



How do you view the role of suppliers today and in 10 years?
At present the suppliers stand for 75% of the value of a car. By 2020 that figure will be 85%. New technology and developments mean that suppliers are taking on a larger role. Today 50% of R&D takes place within the automotive sector in Europe with suppliers. Car companies´ R&D is very concentrated on design, safety, testing and approval. If one looks at development within Research and Technical Development — RTD — the role of the supplier in the development is greater than 50%.
New technology, new players may lead to new supplier structures?
Yes, there is new technology within the field such as electric motors, batteries etc. Generic development often takes places with a company that is subsequently purchased by established suppliers to the major car companies.
How is it going for the supplier at present?
Everyone is experiencing hard times and have slammed the brakes on. Any work with respect to development that is currently taking place with suppliers is restricted to work that is paid for by the customer or required by legislation.
From your perspective how do you view the global car crisis?
Most likely like everyone else. A gigantic over capacity has existed for quite some time and downward adjustments are needed in order to establish a balance. Volumes increased steadily in the USA and Europe up until 2007, but the volumes were kept up through artificial respiration. Cheap loans, advantageous leasing etc. simultaneously as the markets in Asia and the East woke up — but they wanted their own production. During 2009 worldwide car production is at the pace of 50 million cars per year, which is approximately a 50% rate of capacity utilization. The crisis, with its epicenter in the USA, spread to Europe and capacity must be eliminated in both places.
What is the outlook for the Swedish automotive industry?
The truck industry remains strong but is affected by the recession. Both Scania and AB Volvo are in a good position with respect to product and the markets. On the passenger car side it is not looking so rosy. Saab is in the worst position. When the ethanol bubble popped there was not very much left for Saab. Sure, Saab has produced fine cars — but there are many companies doing that today and more on the way. In the situation that Saab is in, one loses confidence on the market each day that the insecurities regarding the future remain. At present Saab´s volumes correspond to what Ferrari produces. Volvo Car Corporation is also experiencing very tough times, but has a little more time, however, an unclear ownership question is always a heavy burden for customer confidence. Volvo Car Corporation´s XC 60 seems to be a super successful automobile that is liked by the market, but it is all about getting volumes. Saab is always saying they just need to reach the level of 150 000 cars to be successful and Volvo Car Corporation says the same thing, but one should reach the 500 000 level. Volvo was close in 2007, but today both Saab and Volvo Car Corporation are a long way away.
If we look at USA — how is it going there?
GM will likely go into bankruptcy within a month and Chrysler probably has it just as tough. USA´s automotive industry has to get rid of its dead weight in order to have a chance. In 2008 the total salary cost for an automobile worker at GM was 72 USD/hour while Toyota in the USA had a cost of 32 USD/hour. Later when the price of gasoline skyrocketed and the only profitable segment that the American manufacturer´s had — Pick Ups — imploded, the crisis was a fact. The results of previous salary negotiations when things were going well and the inability to interpret market developments lead to the crisis and it is horrendous how fast it went.
Ford definitely has problems, but has obtained credit facilities and for the moment is not sitting in the lap of the Government appealing for aid. Ford could emerge the winner from the crisis in the USA. If GM goes into bankruptcy and is subsequently reconstructed on a lower level Government aid can be provided based on the amount of people employed. Ford must receive the same support, which could provide them with a flying start on the new car scale with new technology. USA´s capacity currently stands at a total of SEK 20 million cars per year and it needs to reduced. New technology is in the pipeline and today´s capacity should be eliminated.
Europe — is it as tough there?
No — the situation is better than in the USA but capacity will disappear and all manufacturers will not survive. The passenger car industry in Sweden, France, Germany — Opel and Fiat in Italy are experiencing difficult times and things will be happening here. The risk for political aid to support the domestic automotive industry is considerable and some aid has already been given in that direction. In Europe the feeling is unnerving about the rapid pace of development that is taking place in the automotive industry in Asia — China, India and Korea. The manufacturers there see an opportunity now when interest for smaller cars is, dramatically, on the rise in Europe.
What is happening in Asia?
Japan has been greatly affected by the recession, which is hitting exports hard while the domestic market weakens. The Japanese automotive industry is surprised — yes maybe almost frightened over the rapid progression of developing in China, India and Korea. Capacity is being built up for new techniques in the next generation of cars. China realizes that one does not catch up to the West and Japan on the combustion engine side, but China has ambitions to be the leader on the electric side and they are well positioned there. India is also coming on strong with much focus on the small car segment that will be in demand in the West. Indian manufacturers have already made contact with European niche manufacturers.
How will the new technology affect the automotive industry?
By 2020, at the latest, the CO2 requirements will be 95g per km. This means small cars in order to fulfill the requirement with combustion engines. There will also be a demand for larger cars. Car manufacturers will therefore have small electric cars in their program because it gives "CO 2 credit" when calculated together the combined emission from a manufacturer´s sales. Furthermore electric cars will be in demand. The technology already exists for small electric cars that can go 100 km on one charge, and that is sufficient for many urban drivers. There will be both large and small cars in the future, but electricity will be ‘big thing´ in small cars. Look at Daimler for example, which has Smart as a little car and that will become an electric car, but the company will also continue with its larger cars and will be able to do so by introducing hybrids and utilizing the Smart car´s low emission in order to land on 95 g on average for the entire production.
Sweden finally — What advice do you have?
The passenger car industry must have a clear and strong owner that is knowledgeable and understands the automotive world. An exciting thought would be a Swedish ensemble where ABB, AB Volvo, Vattenfall and the Government went in and took over Volvo Car Corporation — it could be profitable. Saab is already so stripped that the chances of success on its own are small. The Swedish truck industry is strong and competitive and it will come on strong when the economy turns around.
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