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Chapter 5 Automotive Excerpt Own Your Destiny by Damola Idowu<\/a><\/h3>\n

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\u201cI always felt Jaguar really needed to be a modern car company\u2026.We have [had] a lot of retro stuff in the past, a lot of heritage and now it\u2019s time to move on\u2026I want young people to like this car…because that\u2019s the future customer\u2026It really feels like a theatrical event when [you] get into the car\u2026.Is it necessary? No. Is it fun? (Yes.) And that is what it\u2019s all about\u2026\u201d – Ian Callum, Design Director, Jaguar<\/p>\n

Since Karl Benz invented the three-wheeled vehicle that became the birth of the automobile, (I had a chance to drive a replica at the museum of German American History in Washington, D.C.) the automotive industry has had a transformative impact on the evolution of humanity. From the means to power these vehicles, whether through electricity, gasoline, or water, the battle has been waged for over 125 years between internal combustion and renewables, even over the form of renewables, be it electricity, fuel cell, hybrids, or extended range electrics with fuel-powered alternatives. Since the inception of the automobile, all of these choices have been available. Gustave Trouv\u00e9 invented what became known as the first electric car and Am\u00e9d\u00e9e Boll\u00e9e invented what became known as the steam-powered automobile. In the end, Karl Benz won the battle with the aid of his wife, Bertha, who made a famous voyage of 106 kilometers in one of their vehicles, fueling along the way, inventing the brake line in the process, and placing an indelible stamp on human travel. From assembly to fueling, distribution, performance, design, styling, and safety the internal combustion engine has beat out the renewables over the past 125 years.
\nThe impact of the automobile industry on humanity expands beyond mere transportation. For example, Oldsmobile began using the assembly line process for automobile manufacturing and mass production. Henry Ford then revolutionized the efficiency of the assembly line and the affordability of the automobile. He set wage standards and promoted the concept of making automobile technology affordable to the working class which revolutionized everything from manufacturing to financing to distribution. This allowed people from different points on the income spectrum to meet with family and friends or to voyage and explore which expanded commerce opportunities and spurred infrastructure development and the creation of new cities and fostered the evolution of the backbone of manufacturing and laid the foundation for prosperity. Automobile manufacturing laid the foundation for prosperity and supported the expansion of human transport and the movement of goods and commerce intimately into the crevices of land where rail wasn\u2019t able to go.<\/p>\n

\u201cWe do believe that America is ready for the diesel…BlueTEC is the keyword. We have developed a totally new diesel technology which allows us to meet the most stringent, legal requirements for emissions in California, for instance and with those we\u2019ll be able to offer 20 to 30% fuel consumption reduction and at the same time various strong torque, very powerful engines, smooth-running. It\u2019s a whole new world…Ultimately our objective was to make the diesel as clean as the gasoline engine and the gasoline engine as fuel efficient as the diesel…\u201d -Dr. Dieter Zetsche, Chairman of the Board of Management of Daimler AG, Head of Mercedes-Benz Cars<\/p>\n

