GLG News by Mark Fendley

Implications: Certain parts of the automotive passive and active safety original equipment market are moving towards commodity status, with volume being the key to future profitability. Tier One safety equipment suppliers must invest in those technologies that will bring greater value and margins.

Analysis: Autoliv's investment to purchase the radar sensors business of Tyco Electronics makes very good sense. And I believe Tyco's assessment of the future value of this business is accurate, if not conservative.
The vehicle that any consumer buys in 2011, will have a significant shift in value content. The passenger vehicle that was purchased in 2003, had about 35% of the content value as electrical, electronic, software, chipset, computing, and sensing content. The passenger vehicle of 2011 will have about 60% of the content value as electrical, electronic, software, chipset, computing, and sensing content. This value proposition will be driven by infotainment content and telematics, active and mild hybrid technology, emissions control, and active safety content.

The use of radar will see more application for active safety. The utilization of radar, infrared, and CMOS technology is already in place in Lane Departure, Lane Change Detection, Speed Limit Indicators, Active Cruise Control, Rear View Camera, Night vision, and Smart Beam applications. Much of this technology is currently in use in the premium segment. But like technologies before, such as side impact airbags, power windows, power mirrors, this technology will find its way into the more mass market automobiles. And some of the applications will be encouraged and even mandated through safety regulations in the EU, US, and in Asia.

There will be additional developments that will utilize radar, infrared thermographic, CMOS, sound wave, and magnetic wave sensor technology to enhance occupant safety and convenience, and to prepare a vehicle for an impending collision. And this too will move from the premium segment into the mass market. Simply, safety is not optional, once it is demonstrated in the market. And the regulations either proceed or follow.

So Autoliv's investment seems like a sure bet. There are other companies that are investing in sensing technology for use by the OEM's. This includes Gentex and Mobileye with advanced camera technology, FLIR with infrared thermagraphic technology, and Continental with a host of technologies that have been in the works with Siemens VDO. 

Expect to see Autolive and TRW continue to invest in the innovative and higher margin technologies such as sensors and ECU's for active safety applications, and continue to grow the commodity portion of their business in airbags through greater volumes for the global automotive market.

Implications: GM, and Ford, are the victims of too much focus on the American market, for far too long, at the expense of the world market. GM, and Ford, must continue to shift away from, and write down production and assets focused on truck and SUV production. How much will GM and Ford have to give up, to survive?

Analysis: GM's announcement of lay-off's and extended plant shutdown's is further sign that GM is making the hard decisions "the morning after" the hard party of intensive focus on light trucks and SUV's. Truck and SUV production at eleven facilities producing these products is either being slowed, halted, or shuttered all together. Ford is announcing similar reductions at their facilities.

If there was one huge miscalculation made by GM and Ford, that was pouring decades of capital investment, product and component engineering, and product development capacity into  inefficient powertrain technology, in truck based products, meant soley for the US market. Both companies had to recognize that the huge profits being generated by these products were not sustainable over the long term, but were too blinded by customer demand and financial validation of their short term focus. Now, it is a race against time to survive.

Expect to see for the remainder of 2008 and perhaps all of 2009, continued lay-off's, production reductions, and hits to the financial performance of both companies. What we are seeing regarding buying trends for trucks and SUV's will not stop, much less reverse. I don't expect to see a positive quarter for many more to come. On top of this will be continued negative results from the Financial arms of GM and Ford as SUV's and trucks come off lease, and are sold at firesale prices.

The real trick will be if GM and Ford can continue to generate the cash needed to sustain a new product development wave, a global product focus, alternative powertrain technology, and increased regulatory compliance requirements.

Expect to see GM sell Hummer to an Indian automotive company, and to eventually make a decision regarding the future of Saab. Also, expect to see decisions made if both Saturn and Opel brands are needed, and if Pontiac is truly needed in addition to Chevrolet. And with many factories occupying prime real estate in metropolitan areas, expect to see aggressive marketing and sales of GM plant sites as brown field real estate. All of this will be needed to generate cash.

Ford will make similar decisions about Volvo, currently with several Chinese suitors among those interested. Also, they have many plants outside the Detroit area that would make attractive brown field sites for developers.

Finally, Ford and GM must seriously consider strategic alliances with other global OEM's in order to share research, development, supplier development, and manufcturing costs. Without this piece, long term survival will be doubtful.

