Is This the Beginning of the End for Ford and GM? Part 2.

Part One of this analysis covered the dramatic and disruptive technological transitions to electronics components (vacuum tubes to semiconductors) and  the tortuous changes in the cell phone since the early days of the ubiquitous Motorola "brick" and "clam shell" mobile phones took the world by storm. In this second and concluding commentary, let's analyze the automotive industry, one of the largest and most important businesses in the history of mankind. The automobile, in around one-hundred years, has brought mankind from depending on horses and oxen to unbelievable advances in motorcars.

Over the past several decades, these incredible Integrated Circuits in every vehicle have controlled a motor running gasoline (or diesel fuel). Electronics sample the air intake and regulate the fuel intake to get the most out of the vehicle as altitude, temperature, and other variables are managed to get the spark plugs to fire in the best possible sequence and create exhaust gases that are the least objectionable to air quality. The motor is matched to the transmission to optimize the power transfer.

All seems well, and it is. The modern technology is fantastic, amazing, and in danger of being usurped by a new wave of innovation. Welcome to the next fifty years!

We are seeing the precursors already.  The Tesla electric car along with other versions such as the Chevy Volt and Nissan Leaf are leading edges of the all (or nearly so) electric vehicle. But look closer: the real change is like the final victory of Apple and Google with the cell phones. Yes, they made a call, but the real change, the disruption that killed Motorola, Nokia, Blackberry, and others was the use of the Internet. Let's state the fundamental rule again:

The Internet Changes Everything

Okay, now that this is clear, take a look at where Tesla,  Apple, and Google/Alphabet are headed. Its "Autonomous driving." A quick look at the word "autonomous" provides this definition: Acting independently or having the freedom to do so.

Tim Cook of Apple cites a three-pronged approach: self-driving technology based on the Internet; electric vehicles; and ride hailing. And what does the first of these mean? At least, getting from place A to place B using an "autonomous vehicle," probably w/out a human driver. Clearly, this is not going to happen overnight, but don't bet against any of these mega-trends, especially one that involves the Internet as a key enabler.  Apple has a track record of providing solutions to problems and needs that most of us don't know we have/need at this time.

While Elon Musk of Tesla is moving fast into manufacturing wonderful cars and the batteries that power them, Apple probably will avoid the actual "making of the cars" per-se, but introduce the technology and either license it to car companies, or at some time acquire some of the car firms that become financially weak and fall behind. That's why the stock market valuation is a leading indication of change.

At the present, the top ten automobile companies worldwide include (in order of new cars and trucks sold ...  numbers, not revenue):

  1. Toyota
  2. General Motors
  3. Volkswagen
  4. Nissan-Renault
  5. Hyundai-Kia
  6. Ford
  7. Fiat-Chrysler
  8. Honda
  9. Peugeot-Citroen
  10. BMW

Who would like to bet against some combination of Silicon Valley or other disruptive technology leaders being in this list fifteen years from how? Don't be so sure. The only thing about change is change itself. Does anyone think that in fifty years we still will be driving ourselves in gasoline-powered vehicles? There is a zero chance of that, to be sure. The only question is when the change takes place. Surely vehicles will be self-driving for the most part, with human assist available for a transition period. Which firms will be on the Top-Ten list in twenty-five years? Fifty years? One-hundred years? Who knows, but it won't be the same ten companies listed above. That's for sure.

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Please feel free to post a comment here on the blog, or email me directly at <n3bb@mindspring.com> with any comments. Also, I'll very much appreciate your recommendation of "Contact Sport" and/or "Reunion" to friends. In addition, I'd be pleased to appear at book clubs and/or radio clubs within a two-hour drive of Austin to discuss either book.