The acquisition of an automobile is a momentous occasion in family life second to one\u2019s home. The automobile represents the second largest expenditure a family makes. Several evolutions have occurred with the automobile over the past 125 years from the advent of the automatic transmission to the efficiencies in the amount of cylinders necessary to derive comparative horsepower to the current synergies between mobile technologies and car electronics. Several fascinating advancements have occurred, for example, the Mercedes 2006 S500 has the same 303 hp as the 2012 C350, but the C350 uses less fuel with a 3.5L V6 engine through direct injection and operates as powerfully as a V8 and even takes biofuels like E85. Having engines function by deactivating cylinders not needed for power are now commonplace in vehicles. To gain even further energy efficiencies eight-speed automatics are available in cars in the sub-$30,000 price space.
\nLet me bring this in from another point. Chrysler who was bankrupt in 2009, now has a rear wheel drive sedan with an all-wheel-drive system and an eight-speed automatic, the Dodge Charger, that starts at a sub-$30,000 price point. Typically you find that kind of technology in offerings from Audi like the A7 which costs twice as much. When one factors in the Uconnect entertainment system with in-car Wi-Fi capability, the 8.4-inch monitor, and premium Nappa leather you still get a price point of roughly $35,000. Technology, energy efficiency, luxury, and premium options are now becoming available to a whole new demographic of customers, which in itself will radically change what future generations will expect from their automobiles. To that point the same Chrysler is introducing a new compact model, the Dodge Dart, with a sub -$16,000 price point and future options are proposed to include a 8.4-inch multi-media center found in the larger-size models like the Charger and the 300 and there has been a confirmed ZF-derived nine-speed automatic offering in addition to the available six-speed.
\nAll of these technologies offer more efficiency from lower displacements via direct injections, turbos, and modification to air compression, even entire component efficiencies like Mazda SKYACTIV system are making 40MPG in the highway the norm now. President Barack Obama raised the 2025 target for Corporate Average Fuel Economy (CAFE) to 54.5 MPG and while the initial response was a collective groan that the fun is leaving the auto world like the sad days of the late 70\u2019s, the opposite is true,
\nmore technology is now available at an affordable price and the competition is fierce.<\/p>\n

\u201c\u2026Green cars can be good looking, sexy, fast, and big\u2026it\u2019s important to make a statement about getting a green car that\u2019s exciting enough that you want to own this car, that you want to buy it.\u201d – Henrik Fisker
\nPair the power and efficiency of the compact car with luxury options like the heated rear seats in the Hyundai Elantra, the 8.4 multi-media technology center in the Dodge Dart, and voice command in the Chevy Cruze and this appears to be just the tip of the iceberg. The evolution did not come gratis, though, the consumer culture dictated that car companies provide these options as burgeoning car customizers were achieving success through conceiving assorted options to add to entry-level vehicles and the Specialty Equipment Market Association better know as SEMA became a mainstay among the new generations of drivers. According to the Automotive Aftermarket Industry Association, overall aftermarket sales totaled $285 billion in 2010 with a growth of 4.3% from the previous year.
\nThis massive industry exists for a reason. Many people spend more time in their cars than they do in their homes. When one factors in time spent commuting back and forth to lunch, travel on the weekend versus time spent preparing for work or worship and performance of tasks in their home, more time is spent in one\u2019s automobile than in one\u2019s home. On a typical day, commuting to and from work can consume four to eight hours, all things considered. So the question becomes what do people do and what do they want during this idle time.
\nThe structural shift in transportation and the need to be productive has spurred the technology revolution in automobiles. This revolution and the advent of mobile technology like Telelink, OnStar, and Mtune have now allowed vehicles to become information hubs. One can get vehicle diagnostics, navigation in real time, info on things like weather, traffic, sports scores, music, fuel pricing and more via vehicle commands. People can even make calls and cars can automatically contact emergency services in times of danger. These are breathtaking advances. Manufacturers like Toyota and General Motors have partnered with companies like QNX, Microsoft and others to create in-car apps where touch screen technology similar to that found in mobile devices is now available in cars with screens of 8.4 inches or higher and seamlessly integrating with mobile devices.
\n\u201cThe pleasure that I get out of working [at Ford] is to one minute be designing an F-150 pick-up or a Lincoln pick-up then I get on a plane and the next morning I\u2019m designing Aston Martin in London. So that\u2019s a quite nice thing, to be able to change hats and change personalities.\u201d -J Mays Ford VP of Global Design<\/p>\n

