car and to offer a low-cost basic functionality and thus establish a direct connection to the customer. At the same time, automotive manufacturers must invest in the infrastructure that is necessary for the evaluation of data and targeted customer contacts: control centers and call centers. In a next step, it is important to identify those additional services that are attractive for the customers,that are targeted at fulfilling their needs,and thus ensure that they stay loyal to the authorized repair shop even after the warranty has expired.

The same is true for business models and billing models. Because of the transparency of the operating data, it is possible to bill differentiated hourly rates which are based on the utilization of the repair shop's capacity.This also improves the competitiveness of the authorized repair shops’maintenance and repair costs. In a nutshell: in future, manufacturers and dealers will be in a position to provide each customer with services specifically tailored to him and at considerably lower prices, thus securing their customers’ loyalty over the longer term.

However, the after-sales business will also require substantial effort from OEMs in the future, because independent providers will not be prepared to assume a passive bystander role in the field of vehicle networking. Start-ups such as Smarter Car have already developed on-board diagnostic tools that enable independent repair shops to retain customers. Consequently, older vehicles will continue to be the Achilles heel of independent providers in the after-sales business. As vehicle networking progresses, however, OEMs and authorized repair shops will be able to catch up significantly in this area.

That is why manufacturers must go full speed ahead now. The first mover will have a clear advantage in this market.

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THE ROLE OF THE AUTOMOBILE NEEDS TO BE REINVENTED

Personal mobility is facing a major upheaval. Although many customers continue to prefer to own a car,many are prepared to significantly change their mobility behavior because of rising fuel prices and growing regulation.

Innovative services that can be flexibly combined are becoming an increasingly attractive alternative. However, the criteria for choosing a mode of transport remain the same: cost and convenience are still the decisive factors.

If OEMs want to stay in the game, they must position the car as a key component of the mobility mix and combine the different modes of transport in a user-friendly way.

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Matthias Bentenrieder, Daniel Kronenwett

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In the coming years, mobility will undergo fundamental changes: More and more people around the world are willing to go without owning a car.

Particularly in metropolitan areas and primarily in Asia, people are more than willing to switch from owning a car to using a mix of different modes of transport.The key parameters involved in deciding whether to own a car or to use other modes of transport are a car’s purchase costs and, even more so, its maintenance costs.This is more or less true for all people interviewed, regardless of their age, gender or social status.The second strong driver for this change in behavior is the convenient access to alternative modes of transport. Ecological considerations, on the other hand, only have a minor influence on the choice of the mode of transport.

The scenario for sustainable mobility in 2030 that was presented to the interviewees clearly illustrates this willingness to change. It envisions more traffic congestion in individual transport, better-quality public transport offerings and the possibility of completely planning multimodal trips using smartphone apps.The survey also tested factors such as fuel prices exceeding four euros per liter and a number of regulatory measures that influence the choice on the mode of transport. Given this scenario, up to 40 percent of the interviewees would go without owning a car completely, but only 20 percent would switch to an electric vehicle. If fuel prices increase dramatically, as many as 77 percent are willing to change their mobility behavior by either switching to smaller cars, electric cars or by using varying modes of transport. People interviewed in Shanghai and also in France are particularly open to the coming change. Young, well-educated city dwellers and smartphone users are the most flexible group, and with 86 percent, students are the group most willing to switch.Top earners and people for whom status is important have a lower tendency to choose alternative modes of transport. Women and families also are more likely to maintain their traditional mobility patterns.

InDIvIDuAl MObIlIty—A MODulAR SyStEM

Reasons for not owning a car 2011, worldwide

Important

1

3

High running cost

1.7

High purchasing cost

1.8

Higher speed with other transport modes Ecological reasons Parking hassle at home or work

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2

not important 4

2.3

2.9

3.0

5

The analysis confirms that innovative mobility services such as car sharing are becoming more and more important. Especially young people no longer place as much importance on owning a car as previous generations.Today’s young,urban smartphone generation is more open to novel mobility concepts and will drive the changes in the industry. Until today, an average of only 1.4 percent of those interviewed worldwide have been using car sharing, however, this percentage is already much higher in Singapore and Shanghai.

