Last week's Economist carried one of their excellent periodic industry sector reports, this one focused on the global automotive industry. As the lead article and subsequent details demonstrate, the industry is shaky and probably undercapitalized for dealing with the challenges it faces. Thus the problems generated by the prospect of sustained high fuel prices could not come at a worse time for carmakers, especially Ford and GM, which still rely heavily on profits from the sale of large SUVs.
I also suspect it is no accident that Toyota should be so well-positioned, financially, geographically, and technologically, to prosper under these conditions. They are making big bets on efficiency and the environment, in the form of hybrids now and fuel cells later, and on capturing the early loyalty of a new generation of carbuyers, through the introduction of the Scion brand aimed at the Millennials (the so-called "echo boomers"), which at least in the US will ultimately rival the Baby Boom generation in size and influence. If these bets pay off, Toyota could challenge GM for top rank, having already narrowly passed Ford.
It's even more intriguing, though, to ponder some of the other possibilities raised by the Economist. We've already seen one car designed and fabricated in the decentralized and highly outsourced fashion they suggest: Mercedes' Smart. Is this the wave of the future, and if so, how would this change the industrial landscape of the US and other developed countries?