20th anniversary features: Timeline
Over the past two decades a number of major global events have had a significant impact on global automotive supply chains, from new technologies, external disruptors entering the industry, catastrophes (both manmade and natural), and political earthquakes.
There is little doubt a rising China, like in so many industries, has been the major shaping factor for the automotive sector, both from a car making perspective (the number of passenger cars manufactured there per year is now almost 50 times what it was in 1998) and a sales perspective (China’s growing population of consumers could lead to more than 30m units in sales by the end of this decade).
At the same time, however, new production bases have emerged, including Brazil, Mexico, and eastern Europe. New corporate entrants have also joined the fray, most notably the electric carmaker Tesla and China’s major OEMs.
Automotive Logistics presents its take on a select few of the major global events of the past 20 years, including many which have had a significant impact on supply chains and trade, and others that have influenced the direction of the automotive sector more generally.
On May 15, 1997, online retail company Amazon listed on New York’s NASDAQ stock exchange as. From being a major bookseller valued at less than $500m, the company has since grown in to a global e-commerce giant now attracting a stock market value of $465 billion – twice the current value of bricks-and-mortar US retail group Wal-Mart. Recently there has been talk of Amazon participating directly in automotive sales – and even more recently, vehicle OEM Seat announced it would be the first automotive brand in Europe to integrate Amazon’s Alexa voice-recognition interface into its vehicles. Watch this space.
“Amazon.com is the leading online retailer of books” – The first line describing Amazon’s business activities in its 1997 IPO prospectus. It has since expanded and diversified to become the fourth biggest company in the world by market capitalisation
Zhu Rongji succeeded Li Peng as premier of China. In the wake of the Asian financial crisis, he oversaw the restructuring of thousands of state-owned enterprises. While foreign direct investment (FDI) worldwide halved in 2000, the flow of capital into China rose 10%. Global trade later stagnated, growing by just 1% in 2002; however, China’s trade soared by 18% during the year.
Daimler’s merger with the Chrysler Corporation was announced in 1998, and along with the taking of stakes in the Asian automakers Mitsubishi Motors and Hyundai Motor Company underlined the aim of making the German company a world-leading automotive group . However, in 2007 the majority stakes in the Chrysler Group and the associated North American financial services business were sold. The cooperative links to both with Mitsubishi Motors and Hyundai Motor Company were also gradually severed.
After hundreds of billions of dollars were spent worldwide on preparing for the widely anticipated Millennium Bug (the predicted inability of many computer systems to cope with the new ’00’ dateline suffix arising from the turn of the century), little or no globally significant effects were reported when the clock struck midnight on December 31st, 1999. Was this because of the billions spent? We’ll never know…
In what many saw as the peak of the Dotcom bubble, online services giant AOL announced a $350 billion merger with media giant Time Warner – the biggest corporate takeover in history at the time. The tech heavy NASDAQ index in the US, which had almost quadrupled since 1997, soon started a decline. From its then all-time high levels of over 5,000 points reached in March 2000, the index fell by 60% over the next 12 months. It did not close above 5,000 points again until 2015.
In a major boost for global trade, China joined the World Trade Organization (WTO), signifying the country’s deeper integration into the world economy. In the years ahead, the service sector would become considerably liberalised and more foreign investment was allowed; restrictions on retail, wholesale and distribution ended – although many barriers still remain, including the requirement for local joint ventures for vehicle manufacturing.
On September 11, 2001, two commercial aircraft were flown into each of the Twin Towers in Manhattan, while a third struck the Pentagon and a fourth was brought down by heroic passengers on its way towards Washington. The most tragic terrorist attack ever on US soil later resulted in the US invading Afghanistan to topple the Al-Qaeda regime.
The US Customs-Trade Partnership Against Terrorism (C-TPAT) was also introduced post the 9/11 attacks in 2001. Today there are 11,400 partners using the voluntary supply chain security program led by US Customs and Border Protection (CBP), together accounting for over 52% of cargo imported into the US by value.
Having launched the single European currency in 1999, paper notes and coins officially went into circulation at the start of 2002. The euro is now the second largest reserve currency and also the second most traded in the world, behind the US Dollar.
Google, a search engine company founded by Larry Page and Sergey Brin announce an initial public offering to list on the NASDAQ exchange. The company has since renamed itself Alphabet to reflect the much broader range of activities it focuses on, which include autonomous cars via its Waymo subsidiary. In February that year, a social network service called Facebook, was also launched.
Europe was rocked by terrorist attacks as the Madrid train bombings and the attacks in London just over a year later highlighted that the threat of terrorism had not gone away.
The European Union welcomed 10 new member countries, namely: Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, and Slovenia. Since then, the region’s combined passenger and commercial vehicle production has more than doubled, from 1.5m in 2004 to 3.6m in 2016.
Hurricane Katrina was the costliest natural disaster and one of the five deadliest hurricanes in the history of the United States. Katrina caused 53 breaches to various flood protection structures in and around the greater New Orleans area, submerging 80% of the city; it also caused severe destruction along the Gulf coast from central Florida to Texas. Large storms in the US have since become a more regular occurrence, often leading to port and supply chain disruptions -including recently in Texas and the south-east following Hurricanes Harvey and Irma this year.
