MT Magazine November/December 2023

THE ECONOMICS ISSUE

FEATURE STORY

14

The Cruise Origin is electric and autonomous. It currently offers driverless rides in San Francisco, Phoenix, and Austin. General Motors, which owns Cruise, has petitioned the National Highway Traffic Safety Administration to permit the building of Origin vehicles without things like steering wheels because there is no driver involved in the operation of the vehicle. That’s disruption. (Image: Cruise)

• In 1876 the first four-stroke gasoline automotive engine was invented, and 10 years later, in 1886, Carl Benz began commercial production. • The 1901 Model C Packard featured a steering wheel rather than a tiller to control the direction of the wheels. And now the internal combustion engine (ICE) is giving way to the electric motor. General Motors has petitioned the National Highway Traffic Safety Administration for the ability to mass produce Cruise Origin AV vehicles without steering wheels. Suddenly an entire industry – OEMs as well as suppliers – is facing changes to what it’s been doing for more than a century. Or more to the point: They have the choice to face those changes or pretend they are not happening. And suffer the consequences. So, while the focus here is on the auto industry and the situation that it finds itself in – a situation unlike any other time in its history – the purpose is to use this as an example – an extreme one, perhaps – of what is being faced by manufacturers in industries across the board. Your industry may not have its Tesla. Yet. Consequences of Disruptions Paul Eichenberg, a consultant who focuses on strategic, operational, and systems issues, points out that the auto industry over the past few decades has been focused on lean manufacturing and asking: How do we make what we make better? While that was certainly beneficial for companies – after all, it was how they were able to make money – it is no longer sufficient given that, in the past few years, Tesla has disrupted not only products but processes as it has led the way for mass produced electric vehicles, driving the transition being made

But then there’s another market of more than moderate interest: Automotive. In 2023, automotive has an estimated manufacturing market size of $104.1 billion, or nearly twice that of the household appliance segment. While more than 99% of U.S. households have a refrigerator and “only” 92% have a motor vehicle, the average price of a new fridge is $1,500, and a new vehicle is over $48,000. Clearly the automotive market is important. According to the Alliance for Automotive Innovation, a trade organization representing OEMs and suppliers in the United States: • For every dollar spent in vehicle manufacturing, an additional $3.45 of economic value is created. • More than $75 billion in U.S. investments have been announced by auto manufacturers (and let’s face it – the auto industry since 2021 has been dealing with the consequences of COVID and the chip shortage). • Vehicle and parts manufacturing accounts for 6% of all U.S. manufacturing and 11% of the durable goods manufacturing subsector. All of this is prelude to the fact that, according to the U.S. Department of Energy, “Today’s [refrigerator] models have better insulation in the cabinets and sealing around the doors and they use more efficient compressor motors and new refrigerants.” And while everything from IoT capability to smudge-proof surfaces are available to refrigerators, the auto industry has embraced CASE (connected, automated, shared, electric), an acronym that pretty much characterizes why there is over $75 billion in investment. Arguably, the home appliance industry's products and processes are undergoing improvements. The automotive industry is undergoing disruption. To get a sense of the magnitude of the changes, consider this: