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AD&P; > June 2015 > TALK > Insights from IHS > Michael.Robinet@ihs.com 8 INSIGHTS FROM IHS Michael Robinet, Managing Director, IHS Automotive Donald Rumsfeld & the Auto Industry Michael Robinet has been a managing director of IHS Auto- motive since 2011. Prior to that, he was the director of Global Production Forecasts for IHS Automotive. His areas of expertise include global vehicle production and capacity forecasting, future product program intelligence, platform consolidation and globalization trends, trade fow/sourcing strategies, and OEM footprint/logistics trends. One look around today's industry should convince us that we are at a critical turning point. The torrid pace of ad- vanced driver assistance systems (ADAS) content, pressure to improve fuel economy in the face of stifening regulations, and pressure to maintain pricing escalation to a minimum so as not kill growing sales are all concerns. It is both a heady time and one fraught with much uncertainty. Many "knowns" are apparent, it is the myriad of Rumsfeldian "unknown un- knowns" which keep the industry players awake.* Let's explore the "knowns." Anyone who thinks that when the people in Washington perform the midcycle review in 2017- 18 of the fuel economy/emissions standards will do anything but continue to stifen them is foolish. The pace may alter, but the direction and impact on the industry (lightweight- ing, alternative powertrains, etc.) will not change. Do not take your foot of the accelerator with respect to improving vehicle efciency. Another critical known is that the industry and consumers are sure to outpace government and regulators with respect to connectivity and the progress towards automated driving. Several OEMs have signaled that they will be felding NHTSA Level 3 automated vehicles (which allow a driver to disen- gage for periods of time as the vehicle can steer, accelerate and brake on its own) in the not-to-distant future. How gov- ernment handles this from a liability and legal perspective is yet to be seen. A last major known is that the OEMs and suppliers will con- tinue to strive for great efciency and fexibility in produc- tion and design. Faster cadence, a more informed consumer and increased competition will weed out those who react slowly. The goal of improved efciency and fexibility is certainly a known. The "unknown unknowns" are those that keep the industry on the edge. We experienced a litany of these in 2011 with the Japanese tsunami/earthquake as well as the Thailand foods. These "100 year" events seem to be occurring more often. Re- acting swiftly and in a coordinated fashion as a supply chain is key. In both cases, those who had an understanding of the upstream supply chain and how to react to various scenarios were able to minimize disruptions. These external calamities also exposed issues such as over-dependency on a region for critical parts or a lack of second sources. A second unknown unknown is powertrain technology 10 to 15 years out. While electrifcation has a high likelihood of being part of the equation, the massive number of variations and journeys an OEM will take to reach 2025 will difer from manufacturer to manufacturer. Each has placed bets on cer- tain technologies and aligned with key suppliers, but in the end, only a handful of technologies will be most efcient. Other unknown unknowns include the size of the vehicle feet in an automated driving structure where vehicles have much higher utilization rates. How quickly will they be scrapped with more constant use? Will consumers accept these? What are the anomalies? What happens to trafc enforcement, the refueling and maintenance infrastructure? Many questions with a number of possibilities. Likely the most signifcant unknown unknown is the con- stant drive towards industry consolidation. This has been well publicized in the media of late. In a perfect world there would be only a handful of mega-OEMs though we don't reside in a perfect world—far from it. Politics, difering own- ership structures, trade regimes, proftability priorities, and existing production/development infrastructures all point to pressure to consolidate, but it will take a meandering path for several years. Those that understand their path through the future knowns and can be ready to efciently deal with the unknown un- knowns will continue to experience success with a minimum of risk. *Editor's note: Robinet is referring to former U.S. Secretary of Defense Donald Rumsfeld's observation in February 2002: "There are known knowns. These are things we know that we know. There are known unknowns. That is to say, there are things that we know we don't know. But there are also unknown unknowns. There are things we don't know we don't know."