Tesla unveils the Roadster, the first highway legal serial production all-electric car to use lithium-ion battery cells. Production started in 2008. a Vanity Fair article in 2007 profiling Tesla said: “But, for a young, coolly ambitious Internet mogul named Elon Musk and his partners, the plan is to ride the technology curve down to a more affordable, $49,000 four-door sedan, then a $30,000 mass-market model.” The company recently realised this ambition, starting production of its mass-market Model 3 electric car with a starting price of $35,000. In mid-November, the company is expected to unveil its first electric truck.
At an event at Macworld in San Francisco, Steve Jobs announces the Apple iPhone to the world, kicking off the smartphone revolution that is today a regular part of our everyday lives. Ten years later, smartphone and software apps are finally beginning to penetrate supply chain and logistics operations.
Considered by many economists as the worst financial crisis since the great depression, the Global Financial Crisis began with the sub-prime mortgage crisis in 2007 and reached a peak on September 15, 2008 with the collapse of the 158-year old US banking group, Lehman Brothers. The world has still to fully recover from the fallout.
The global financial downturn had a major impact on the world’s automakers, particularly in North America. Following dramatic falls in vehicle sales in 2008, two of the big three carmakers in the US, GM and Chrysler requested emergency loans to stay afloat. The US and Canadian governments provided a financial bailout totalling approximately $85 billion. In total the US is expected to have lost a net amount of $10 billion from the automotive bailout, after being paid back much of the funds. At the same time it is estimated that without the assistance the country would have had 2.6 million fewer jobs in 2009 and 1.5 million fewer jobs in 2010.
In the same year, the Google self-driving car project began. Within months, the company had succeeded in driving an order of magnitude larger than had ever been driven autonomously. The division has since been renamed Waymo and has advanced so much, it is now inviting residents of Phoenix Arizona to join a public trial of its self-driving vehicles.
The Eyjafjallajökull Volcano eruption grounded flights across Europe, causing the greatest disruption to airspace since the Second World War and crippling global supply chains. For example, BMW was forced to halt production at three plants in Germany as well as in the US. Some stoppages were over just a single, unexpected part: Nissan, for example, stopped production of 2,000 vehicles at its Oppama plant in Japan because it was unable to import air pressure sensors from Ireland. Impacts were felt in the supply chain for months.
The devastating Tōhoku earthquake off the north-east coast of Japan near Sendai was the most powerful earthquake to ever hit Japan. In total almost 16,000 people lost their lives, while the Fukushima nuclear power plant was struck by the consequent tsunami, causing a meltdown. Carmakers were forced to suspend production at the majority of plants in the country as the country took special measures to conserve the expenditure of power and direct it toward the relief effort. Car plants all around the world felt the impact, from GM in North America to assembly facilities in France.
In a sign that car sharing was here to stay, rental car giant, Avis announced the acquisition of industry leader Zipcar for $500m. In September 2016, Zipcar said it had over 1 million members across the 500 cities and 9 countries, sharing around 12,000 vehicles.
The International Monetary Fund (IMF) announced that on a purchasing power parity basis China was the world’s largest economy with a GDP of $17.6 trillion versus the US’s $17.4 trillion, ending the latter’s 140-year reign at the top.
The Volkswagen emissions scandal began when the US Environmental protection agency sent a notice of violation of the clean air act to the German carmaker. It was found that certain diesel engines were programmed to only activate some emissions controls during emissions testing. In January 2017, Volkswagen agreed to plead guilty to criminal charges and in April that year a US federal judge ordered Volkswagen to pay a $2.8 billion criminal fine. Since the event other investigations have been initiated around the world involving other OEMs including FCA and PSA.
A referendum in the UK on June 2016 on remaining in the European Union saw a majority of those voting to choose to leave the bloc, casting doubt over future trade relations between the country and the rest of the EU, despite them sharing highly integrated supply chains.
Donald Trump stormed to a shock victory in the US presidential election. The victory created uncertainty for the automotive sector and other industries, given his campaign rhetoric around eliminating free trade agreements and global production networks.
After nine years , the expanded Panama Canal opened to commercial traffic. The estimated $5.25 billion in investment means the route now has six new locks that can handle post-Panamax vessels up to 366 metres (1,200ft) long and 49 metres wide. The Höegh Target, the world’s largest PCTC with an 8,500 car capacity, passed through the expanded canal in September last year.
— Höegh Autoliners (@HoeghAutoliners) September 9, 2016
At the Belt and Road Forum for International Cooperation held in Beijing, attended by delegates from over 100 countries, China’s president Xi Jinping announced investments of $124 billion toward further developing transport and logistics links across the ‘New Silk Road’.
An economic partnership and in principle trade agreement was announced by two of the world’s largest economies, Japan and the EU. Tariffs on more than 90% of the EU’s exports to Japan will be eliminated as the economic partnership takes effect. Once the agreement is fully implemented, Japan will have scrapped customs duties on 97% of goods imported from the EU.