GEARS Magazine - January/February 2002

Future Trends

In previous issues of GEARS we’ve given considerable space to articles that address elements of change. This issue, and this article, will continue that theme. It’s our belief that one of the most important things we can do as an association is to identify industry trends and changes as early as possible, assess what possible impact it could have on the industry, and pass the information along to the membership.

Every few years or so, for the past several years, GEARS has conducted a reader survey that taps several areas of interest and concern among those in the industry. We’ve recently concluded just such a survey, and the results, along with commentary, are included in this issue.

This article looks at predicted change, but on a broader scale. We’ll look at predictions for the next 15 years as they relate to small businesses in the United States, along with related economic and social considerations.

One of the most obvious and oft-repeated references to future change is the aging of the baby-boomer generation and their retirement from the work force. This represents not just a decline in work force numbers, but a loss of business and technical expertise. Along with the retirement of these business owners may also come the closure, rather than the continuation, of their business.

Why? Hot on the heels of an aging baby boomer generation is a marked decline (because of birth rate) in the number of young people who will be ready, willing and able to backfill the vacancies. As this industry knows too well, a shortage of good transmission technicians already exists. The existing difficulty, coupled with the prospect of a reduced labor pool in the future, is sure to have additional negative consequence for our industry. Only aggressive, proactive steps to lessen that impact will make a real difference (and more about that later).

Also predicted is a shift away from a manufacturing-based economy to one that is knowledge-based, and oriented towards service. In some respects, I believe this will actually be of benefit to many in the transmission rebuilding industry. How this may affect the supplier-side of the industry is not well defined. For the shop whose business is selling and installing transmissions (either rebuilt or remanufactured), the implications seem to be pretty straight-forward. A premium would be placed on the ability to accurately diagnose the problem and sell the fix, with significant emphasis placed on customer relations and service.

As automatic transmissions become increasingly more complex and symptoms of possible malfunctions more interrelated with other drivability issues, diagnostic skill will not be just important, but critical, to survival. These are skills increasingly more rooted in science than art, and very expensive to cultivate as an on-the-job experience.

WORKFORCE CONSIDERATIONS

Unfortunately, another prediction for the future is that the number of young people entering the work force that are trained in computer, math and science skills will decline. So not only can we expect shrinkage in the surface size of the pool, we will also find that pool to be all the more shallow.

At the same time, other industries and organizations will be competing for the same young people to fill their own ranks. Traditionally, larger organizations are better able to attract an incoming workforce. Better compensation packages may be available along with greater non-financial perks: flexible work hours, education incentives and assistance, more time off, and other benefits will help to retain current workers and attract new ones.

It’s also safe to assume that the technical aspect of transmission rebuilding will only become more complex. An area of significant future growth is predicted to come from the development and use of microelectronics and micro-electro-mechanical systems (MEMs), with primary use in diagnostic equipment. No doubt applications will emerge from this field that will find inclusion in the development of future transmissions and diagnostic equipment.

Does all this sound as though the future will have little or no room for the business of transmission rebuilding? Not even close. As with any and all evolutionary change, shop owners will have to work better and smarter. That’s nothing new. Just look where you’re at now, and think of how you evolved to this point. As we’ve said so often, change has always, and will always be, a part of life. Just as the future will hold its own challenges, it also holds opportunity.

First, there will always be young people who are attracted to automobiles and what it takes to make them run. Unlike in times past, though, there now may be fewer young people who, because of lack of exposure, don’t have the opportunity to become excited about the possibilities related to automotive technology. Except for the most rudimentary maintenance, the repair of late model vehicles is beyond the ability of most vehicle owners. Because of the system sophistication of late model cars, fewer adults work on them … which also means that fewer young people will be working on them as well. The natural evolution of this means that fewer people will ever know if working in a technical/mechanical setting is something they might want to pursue as a vocation.

Fewer people who are able to do minor repairs on their cars may bode well for the existing general repair shop, but not the transmission specialist. It’s been awhile (if ever) that your average "Joe Citizen" could repair his own transmission. Those that have needed transmission work have been coming to you for a while now.

A significant but subtle downside to this is that early opportunities are missed to expose the young person to the challenges and possibilities created when they can work on their own car or truck. Unfortunately, the vast majority of high school programs throughout the United States are oriented towards preparing young people either for college or "something else." The latter choice usually means the individual is left to find his or her own way. At best, they may be "tracked" towards customary trade work, or into occupations that don’t include college. More commonly, the individual’s desires or temperament are often ignored, and they simply finish high school with no idea of what it is they want to do.

The number of high schools that have dual-track programs that also address the needs of those not oriented towards college are few and far between. But that is the exact population that needs to be targeted for technology or trade programs, and the involvement of businesses and associations in allied school-to-work programs.

Involving young people in training and education programs for which they feel suited not only keeps them involved in the education process, but it provides a realistic method by which they can prepare themselves for a meaningful and productive career.