At the end of the day.....a few years...... I expect a much smaller GM and Ford to emerge as proper sized, globally focused, moe flexible, and more open to proper partnerships and alliances. This is the only way to survive as an automotive company in this day and age.

Implications: Toyota's announcement that the new Mississippi facility will produce the Prius is a smaret decision to increase capacity for a marketable product, with variant potential for the future. Toyota's temporary suspension of production in Indiana and Texas to reconfigure the plants for greater product flexibility is a model already proven to be a smart capital investment strategy by Nissan and BMW. Toyota is also indicating with this article a philosophy for world cars, as demonstrated by Prius production for other markets.

Analysis: Toyota is about to employ lessons learned by other OEM's as a method to survive and thrive in an unpredictable, single market. Those lessons are to create product flexible manufacturing facilities and produce world cars delivered from a low cost maunfacturing base.
 
One of the many Achille's heels of GM, Ford, and Chrysler is that they concentrated for too long on a sole market for predominance of sales - the United States, and they invested in manufacturing facilities with minimal product flexibility. In addition, vehicle assembly capacity was created to service a single market.

Nissan and BMW, among others, have long created a flexible infrastructure in their factories that allow multiple products to be produced in one process. The Tennessee Nissan facility pumps out small trucks, small SUV's, sedans, coupes, and hybrid all in the same manufacturing process. And the flexiblity is built in to adjust product mix based on market demand.  So if the Altima is selling, but the Frontier is not, then capacity utilization can be adjusted.The South Carolina BMW facility has taken this even a step further by not only producing X5, X6, Z4, and Zcoupe products on the same assemlby line, but the products are delivered to a world market of more than 130 country destinations. So not only can product mix be adjusted, but the markets supplied can be adjusted. So the example is that if the US is down, then Russia and China are up to absorb vehicles available for the market.

Toyota is now doing just this in multiple locations. The Missippi facility, originally intended to produce the Highlander and hybrid Highlander, will be tooled to produce the Prius. Now one could question if flexibility should be built in to also produce the hybrid Highlander. Even if the current generation of hybrid technology doesn't deliver the fuel efficiency savings expected in small SUV's, then perhaps the next generation might. And a manufacturing site that can deliver sedan and truck hybrid vehicles, in a flexible manufacturing environment, would be a formidable tool to deliver what the market demands in the future.

Also expect to seeing tooling changes in the Texas and Indiana truck plants that will allow greater flexibility in the number of vehicle models that can be delivered from the same manufacturing site.

Also, another indicator of manufacturing success is utilization of the factory capacity that you have. Toyota, Nissan, and BMW typically plan to keep worldwide manufacturing capacity at a 90% plus utilization rate.  And if the market demands more, then overtime and flexible work schedules deliver more hours and more vehicles. In many GM and Ford facilities, factories will routinely run at less than 80% capacity - a huge waste and misallocation of resources and capital.

The next step for Toyota and Nissan will be do deliver world products from their US manufacturing sites. With the dollar no longer a dominant currency, producing cars from US dollar components, produced in US dollar manufacturing facilities, then sold in European, Asian, and South American markets, is a smart business decision.


Toyota, even with slow US sales, will emerge as a stronger manufacturing and marketing company as a result of this strategy.
 
The obvious question is will, or even can, GM, Ford, and Chrysler afford to emulate this sound strategy. Can they afford not too?

Implications: With the downturn in US sales volumes and a rapid switch from SUV and light truck to smaller, more fuel efficient cars the Big Three are taking some of the Tier One suppliers down with them. Those that are diversifed in terms of product, geography, and model mix are the most well positioned to ride out the storm. Johnson Controls is one of those companies positioned well to maintain and to grow in the current, difficult market.

Analysis: With the reduction in volumes, the shuttering of factories, and the monumental tasks of changing model mix and right sizing the companies, GM, Ford, and Chrysler are creating a painful ride for many Tier One suppliers. And those Tier One who receive a majority of their sales exclusively from the US assembly fctories are in for a word of pain in the next few years. Examples, beyond the recent debacle, are American Axle, with 75% of sales derived from GM. another example, Lear receives approximately 45% of revenue from GM and Ford sales. Both of these companies also do nothing other than automotive Tier One components. There are many other examples of Tier One companies with the lion share of their business linked to domestic factories and to the Big Three. Beyond the Big Three link, the domestic production, and the lack of corporate product diversification is the rapidly increasing costs of commodities that are no longer so readily absorbed as a 100% pass through by the OEM's.

