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WESTLAKE VILLAGE, Calif. — J.D. Power and Associates believes the ongoing metamorphosis of the auto industry into a completely global venture could produce more situations like the combined effort of Chrysler and Fiat.

A firm expert who concentrates on analysis from a global perspective sees more joint ventures and collaboration in order for automakers to thrive on a worldwide scale. John Humphrey, senior vice president of global automotive operations at J.D. Power, shared this assessment and more recently.

"Automakers that don't have the size or resources to become a global manufacturer, particularly considering the changes in technology, environmental regulations and scale requirements, won't be able to remain competitive," explained Humphrey, who has spent more than 20 years tracking the industry from bases throughout the Asia Pacific, India and most recently China.

"So the question is: how do they get the necessary backing? One solution that could make sense for some automakers is to form a strategic alliance or joint venture. There will be some brand dilution, but the real challenge is how to survive," Humphrey continued.

An example J.D. Power gave is the merging of Chrysler and Fiat. The work of the two automakers soon will bring a new model of Fiat to the United States, a unit similar to what the brand successfully sold in Europe.

"Chrysler is a perfect example of a company that didn't have the reach outside the United States," Humphrey noted. "Fiat, bringing in the products with small-car expertise and the reach, will help them. With the costs associated with bringing new products to market, you'll see more product sharing in the future. I don't think this is a one-off situation."

Humphrey conceded that manufacturers often are some of the slowest companies to react to industry shifts. He emphasized that philosophy likely will have to change, especially since so many sector elements intersect beyond the United States.

"There are so many forces that have come into play in the past five years that if an automaker doesn't have the scale or the reach to compete globally, it's not going to be a viable entity," he noted.

"Many automakers were sourcing a major portion of their sales and profits from developed markets like the U.S., but that's not going to be the case anymore, at least for the foreseeable future," Humphrey went on to say. "If you look at the other markets — Japan and Western Europe, in particular — they're going to be flat, at best, post-recovery. So, manufacturers will have to be able to tap into new emerging markets to get the volumes they need."

And when automakers bring something new into a market — either an established or emerging one — Humphrey stressed that OEMs must be sharp when rolling out vehicles. A model that fails to catch consumer attention can be devastating.

"We've seen manufacturers come out with products that just don't meet the needs of that target segment. You have a bad launch and not only do you have to live with the financial consequences of that product, you also have to live with the impact on the image of the brand," Humphrey asserted.

"The margin of error is very small in today's competitive environment. We've seen, in a lot of emerging markets, launches that show automakers don't understand the needs of the market and the product is a dud. And, unfortunately, that still happens in the U.S. There's still a lot of learning that needs to be done in the emerging markets. And, in the long term, that's going to have a big impact on the health of a manufacturer," he continued.

With globalization of the auto industry likely to become more complex in the future, Humphrey ventured some projections about how the sector could appear a decade from now.

"Ten years down the road, the auto industry will be extremely different from the way we know it now," Humphrey predicted. "We're forecasting about 67 million units being sold this year, down from 70 million in 2007. We see surpassing the previous peak of 70 million by 2011, to 72 million units, so the market on the surface will be back to normal. 

"However, that's as far as you can get from the truth, because you're going to have a very tough situation in the U.S and other mature markets," he added.

Humphrey expanded upon why he believes the domestic sales market future is clouded.

"The U.S. is not going to be the dominant powerhouse it was. The years of 16- and 17-million-unit sales were artificially created, with incentives and fleet sales to rental car companies," he pointed out.

"We do forecast that it will return to that level eventually, but not for several years, and more because of increasing numbers of households and vehicle replacement demand," Humphrey continued.

J.D. Power reiterated that emerging markets and economic struggles in the world's wealthiest countries should continue to force automakers to think globally when making competitive strategies.

"The auto industry used to be the U.S., Japan and Western Europe. They'll continue to be important, but they'll continue to decrease in terms of their contribution to the profitability of the OEMs. That, in and of itself, will force more manufacturers to go global," Humphrey stressed.

"Add in all the regulatory requirements and manufacturers will have to become more flexible," he added. "The center of the automotive universe is going to change."