In Europe, this model is particularly attractive to the British. Besides the distinct increase in the preference for flexible use models such as car sharing, the importance of electric vehicles is also on the rise as they make a valuable contribution to the mix of the different modes of transport. Modern information and communications technology that uses the smartphone as a control center organizes the interplay at the individual level. It is crucial that all elements can be easily and seamlessly combined into an integrated model if users are to accept this concept. If you want to achieve better mobility, it is not enough to just change the type of powertrain. A potentially successful concept must not only be easy to use for different groups of users, it must also be possible to combine it intelligently with other transport concepts.

Overall, the choice of a specific mode of transport is determined by strong constants. Driving to the place of work, for instance, is the most important motive for using a car in all regions.The importance of cars is particularly high in areas where public transport is not widely accessible—especially in rural regions. However, the study also reveals geographic differences: while 97 percent of the people interviewed rated the quality of local public transport in urban regions in Germany as “good”or “very good”, only 81 percent of the interviewees in Singapore gave such positive ratings.

Nevertheless, 71percent of Germans own a car, compared with only 51 percent in Singapore.

Share of people choosing non-car ownership 2030, germany only SCEnARIO 1—COntInuOuS DEvElOPMEnt

25.2 %

26.8 %

24.4 %

12.6 % 11.8 %

tAKIng REgIOnAl MObIlIty nEEDS IntO ACCOunt For the automotive industry, Asian megacities with their high share of young, technology-oriented inhabitants and a transport policy willing to make significant investments are very attractive places for trend-setting projects focused on the IT-assisted combination of mobility options. OEMs must act quickly if they want to be among the first in the race to create an optimum mobility offering for the young urban generation. Although developing and manufacturing cars will continue to be the automotive manufacturers’core business for many years, they must become more experienced in operating vehicle fleets based on flexible use models and, in particular, they must network the vehicle with other mobility services.

“Ease of use”will be decisive for market success. If automotive manufacturers also want to maintain their position as the leading mobility provider in the future, they should retain control over the customer interface and assume a strong role in partnerships. Manufacturers don’t have to offer all mobility options. But in tomorrow’s multimodal world, it is important to continue to position oneself as the key contact person in the mobility chain with the attractive car option and thus reinvent the role of the car.

Fuel €2.50/l/l

Public transport

0.8 %

1.6 %

Smart phones

Congestion

SCEnARIO 2—SuStAInAblE MObIlIty

39.9 % 33.7 %

39.4 %

34.6 % 35.2 %

26.8%

tHE StuDy For the study titled The Future of Mobility, Oliver Wyman and the ESB Business School Reutlingen, Germany, asked approximately 3,000 people in Germany, France, the UK, Shanghai and Singapore which mode of transport they use today and how their mobility behavior will change in future.

Among other factors, the questions took rising fuel prices and different incentives and regulations such as a superhighway toll for passenger cars, restricted access to cities and financial subsidies for electric cars into account.

The authors of the study developed two scenarios: the first scenario is a moderate one, assuming, among other things, a fuel price of 2.50 euros per liter until 2030 and a better developed local public transport network.

The second scenario is more aggressive in terms of promoting sustainable mobility and is based on a fuel price of 4 euros per liter as well as other charges such as city and superhighway tolls.

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7.0 % 4.2 % 0.9 % Scenario Fuel Parking 1 €4.00/l fees

0.5% City toll

0.5% Mobility Highway toll charge

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AUTHORS IN THIS ISSUE

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MAttH IAS bEntEnRI EDER

ROn HARbOuR

+ 49 89 939 49 553 matthias.bentenrieder[at]oliverwyman.com

+1248 9067912 ron.harbour[at]oliverwyman.com

- Sales and downstream strategies - Mobility services and connected car - Rollout programs

- Production increase and optimization - Production strategies, processes, redesign and cost optimization - benchmark analyses, product teardown, operational due diligence support

MARC bOI lARD

lutz JAEDE

+ 33 1 56 68 15 15 marc.boilard[at]oliverwyman.com

+ 49 89 939 49 440 lutz.jaede[at]oliverwyman.com

- Performance improvement in research and development - Strategy and growth - Distribution

