3 Pages ONLY!!! You will identify the problem or opportunity and discuss a viable solution based on your analysis of the case.
The general structure of all critical analyses:
1.Describe the business situation, including the macro-environmental and micro
-environmental conditions facing the organization.
Develop the problem statement: the opportunity or threat facing the organization.
What alternative strategies and programs would you consider
in dealing with the opportunity or threat to the organization? Present each alternative in sufficient detail to give the reader an idea of why it may be beneficial.
Recommend one or more of the alternatives you have identified. Inform the reader of your reasons for these recommendations.
Describe tracking metrics to determine whether you
r recommended strategies and programs are effective. Be sure to include both intermediate and conclusive metrics to guide management’s redirection of ineffective strategies.
Summarize what you have learned from your critical analysis.
The steadily disappearing American car
· Sedans started disappearing from the U.S. car market in 2008.
· Fueling the trend are low gas prices, a stronger economy and dramatic improvements in the design of SUVs and trucks.
Published 2:30 PM ET Fri, 6 April
Atlantic-kid | Getty Images
Travelers at a gas station in Arizona, 1981.
After a century of ferrying millions of daily commuters and taking countless family road trips, simple passenger cars are disappearing from American life, and they may not come back.
Detroit’s Big Three automakers — Chrysler, Ford and General Motors — pioneered the mass production of the car, but in just four years, all three may be known to Americans simply as truck and SUV makers, with only a stray sedan for sale.
The automotive industry in America is making what many observers think is an irrevocable shift toward pickup trucks, sport utility vehicles and crossovers. While carmakers are producing sedans and sports cars that are safer, faster and more comfortable than ever, customers continue to flock to taller vehicles with features cars simply cannot offer.
“Since 2009 or 2010 it has been a truck story,” said Jeff Schuster, senior vice president of forecasting at LMC Automotive, which tracks the auto industry. The exception was a slight pullback in 2012, when the midsize car segment underwent a major refresh, he said.
The trend shows no sign of abating, despite cries from car enthusiasts that crossovers lack the driving dynamics of sedans and complaints from environmentalists that SUVs and trucks are typically less fuel-efficient than cars.
By 2022, LMC Automotive estimates 84 percent of the vehicles General Motors sells in the U.S. market will be some kind of truck or SUV. Ford’s ratio of domestic SUV and truck sales will hit 90 percent; Fiat Chrysler’s will notch a whopping 97 percent.
“We have SUVs eventually crossing the 50 percent threshold by themselves in the near future,” Schuster said.
Signs suggest SUVs and crossovers are also taking hold elsewhere in the world.
Automotive executives and industry watchers think there will be only a small space for sedans in the U.S., perhaps consisting mostly of sports cars or niche vehicles favored by enthusiasts.
A few factors that drove this unprecedented shift can be attributed to gas prices, a stronger economy and big improvements in the design of sport utility vehicles, said Karl Brauer, executive publisher at Cox Automotive.
“It was really a one-two-three punch,” Brauer said. “Essentially every force lined up to help SUVs, and that has been hurting car sales.”
Gas prices track with SUV popularity
When average U.S. gas prices reached their all-time high of $4.10 a gallon during the recession in 2008, U.S. automakers sold far fewer trucks and SUVs than they do today, and fewer than they had several years before. In 2008, cars were 51 percent of sales, and trucks, SUVs and crossovers were 49 percent.
But high gas prices spurred investments in U.S. oil extraction. Production doubled in about a decade, from 5 million barrels a day to about 10 million, said Patrick DeHaan, petroleum analyst at GasBuddy, a technology company that gives nationwide gas prices in real time.
“There has been kind of been a monumental paradigm shift in the oil sector,” DeHaan said. “The U.S. is producing the most oil it has since the 1970s. All this has led to 3+ years of relatively affordable gasoline.”
That has led consumers to reconsider the importance of fuel efficiency when buying cars.
That showed in the car market. By 2017, that nearly even split between car and truck sales became lopsided, with 35 percent of sales going to cars and 65 percent to trucks and SUVs.
Oil prices are likely to be more stable going forward, and gas prices should hover between $2.50 and $3.00 through 2019, DeHaan said. American production will likely act as a check on OPEC — if the cartel raises prices too high it will incentivize other producers.
There are still risks on the table, and there is still potential for volatility in the market.
“OPEC could wake up tomorrow and decide they aren’t happy with $65 a barrel,” DeHaan said. Rising tensions with Russia are also a risk. Oil-producing countries have used the commodity as a political weapon in the past, he said.
But even if gas prices rise, U.S. consumers may never turn back to cars.
“Some buyers would move to cars, assuming there are still small cars available at that time, but I think the majority of the movement would still take place within the SUV segment,” he said.
Trucks and SUVs still generally lag cars in fuel efficiency, but they are improving. And they have made big leaps in design and quality that make them more competitive with cars.
Powertrains are growing more efficient. Ford, for example, has talked of selling hybrid versions of vehicles across its lineup, including trucks such as the F-150.
The higher ground clearance on SUVs and trucks leave space beneath to store a battery, Schuster said.
Even combustion engines are far more efficient than they used to be. For example, GM built an engine that can shut off a few of its cylinders at times to improve efficiency. It can be found on pickups such as the Chevrolet Silverado and GMC Sierra, or on crossovers such as the upcoming Cadillac XT4.
Many crossovers and SUVs are also built with unibody frames, which tend to be lighter, Brauer said. In addition to improving fuel economy, the lighter frames make the vehicles drive better — they don’t feel bumps in the road as much and can corner better than heavier body-on-frame vehicles. They are easier to insulate, making them quieter and reducing the wind noise that comes with driving a taller vehicle, especially at high speeds.
Larger trucks, such as the Ford F-150, use aluminum instead of steel to reduce weight, cutting fuel use. GMC is the first to outfit its trucks with a carbon fiber bed, another lightweight material.
Customers see a vehicle that can drive like a car and offers the benefits of an SUV — better visibility, more space, and flexibility in seating and storage.
“We basically removed the downsides of owning SUVs over the last 10 years with engineering and design,” Brauer said.
The deal is also good for manufacturers. Average transaction prices for a subcompact SUV such as the Ford EcoSport are $4,500 higher than the automaker would get from a subcompact car like the Fiesta, and $2,500 more than the company would get from the slightly larger Focus.
The Wall Street Journal reported Wednesday that Ford will discontinue its once best-selling sedan, the Taurus, and end U.S. production of the subcompact Fiesta. The report also said Chevrolet will altogether stop making the Sonic, another subcompact car.
There could be some pushback if regulators pass tough emissions rules. But at some point, technology may narrow remaining gaps in efficiency.
And consumers could still decide they like cars after all, swinging the pendulum in the other direction. But don’t count on it, Brauer said.
“Those would be tiny little blips in the trend we are seeing and will continue to see,” he said.
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