News Article

Industry Experts Discuss Best Strategies to Navigate Uncertainty

By Alejandro Enríquez | Wed, 07/22/2020 - 06:00

The COVID-19 pandemic and USMCA’s enforcement on July 1 have put the automotive industry in North America in a complicated spot that resembles the 2008-2009 economic crisis scenario. Uncertain times call for great leadership. Strategic planning, communication and execution are the keys to successfully navigate them. Industry experts met during the webinar: "Leadership Tools to Successfully Navigate Uncertain Times" to address the state of the automotive industry in North America.

Automotive Results

Eduardo Solís, former Executive President of AMIA, highlighted the role that Mexico plays for the automotive industry in the world. "The country is the sixth-largest vehicle manufacturer, fourth-largest exporter and the No. 1 manufacturer in Latin America. Production and exports grew quite nicely coming out of the 2009 crisis but the effects of COVID-19 were evident during April and May,” said Solís.

With the implementation of USMCA, stricter rules of origin now promote nearshoring practices and supply chain regionalization. “Rules of origin are quite stringent. But there is a temporary waiver according to the treaty as OEMs can negotiate with the authority of the importing party a temporary transition regime. The original three-year period could be extended up to five years,” said Solís.

Alicia Masse, Principal Advisor at GlassRatner Capital Group, addressed the impact of the pandemic in the trends the industry was experiencing in pre-pandemic times. “We were in the 20-million-unit range for five years and now we are close to 16 million. What that means to the industry is that there is opportunity to put money into rainy day funds. The automotive industry learned a lot from 2008-2009," she said.

"As companies resume operations, production will not ramp up to pre-pandemic levels. We are not going back to the numbers we saw in 2019. We are going to see 2019 numbers by the end of 2022 or 2023,” Solís mentioned. The gap in demand, according to Masse, obeys to the pandemic impact on fleet purchasers and rental fleets. " The rental fleet segment is experiencing the most significant drop as travel ground to a halt for approximately eight weeks and is expected to recover at a gradual pace for the rest of 2020,” she said.

Navigate the Crisis or Freeze

Apart from paying close attention to financial results, crisis allows outstanding leaders to emerge. “Times of crisis are perfect for authentic leaders to rise up and shine. At this moment, it is critical that leaders connect at a very human level with their teams. While strong leaders shine in this situation, weak leaders fail,” said Jan Griffiths, President and Founder of Gravitas Detroit.

As the pandemic quickly developed a complicated scenario, Griiffths mentions that two things can happen when a human being faces a crisis: they can either embrace it and deal with it or freeze. “We have gone through a period of denial, then anger came, as well as some sort of loss because we lost our lives as we once knew them. But now, we are in this period of acceptance and understanding what this new normal is all about,” she explained.

A crisis scenario also presents an opportunity for companies not only to optimize procedures but to streamline their footprint or their entire business, says Richard Payne, Engagement Manager at Seraph. "Today, there are not only financial pressures for companies but geographical and political pressures, which will lead to more consolidation of businesses than what we saw in 2008 and 2009," he pointed out.

To help companies in the subsequent relocation or consolidation processes, the MOVE methodology, created by Seraph over the years proposes four keys to success: alignment, planning, execution and closure. Within this methodology, Payne highlighted, companies may never lose sight of their people. “It is not just about the products and the process. It is about our people. We need to have the same passion to taking care of our people, especially in difficult times such as the one we are going through,” he said. “If a company has 200 employees, its decisions not only influence those people but their families as well.”

Alejandro Enríquez Alejandro Enríquez Journalist and Industry Analyst