GET READY FOR "MICRO-NICHES"

"Micro-Niches?"

Automotive News is reporting that Chris Theodore, Vice Chairman of ASC, Inc., said today at the annual Traverse City, Michigan, "Management Briefing Seminars" that "automakers must learn how to make such small-volume products profitable -- or at least sustainable. . . . It's going to take a different approach to manufacturing."

"A micro-niche is a model that sells only a few thousand units a year -- but which automakers keep alive for a halo effect on their brand."

Doubters of the "halo" theory and efficiency-oriented bean-counter types hate niches and "micro-niches" because they play havoc with economies of scale, work rules, and smooth-running mass production lines.

But, "customization" is a general trend in consumer products and Theodore noted its increasing effect on the U.S. auto industry. The number of models "selling fewerthan 10,000 units a year" has doubled, "from 54 in 1999 to 117 in 2005." Even mass market models sell in smaller volumes today. Theodore said "the average nameplate sold only about 48,000 units."

The future clearly belongs to the lean and flexible.

Skeptics will note that Theodore's company, however, has a dog in this fight to promote and then to outsource "micro-niche" vehicles.

However, one can hardly dispute that "micro-niches" have the potential to increase sales at the margins, albeit with greater costs and required effort.

FoMoCo has historically used outsiders to build "micro-niche" specials. In the 1960s, Shelby-American, A.O. Smith and Kar Kraft all built "specials" for FoMoCo. Reportedly, the 2007 Shelby GT will be a joint production between FoMoCo and Shelby's Las Vegas factory.

The real challenges for "micro-niche" vehicles include (a) identifying and quantifying the target market; (b) providing a suitable OEM platform;(c) engineering, sourcing and certifying the value-added components; (d) arriving at an effective division of work between the OEM and the "micro-niche" contractor; and (e) properly marketing and promoting the end product so as to maximize sales and the effect of the "halo" on lesser mass production products.

The 2007 Shelby GT will be little more than a "tape-stripe special" with minor styling tweaks and FRPP "packs" on the suspension and the stock-block, hypereutectic-piston 3v engine.

The critical parameters of "micro-niche" vehicles will be controlled by the OEMs. OEMs dictate the basic layout of the vehicles (e.g. RWD v. FWD), the computer codes, transmission and drive axle torque ratings and engine internals. If the drive to cut costs and weight compromises the basics, no amount of "micro-niching" will produce fun and interesting high performance products. As the old cliche goes, "you can't make a silk purse out of a sow's ear."

But "micro-niches" really only work it they can take advantage of mass production platforms and "common" support systems (HVAC, electrical, safety, etc.)

Excluding the Mustang, F-Series and some BOF SUVs, FoMoCo's current line-up isn't very receptive to strong "micro-niche" products. Nor has FoMoCo shown enough aggression in pursuing them.

FoMoCo engineers and product planners should keep the foundational requirements of micro-niching" in mind as they plan future products.

An essential element for FoMoCo is to certify several engine packages that are "power adder ready." Under the current environment, supercharged, turbocharged, "dual-charged" and perhaps even nitrous oxide injected engines with cylinder deactivation and variable valve timing will become the preferred ways to combine daily-driven efficiency with occassional blasts of fun.

Notwithstanding the relatively inefficient, Eaton-blown GT500, FoMoCo is way behind here.

Micro-niches are here to stay. But will FoMoCo lead?