- Strategy and organization - Restructuring - Automotive suppliers

FAbIAn bRAnDt

AuguSt JOAS

+ 49 89 939 49 605 fabian.brandt[at]oliverwyman.com

+ 49 89 939 49 417 august.joas[at]oliverwyman.com

- Sales and after-sales - Quality management - Commercial vehicles

- growth strategies, business designs - Organization, change - Performance improvement, efficiency

RÉMI CORnubERt

DAn I El KROnEnWEtt

+33 145 02 33 95 remi.cornubert[at]oliverwyman.com

+ 49 89 939 49 591 daniel.kronenwett[at]oliverwyman.com

- Strategy development and implementation - Effectiveness and efficiency in research and development - Performance improvement and cost reduction programs

- Passenger cars and commercial vehicles - M&A, strategy & profit improvement - Sales programs

JOCHEn gASt

JOHn luCCI

+ 49 69 170 08 377 jochen.gast[at]oliverwyman.com

+1248 906 7914 john.lucci[at]oliverwyman.com

- Process improvement and cost optimization - Program management - Pricing

- Manufacturing strategy development and development - Operational due diligence - Shop floor transformation

CHRIS POWERS

ADRIAn SlyWOtzKy

+1 248 906 7927 chris.powers[at]oliverwyman.com

+1 617 424 3850 adrian.slywotzky[at]oliverwyman.com

- benchmarking analysis - Operational efficiency - Production cost

- new business development - value growth - broad cross-section of industries

JuERgEn REInER

lARS StOlz

+ 49 89 939 49 577 juergen.reiner[at]oliverwyman.com

+ 49 89 939 49 434 lars.stolz[at]oliverwyman.com

- Research and development - technology and It strategies - Software development and management

- Product development and procurement - Suppliers: strategies and operations - Automotive downstream

JAn SICKMAnn

SvEn WAnDRES

+ 49 89 939 49 530 jan.sickmann[at]oliverwyman.com

+ 49 89 939 49 532 sven.wandres[at]oliverwyman.com

- Strategy and organization - brand management, sales and after-sales - Efficiency programs

- growth strategies and international rollout - Mobility, sales and after-sales - Passenger cars and commercial vehicles

PublISHER’S InFORMAtIOn Publisher: Oliver Wyman, MarstallstraĂ&#x;e 11,80539 Munich,germany, www.oliverwyman.com Editorial staff: Julia Karas / julia.karas[at]oliverwyman.com, Roman Mueller / roman.mueller[at]oliverwyman.com Concept and design: vogt,Sedlmeir, Reise.gmbH, Munich,germany Photography: iStockphoto,vogt,Sedlmeir,Reise.gmbH, Fabian Helmich Responsible: August Joas / august.joas[at]oliverwyman.com

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AbOut OlIvER WyMAn Oliver Wyman is a global leader in management consulting. With offices in 50+ cities across 25 countries, Oliver Wyman combines deep industry knowledge with specialized expertise in strategy, operations, risk management, organizational transformation, and leadership development. the firm's 3,000 professionals help clients optimize their business, improve their operations and risk profile, and accelerate their organizational performance to seize the most attractive opportunities. Oliver Wyman is a wholly owned subsidiary of Marsh & Mclennan Companies [nySE: MMC]. For more information, visit www.oliverwyman.com.

Follow Oliver Wyman on twitter @OliverWyman.

Oliver Wyman’s automotive experts have broad industry experience and a commanding track record of successful consulting projects for leading automotive OEMs and suppliers in Europe, America and Asia.

We offer consulting services along the entire value chain of the auto industry: R&D, purchasing, manufacturing, sales and channel management, after-sales and financial services.

Oliver Wyman’s global Automotive Practice supports clients with strategictopicslikebrandmanagement, customerorientation, corporate and business strategies, market, competitive, and technology analyses, product development, innovation management, sales strategies and after-sales programs. Operational optimization includes purchasing, production optimization, efficiency improvement programs, reengineering, turnaround management and restructuring. In addition, Oliver Wyman offers the whole range of mergers & acquisitions consulting services, from partner search to evaluation, transaction support, and post-merger integration. © 2012 Oliver Wyman. All rights reserved.

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