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European Autos: The Lean Option

by APICS CEO Abe Eshkenazi CSCP, CPA, CAE | N/A 2012 | 0 | 0
APICS Operations Management NowBy most accounts, American automotive manufacturers are having a good year. Demand is strong both domestically and in the rest of the world__save for one location in particular. Recently released European sales figures for the first half of 2012 are dismal, reinforcing the severity of the euro-area crisis and the lackluster global economy. The situation is even worse for continental manufacturers, as a recent headline in the Economist illustrates: “Europe’s Carmakers: Deeper in the Doo-Doo.”

The Economist headline references comments by Fiat’s Sergio Marchionne; and, while many other car manufacturers have been less explicit, they don’t have better news to share. France’s Peugeot-Citroën announced $1.06 billion losses for the first half of 2012. Ford’s European arm announced that it expects losses in 2012 to be more than $1 billion, and Opel-Vauxhall, the European division of General Motors, also expects to lose more than $1 billion.

According to the Economist, “the euro-area crisis has aggravated a chronic oversupply of cars in Europe and prompted a brutal price war. Peugeot is burning cash at a rate of [$2.44 million] a month. Its shares have slumped. Investors wonder whether it can survive more than another year or two.”

While European leaders ponder options for their carmakers, they may look to 2009 as an example, when the US government offered loans and streamlined bankruptcy for GM and Chrysler. To survive, those carmakers also had to make deep cuts in the form of plant and dealership closures to become more lean. Now, European automakers are facing the same tough choices.

“Given how much restructuring the rest of European industry__including the makers of car parts__has undergone, it is remarkable how few car factories have closed,” reports the Economist. “The only significant closures since the financial crisis have been one apiece by Fiat (in Sicily) and Opel (in Belgium).” Peugeot has plans to close a factory in Aulnay, which would be the first French car plant to close in 20 years.

Consider the definition of sustainability from the Operations Management Body of Knowledge Framework: “Sustainability is the idea that business can help ensure that markets, commerce, technology, and finance advance in ways that benefit economies, societies, ecosystems, and stakeholders in general__or at a minimum, do no harm__and contribute to a more maintainable and inclusive global economy.”

The concepts of lean, sustainability, and business strategy are intimately linked, yet difficult to balance. To better understand these concepts, consider attending the 2012 APICS International Conference & Expo, October 14–16, in Denver, Colorado. The conference’s educational sessions are designed to elevate supply chain performance. For example, Robert F. Palevich will discuss the corporate culture and management components required to achieve success in “Creating a Lean, Sustainable, World-Class Company.” Among other topics, the session will present strategies for becoming leaner in a global marketplace.

As supply chain and operations management professionals, you face difficult decisions every day. APICS provides you with the resources and education so that you may experience success in any economic climate.

Idea exchange

Now, you can take the APICS Operations Management Now discussion to your social networks on LinkedIn, Facebook, Twitter, and the APICS Supply Chain Channel. Be sure to use the hashtag #OMNow and include @Tweet_APICS in any tweets to have your words featured on the APICS homepage.

  • If not on the scale of Europe's carmakers, have you dealt with depressed demand and decreasing revenues in your supply chain? If so, what are some steps you took to help bring your company to profitability?
  • Do you consider US automakers since the recession to be a success story? What have they done particularly well? What could they further do to increase profits?
  • What is the intersection of lean and sustainability in your company and your supply chain? 
In other news
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    September/October 2011, APICS magazine
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