Learn More<\/a>\t\t <\/p>\n

Global Emerging Markets
\nFor any company that wants any viability in the future, reaching the critical 18-49 demographic is essential. A global shift is currently occurring in messaging and marketing towards this demographic. Businesses have long been based on targeting Baby Boomers and Suburbs; however, 2008 has dramatically altered that calculus. As I am detailing in my forthcoming book, Own Your Destiny A Modern Guide to Starting Enterprise in the 21st Century, a humongous shift has occurred based on financial reality, technology capability, and emerging demographics. From the palm of one\u2019s hand, with a smartphone, one can video chat with people around the globe, for example.
\nCurrently, the era of Reagan is considered the gold standard, yet during Reagan\u2019s presidency, there was not a dominant Brazil; South Korea didn\u2019t host the Olympics until 1988; and it was in 1987 that Reagan made the \u201cTear Down This Wall\u201d speech in Berlin, Germany. Also, during Reagan\u2019s time, Japan not China was dominant and Africa did not yet have more than twice the residents of America (315 million) owning a cell phone (740 million) and 330 million out of 1 billion people spending between $2-$20 a day as is now the case. Also during this time, the minority population in America was not yet at the current 38% mark. Over 85% of the population growth from 2000 to 2010 per the last census report was from minorities, with a trend toward becoming a majority by 2040 and a majority of children born in America today are currently born to minority families.
\nToday\u2019s reality is that emerging markets domestically match with emerging markets globally with products that can sell to markets both domestically and globally. In addition, entrepreneurs locally can buy and sell goods globally with the advent of technology and global shipping logistics. For example, South Korea with whom President Obama signed a free trade agreement in 2011, has a population of 50 million with an unemployment rate of 3% and a median income at $30,000. South Korea is also ranked #1 in the world in education. In comparison, Black median income is $32,000 and Latino median income is $38,000. South Korea is home to Hyundai, KIA, Samsung and LG. Samsung is also a major supplier for the Apple iPhone. Brazil has a larger economy by GDP than Britain and France, and may overtake Russia by years end, becoming a fixture in top 10 global economies in terms of GDP. Germany is the #1 country in the EU and is #5 globally in terms of GDP. China has an economy growing at 7.4% per their latest report and has already surpassed Japan to become the #2 economy globally right behind the USA in terms of GDP. China actually has a trade deficit with Brazil based on raw materials and recently created a $20 billion fund to invest and get preferential treatment in regards to minerals and exploration in Africa.
\nThis is obviously not the world of Reagan because the untold secret ignored is the depth to which Reagan won. Reagan succeeded in promoting capitalism globally and as such we now compete on a global stage where countries like Brazil and Germany, without dominant militaries, are emerging in areas of clean energy technology with strong gains in the fields of renewable energy and bio fuels, for example. Countries have adapted capitalism to their own paradigm and have now integrated its execution to their national interests.
\nAn important factor in the global emerging markets is the fundamental cultural shift and the deep affinity for urban culture as the new popular culture globally. Culture impacts commerce, for if you cannot culturally relate you cannot market and communicate. Hip-Hop culture is the popular culture of the 18-49 demographic set with icons like Jay-Z and Lebron James reverberating across the globe. This new dynamic brought about the shift in politics that powered an Illinois Senator, Barack Obama, into a historic presidency in 2008. An actual friend of Jay-Z, his historic win represented a change and the current election is testing the measure of that seismic shift and what direction the country will move in relating to minorities domestically and to emerging countries globally.
\nFor America to thrive in this new capitalistic environment, human development and economic participation are paramount, yet the issues of the critical investment necessary are the hotbed items of the current debate. According to a report by MasterCard, 40% of Americans ages 25-34 do not have a bank account and estimates have pegged the unbanked population in America at over 60 million per the FDIC. Without engaging new generations of Americans and also if their earning potential is dramatically lower than their Baby Boomer predecessors, promises made to Baby Boomers cannot simply be kept because funding for Medicare, Medicaid, and Social Security come from payroll taxes or FICA up to the first $106,000 earned by every individual. Baby boomers total over 79 million with over 76% being White non Hispanic according to William Frey as cited in a Washington Post editorial June 8, 2012. The median age of White Non Hispanic Americans is 41 years old contrasted with a dynamic growing Hispanic population with a median age of 27 years old and a steady growing Black population with a median age of 32 years old, and slightly over 31 for Asian Americans.
