1. Dr Peter Wells Centre for Automotive Industry Research
The crisis spiral
Dr Peter Wells
Centre for Automotive Industry Research

2. Contents The crisis spiral concept Automotive examples
Interconnectedness
Time
Automotive examples
MG Rover & Mitsubishi
Wider considerations

3. Sources of crisis Economic / business Environmental / social
Internal e.g. Failed new model, labour unrest, major supplier fails
External e.g. general demand slump, material supply crisis
Environmental / social
Not including ‘disaster recovery’
External source (usually)
Unpredictable…major role for corporate communications

4. Revenue Falls / Costs Rise
The Crisis Spiral
Demand Falls
Revenue Falls / Costs Rise
Brand Status Falls
Output / Sales Fall

5. The Crisis Spiral
FINANCE
STAFF
DEALERS
SUPPLIERS

6. Plant Investment Falls
FINANCE LOOP
Secondary Sales
Vulnerable
Shares Sold
Value Falls
R&D Investment Falls
Revenues Fall / Costs Rise
£ Shortage
Plant Investment Falls
Assets Sold
Interest Rates Up
Debt Rating Falls

7. SUPPLIER LOOP Revenues Fall / Costs Rise No Component R&D
Supplier Volumes Fall
No Supplier Parks
Benefits of Alliances Reduced
Advance Payment
Revenues Fall / Costs Rise
Weak Partners
Time To Market Increases
Product Uncompetitive
Need Alliances
Less To Contribute
Quality Falls

8. DEALER LOOP Revenues Fall / Costs Rise Sales / Dealer Fall
Confidence Falls
Multi Franchises
Customer Service Falls
Dealers Leave
Revenues Fall / Costs Rise
Adopt Other Brands
Property Declines
Dealer Investment Falls
Territory Lost
Training Declines

9. PERSONNEL LOOP Revenues Fall / Costs Rise Plants Closed Down
Contract Staff Hired
People Laid Off
Competencies Decline
Pay Limited
Revenues Fall / Costs Rise
Recruitment Difficult
Morale Falls
Best People Leave
Absenteeism Rises
Productivity Falls

10. Some Brief Examples MG Rover The forty year crisis
From the impossible to the inevitable
Losing control over destiny
Car design integration ability lost
Key decision moments e.g. move to BMW
Key intervention moments?

11. Some Brief Examples Mitsubishi Initial problem with detaching wheel
Main problem came with cover ups and denials
Been through successive rescue plans
Now trying CSR-lead revival
Major reengineering of corporate culture
Additional problems in the US
Still spiralling downward

12. Crisis and Time
Different elements of entire value system respond at different rates:
Finance…immediate
Link between reputation risk and finance risk
Run on the bank problem…drawing the line in the sand
Other elements work through more slowly
Government (non) intervention critical

13. Crisis and decline Can the spiral be reversed or even pre-empted?
Does the crisis accelerate the rate of decline?
Are corporations more vulnerable now than they used to be?

14. Conclusions
More research needed!