 

1 Response

  1. JK James George
    This interesting comment comes from an email from WP. **************************************************************** My interest was piqued by your QRZ entry, so I wandered through your author web site. Here are a couple of comments on your two recent blog posts on the future of the American automakers. I claim to be a bit of a ringer because I worked for Motorola in the late 1970s and in the auto industry from 1997 until my retirement in 2015. My first day at Motorola in Schaumburg, I met the engineers who had been working on the DynaTAC "shoe phone" for many years, the long, deep, handset-shaped portable with two vertical rows of buttons. A few years later, I wound up working on the Motorola demonstration cellular system. Around 1978 or 79, I remember my trip to the Motorola Semi plant in Austin to beg for LS-TTL chips so we could complete the Motorola cellular demonstration system in Washington and Baltimore. One of the engineers I met bragged about the thousands of tons of concrete being poured for the new fab (Fab 3?) then under construction. I got done a little early and was able to leave the Motorola plant and get onto a flight departing only one hour later. That was back when the airport was in town and the rental car drop-off was just outside the terminal. I left Motorola before the first commercial cell phone systems were on the air. I don't remember any complaints about call quality in the analog system. I do remember the various operating companies being a little stingy with cell site placement. Spectrum reuse was of course always a feature of cellular telephony, so your mentions of spectrum are a little confusing. There was a projection around 1983 that said, if an operating company could get 50,000 cellular customers in metropolitan Chicago, they'd make money hand over fist. Not many people saw the future when more than half the population would own individual cell phones. Marty Cooper, my boss's boss, did. He left Motorola to found a company that told carriers where to place their cell towers, and got rich in the process. But I think the demand for ever more spectrum before, say, 2000, was driven by the immense growth of the subscriber base. Another thing you don't mention is the fact that many countries, like China, India and much of Africa, used cell phones to completely skip the wired-phone era for most of their populations. That had little to do with Apple or Google. Shortly after I moved to the Detroit area, I worked on automotive diagnostic tool software at Chrysler. Based on this, I have to say that the interesting part of automotive electronics is not that microprocessors ran engines, but proliferated on the basis of silicon chips being cheaper than wire harnesses. In 2000, a Chrysler vehicle had, if memory serves, anywhere from ten to twenty Electronic Control Units (ECUs), basically microprocessor-based controllers. 2017-model cars have at least 20 ECUs; luxury models probably push 70 for microprocessor count. So the automakers are not unfamiliar with electronic systems, software or networking. However, pure electric vehicles are not quite the disruptive force you make them out to be. The reason is simple: they are great for commuting, but terrible for long distance travel. So I would expect electric vehicles to be the second cars of a lot of families, or else be bought by people who never travel farther from home than the airport. Imagine, if you will, someone driving around the Hill Country in an electric car. He's either get no farther than about two hours from home, or be looking at his charge level all day. For a good example of an auto that shows both innovation and good suitability to task, I suggest you test drive a Ford CMax. It gets 40-plus MPG in all situations, seats retirement-age bodies comfortably, and is available in a plug-able version. It's a really well thought out hybrid vehicle. As far as self-driving cars go, the jury is still out on what the Detroit 2-1/2 will be doing. I know they have made some technology acquisitions recently. Detroit may not be pioneer, but they do have the capability to scale up vehicles into the millions. One of my friends says, "the auto companies are all about cash flow." That is, they know how to control their operations in order to turn profits year after year, and they are currently awash in reserves. So it would not be at all surprising to see autonomous vehicles with decent price and performance bearing familiar names. I think you are wrong, though, when you say that self-driving cars will depend on the internet. An autonomous vehicle must be just that: autonomous. Last summer I drove US-50 from Fallon, Nevada to Delta, Utah, six hours with almost no traffic and even less cell coverage. I have doubts about how much coverage you would find around, say, Llano or Lampasas. An autonomous vehicle must be able to operate completely independently, if only for safety reasons. I can think of only two kinds of data a car would want from the infrastructure: road and traffic conditions, and map updates. It's a mistake to look at vehicles in terms of general-purpose computing. I believe the real advances in self-driving vehicles will come from machine vision and robotics, not from internet technology or software in general. The skeptic in me, though, will not believe self-driving cars are a common part of life until I see reports of "blindspin." This was something Roger Zelazny wrote about in The Dream Master, a 1966 science fiction novel based on an earlier novella. Blindspin is the habit of teenagers who punch a random destination into a car, black out the windows, and enjoy a couple hours of uninterrupted couples time. The rest of the novel is about using machine-aided psychotherapy, but what Zelazny has to say about his imagined future is still relevant.

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