When transmission shops become involved in such programs, they not only help the young people, they create a resource of trainable talent. This is of benefit to both the shop and the industry. There are several ATRA member shops across the United States whose owners have taken it upon themselves to become involved in high school automotive technology programs. Some are adjunct teachers, mentors, or provide the "real world" shop setting for the new apprentice. Many of the young people become transmission technicians, while some go into general automotive repair. Some, I’m sure, go on to other things. The important element is that young people are exposed at an early stage to the transmission industry, and what it may have to offer them as a career. In my estimation, such a proactive pursuit of young talent is far better than sitting back, hoping that trained technicians will find their way to your door.

A step beyond the basic school-to-work programs are the technology-centered colleges such as the University of Northwestern Ohio in Lima. Comprehensive education and training programs are available that not only lead to enhanced technical and management competence, but to Associates and Bachelors degrees as well. An important aspect of a Northwestern education is that it can also be obtained through video and the Internet, and wrapped around the schedule of someone who is already working.

ECONOMIC TRENDS

In these times, trying to develop a solid, reasonably accurate forecast of economic trends in the United States (with international considerations), is a bit like trying to nail jell-o to a wall. Whatever thoughts and predictions the economic pundits had in play prior to September 11, went out the window with the terrorist attacks.

What had been a slowing U.S. economy quickly ground to a near standstill overnight. Suddenly, a very large wild card was on the table, with implications for nearly every segment of the national and world economy. Some conditions and factors believed by many to be key in the overall course of our economy, and its future path:

Prior to September 11, our economy had already slowed considerably, and was thought by many to be at the edge of a recession.
Our nation’s Gross Domestic Product (GDP) for the latest quarter indicates a continued decline (though admittedly a small one). As it represents the second such consecutive quarter, it fulfills the technical definition of a recession.
The "fear factor," a real result of terrorism, contributes directly to a lack of consumer confidence and a slow down of consumer spending.
Unemployment figures, currently over five per cent (5%), is the highest in some time, and an additional contributor to a slowdown in our economy.
Our war on terrorism is likely to be protracted, costly, and without containment. It has been, and will likely continue to be, fought in part on American soil. This will continually reinforce the "fear factor" with uncertainty.

Within the general slowdown in consumer spending stands one distinct exception. The sale of new vehicles for October hit an all-time high, with 1.73 million vehicles sold; an increase in over 24%. Consumer spending increased 7.1% in October – the largest monthly increase ever – based largely on the increase in auto sales.

The driving force behind this has been the 0% financing made available by General Motors, and grudgingly followed by other manufacturers. The heavy price discounting is expected to continue through the holiday season and into the new year. It is seen by many, however, as being short-sighted, and a costly program done at the expense of future sales. Some Wall Street analysts are predicting a reduction in new car sales next year by as much as 15%.

How does all that translate into what you may expect for the future? Any specific prediction for the economic future of the U.S. would be tenuous, at best, and probably irresponsible, at worst. There are simply just too many significant variables that cannot be controlled or even anticipated by the independent shop owner, given the current state of international conflict.

If any broad, generalized inference can be drawn from what we expect the future to hold, it would probably be best to look at times past. Historically, a common theme emerges during a recession, where consumers repair large-expense items rather than replace them. It would stand to reason, then, that the transmission rebuilding industry would benefit from such a down-turn. This, despite record new-car sales, as the actual numbers represent only a small fraction of the total vehicles in service across the United States. As an additional consideration given the recent explosion in new auto sales, what can we expect in a few years when the vehicles are out of warranty, and develop transmission problems? What other ripples will be felt when a glut of leased vehicles return to dealerships for resale? My questions aren’t meant to be rhetorical, but any answer at this point can be only speculative, and an example of a variable whose impact cannot yet be assessed. But be assured, the questions will only have greater significance in the future.

Without betting the farm – or the shop – on what you think are definite indications for the economy’s future, look forward with more conservative (and safe) considerations. This can best be accomplished by taking a good look at the emerging economic indicators with an eye towards adapting your business to meet the changes as they present themselves. Take a hard look at your market area and identify the niche you can best fill. Adjust your products and/or services to fill those needs, and you can go a long way towards being the one your competitors have to chase.

Another major consideration for the future is the growing reliance on information accessed through the Internet. Consumers already use the Internet to educate themselves about major purchases of goods and services. A growing number of transmission shops use the Internet to access technical information and source parts. Both of these applications, along with many others, will expand tremendously. The successful business will be one that is willing and able to stay plugged in to the opportunities the cyber-world has to offer.

No doubt the future of the transmission business will be replete with challenges and unforeseen events. But for those willing and able to adapt, tremendous opportunity will exist as well. Stay alert to the resources that will help you identify the changes and assist you in overcoming the obstacles. But never forget: your own ability, coupled with a willingness to seek out answers and put into play a reasoned, flexible business plan, is the best asset you could ever have access to, regardless of what the future holds.