\nAs Boomers get older and suburbs shrink due to the housing crisis, the foundation the consumer-based businesses have been built on, has forever changed. The changes in the emerging demographics and purchasing power along with access to capital and available credit have fundamentally changed an economy which is 70% built on consumer activity. Hispanic median income is $38,000, compared to White median income of $51,000 which contrasts with Asian American median income of $65,000 and Black Median income of $32,000. The Asian American population which comprises approximately 18 million of the over 120 million Americans who are minorities is rapidly growing and the education outcomes directly relate to economic outcomes in a stark manner.
\nThis is the new environment that companies must exist in and is the reality facing the domestic automotive companies as they seek to carve a position at the top of the heap. In the past 3 years, auto sales have grown from 10.4 million in 2009 to approximately 14.5 million this year and over 40% growth with tangible benefits in fuel efficiency, in car technology, and a noticeable difference in marketing. Hip-hop icon Eminem had a decided impact on the sales of Chrysler with his Superbowl ad. Jeep sponsored team USA Basketball Team and hired Chris Paul as a spokesman. Hyundai and Kia also used hip-hop music to boost sales and in Kia\u2019s case basketball superstar, Blake Griffin, markedly boosted sales to record levels. Detroit is back but in reality it has now become a symbol of the future where Silicon Valley meets American industrial might as full integration of smartphone features can be found in entry-level vehicles like GM\u2019s Chevy Spark. Cars have more technology and features in sizes for all tastes with great fuel efficiency as full size cars are getting upward of 47 MPG with slight electrification. It is a great testament to two programs managed by the Obama administration, the Department of Energy Advanced Technology Vehicles Manufacturing Loan Program created in 2008 with a fund of $25 billion authorized under section 136 of the Energy Independence and Security Act of 2007, to reduce dependence on foreign oil. The Bush administration initially signed the program into law. The Bush administration also provided the initial capital from the TARP program to tide GM with $14 billion to and $5 billion to GMAC and $4 billion to Chrysler until the restructuring that would occur later under President Obama. An ironic footnote to the auto story is that former George W. Bush Treasury Secretary from 2000-2006, John Snow, left the administration to become Chairman of Private Equity Firm Cerberus Capital Management and take control of 51% of GMAC and 80% of Chrysler LLC. GMAC was the financially arm of GM and impacted consumer loans and dealer financing. In June 2009, President Obama provided a $5.9 billion loan through the DOE program to Ford for fuel-efficiency vehicles. $33.3 billion more was provided to GM and $7 Billion to GMAC which has now become Ally Bank, Cerebus Capital however still maintains an interest in Ally Bank which also absorbed the entire portfolio of Chrysler Financial. $6.9 billion more was provided to Chrysler from TARP funds post their bankruptcy, with Cerberus forgoing their interest in Chrysler LLC. The money has been well spent and now GM is #1 globally in sales and Chrysler turned its first profit since 2005 in 2011, and on pace to repeat in 2012. Ford has been soaring and all other manufacturers have been successful, in addition. As global markets emerge, auto manufacturers have to adapt their product offering to individual markets which increases product and development costs. Chrysler, now part of Fiat is able to take advantage of economies of scale and in fact some manufacturing that was previously done in Italy is now moving to America.
\nSome of the market differences are like Brazil where GM cars run on B-20 fuel. In Germany, GM designs the Opel Insignia a 2009 European car of the year at its design studio. The Opel Insignia is currently sold in America as the Buick Regal. In China Buick\u2019s are designed at the GM China Advanced Studio. The Buick Excelle was China\u2019s best-selling passenger-car in 2011. The shifts in market demographics and global technical and design capacity directly impact workers and products in America. Jeep makes the Liberty and over one hundred thousand Wranglers in Toledo, Ohio, a hub since John North Willys bought Overland Automotive in 1908 and later in 1941 when Jeep was formed to transport the Greatest Generation in World War II. Over one hundred thousand Grand Cherokees are made annually in Detroit, Michigan. GM makes over two hundred thousand Chevy Cruzes in Lordstown, Ohio. Tesla also makes thousands of Model S\u2019s in Freemont, California at the NUMMI plant formerly owned jointly by GM and Toyota.<\/h3>\n

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Hackathon Spring 2017<\/h3>\n

Check out our next Hackathon at Carnegie Mellon University February 17th-19. Email us for more details<\/p>\n

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