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11.21.19 – Club News

Club News written by Thomas Mathison

The Rotary Club of Downtown Grand Rapids gathered at noon at the University Club for its regular meeting. President-Nominee Paula Jastifer called this meeting to order, in a striking turkey headdress, at noon by welcoming everyone and announcing the line-up of events and future speakers for the Club:

  • 28:  No luncheon – Thanksgiving
  • 5th: Club 77 hosted by Chip and Sarah LaFleur @ LaFleur Marketing
  • 12th: Charlie Wondergem, Founder / Board Chair – Billy Bear Hug Foundation @ University Club

 

Paula called upon Tom Mathison to lead us in song today, “We Gather Together”, followed by today’s invocation by Max Smith.

Following lunch, Paula reminded everyone the upcoming Club 77 event.  RSVP’s are due by the November 29. She then invited Katherine Roye to introduce guests and visiting Rotarians, as well as give a quick Selfie Contest announcement. Paula then invited Alex Wilson to give an update on the upcoming Senior Neighbors Holiday Luncheon.

President-Nominee Jastifer invited Jason Webb to the podium to announce a new club member – Matt Hogg, a Financial Advisor with Raymond James, who joined Jason at the podium to be introduce and to say a few remarks.  Then Paula gave Matt his membership pin.  Matt was sponsored by Bruce Young and Dawn Smith.

Paula invited Bill Buchanan to introduce three Interact students from East Grand Rapids High School:  Auden Garrard, Maia Newkirk, and Lauren Sytsma.  Each of them spoke about activities in high school and about thoughts about education and career goals following high school.

Kevin Paul came to the podium to introduce our speaker today, Phil Biggs.  Bill is from PriceWaterhouse and is a 25-year member of the U.S. Automotive Team for PWC.  He began by stating that the U.S. auto industry is evolving and making a comeback.  Cleanroom factories, artificial intelligence, greater capital investment, and social media is transforming the industry and creating new business models.

In 1999, the auto-industry was really a tiered system of OEM firms, Tier 1 firms, Tier 2 firms, etc.  Today the supply chain is more of an eco-system, where dealers are gaining and larger and larger role as we go to more mobility technology.  The average new car is more complex, comprised of more than 30,000 parts in each vehicle.  In 1999, there were over 20,000 tiered suppliers.  Today there are 800 global mission-critical supplier partners that face vastly greater complexity.  Today, there is the power of 100 onboard computers per vehicle, and 150 million lines of code with 4G capability.  In the future will be 500 million lines of code with 5G capability.

The auto industry has gone from manufacturing cars to meeting personal mobility needs, from “make and model” to connected vehicles, becoming a living room on wheels as alternatives such as Uber, Lyft, and public transportation modes arrive.  New apps are the link to emerging transportation preferences.

Since 2005, the auto industry has migrated from Detroit to Silicon Valley and southeast U.S. states, although 75% of auto R&D remains in Detroit.  There are several key business issues facing OEMs:

  1. Diverse Powertrain (Engine) options cause uncertainty
  2. Arrival of tech giants and autonomous cars
  3. Connected cars and personal mobility disrupt future planning cycles
  4. Global and Regional Lack of Workforce Readiness

Key business issues facing suppliers:

  1. Shared participation in light-weighting, shared advanced R&D
  2. Fewer suppliers / greater mission-critical global objectives
  3. Shift to emerging markets (northern Africa, SE Asia), where requirements are more complex and there is a scarcity of materials, trained workforce and operating cash.

Ker business issues facing Dealers:

  1. Managing autonomous car fleets and mobility services will emerge as a new revenue stream
  2. Inventory floor-planning
  3. Mobility and autonomous requirements will change how dealers operate
  4. Unprecedented co-investments between OEM and dealer.

Other observations:

  1. Big tech companies (Google, Apple, Tesla, etc.) are controlling much iof the product, research, supply chain and investment ecosystem.
  2. Apple alone has more free cash flow that all 30 global OEMs combined
  3. Tesla and Apple are greatly influencing the retail-dealer model by challenging dealer laws in TX and MI and seeking direct-to-customer sales and delivery channels.
  4. Assembly is expected to see gains, with most of the growth coming from the Asia-Pacific region.
  5. Alternative-powered vehicles will continue to grow as TCO (Total Cost of Ownership) reaches parity with combustion engineers, perhaps as early as 2025.
  6. Sales of light trucks is increasing, as passenger cars is reducing.

Bill spoke about mobility.  Why is it important?

  1. Congestion is the primary driver of new mobility solutions, particularly in urban areas.
  2. Early indications are that the challenges and risks related to next-generation investments will reshape the industry via joint ventures.
  3. Autonomous cars are changing the game. Moving toward nearly-fully autonomous vehicles by the middle of the next decade.  But they will likely emerge in the context of ride-sharinbg because of the high cost of the vehicles, and because of route restrictions.

Likely implications of mobility, going forward:

  1. Mergers and acquisitions, alliances, etc.
  2. Restructuring and retrenchments
  3. Potential industry consolidations
  4. Government action

Conclusions:

  1. Few is any gaps remain industry-wide, luxury gap narrows
  2. Increasing complexity as the industry evolves from the traditional auto sales cycle to Mobility as a Service (MaaS), including ride-sharing, car-sharing, ride-hailing, on-demand travel, and multi=modal systems integration as Smart City planning arrives.
  3. Long term trend from mechanical components to new software interfaces equates to breakthrough hardware and software requirements.

Bill concluded his remarks with warm applause from the Rotary audience and received a number of questions:

  1. What is the trend in mass transit?
  2. How disruptive has Tesla been to the ecosystem?
  3. Are OEMs spending more R&D on trucks/sport utility vehicles or cars?
  4. Who is responsible for infrastructure, mapping roads?

Paula then presented Bill with a certificate for each of them, marking a new water filter for a family in Nicaragua in honor of his time with us today.

Paula reiterated the upcoming Rotary events and then rang the Rotary bell to adjourn the meeting.

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