On the other hand, Johnson Controls looks to be in a position to weather the storm quite nicely. Johnson Controls has three primarily businesses - Business Environmental Controls, Automotive Interiors, and Energy Technology or Batteries.

The Business Controls division should continue to benefit from the "lean to green", the CO2 reduction strategies, and the desire to produce more energy efficient buildings globally. Expect this division to make up the largest portion of Johnson Controls revenue in the future.

The Energy or Battery business is also well positioned. Johnson Controls is already a dominant player in the OE battery and Retail battery markets. So the company has two distinct methods for deriving battery sales globally. In addition, Johnson Controls is becoming a strong participant in the move towards hybrid and mild hybrid technology with cooperative research, development, and manufacturing of hybrid battery technology in Europe, the US, and in Asia.

As for Automotive Interiors, Johnson Controls made a deliberate moved years ago to diversify the customer base for interior systems. A full 2/3 of sales is derived from automotive assembly facilities outside of the United States. And some estimates indicate that Johnson Controls may have less than 15% of interior sales from Big Three US factories, with the remainder of US factory sales coming from the Asian and European transplants.

Johnson Controls seems to be well positioned to ride out the automotive storm. Although they will be impacted by the decline and shift of production at the domestic Big Three, it will be to far less of a degree than many of their Tier One counterparts. And what they lose in Interior Systems, should more than be offset by Building Controls and Battery business.

Implications: The new price point for HD receivers will mean signicantly more volume of units in automotive OEM applications, potentially surpassing one million units installed in OEM applications by early 2009. Unlike Sirius and XM, Ibiqiuty's HD radio is finding an audience in Asia and in Europe. Ibiquity is entering into unique partnerships with Apple and Navteq, that will enhance the functionality of HD radio.

Analysis: I am sure Ibiquity would like to see digital radio mandated like we have seen for digital television broadcasting. But even without that, HD radio will experience a steadily increasing presence as original equipment in automobiles in the US and abroad.

The new price point will bring in more consumers who will give HD a chance. And they will find a product that is as clear, if not clearer, than satellite radio. In additon, a business model that requires no monthly subscription as found in satellite radio. The experience of the consumer market, will also trigger more OEM's to offer it as standard or optional equipment. BMW, Mercedes,Ford, Hyundai, Jaguar, Volvo, and scion are already offering or wil offer later in 2008 Ibquity HD radio receiver technology as standard or optional equipment on most models. Expect to see more OEM's, including Scion parent Toyota, to follow suit in 2009 and 2010. This additional volume should push HD receiver volume over the 1 million mark for automotive OEM original equipment.
In addition, Ibiquity has entered into revolutionary content agreements with Apple to provide a mechanism for instant purchase through iTunes of songs heard on HD radio while in your car. An agreement with Navteq and Clear Channel provides access to real time traffic and weather that can be received through the HD receiver and broadcast as data for the vehicle navigation system. These types of collaborative partnerships are very representative of the infotainment content that will continue to be developed and marketed for OEM applications.

The OEM's are going to offer the content that the consumer desires. Whether this is satellite, streaming wireless internet, or HD radio, the automotive OEM's want to provide the entertainment capability and the instantaneous data access that will be standard equipment in the vehicle of the very near future. The platform for the data broadcast and reception will be the open point as infotainment continues to evolve.

Expect to see terrestrial radio continue to play a huge part in the future of automotive infotainment. And if Ibiquity continues to develop such novel partnerships and attractive pricing models, expect to see more and more vehicles, not only in the US, but worldwide, with HD receivers.

Implications: Volkswagen recognizes they have to produce in the US to growth the US market share. The same formula has worked for the other German, Japanese, and Korean transplants. Expect the factory to be flexible enough to produce both Volkswagen and Audi products, since they share platform and powertrain components. Also, expect the factory to be positioned as an export center for VW and Audi products produced with US components with a US dollar basis.

Analysis: Volkswagen is surely going to provide a bright spot to an otherwise gloomy July for the US auto industry. Volkswagen is scheduled to announce the intent and location of a Volkswagen production facility prior to the 3 week summer shutdown in Germany. Three states and locations are in the final running - Michigan, Chattanooga, TN, and Alabama. My money is on a location in the Huntsville, Alabama area.

Volkswagen must follow the formula that has been proven out by Toyota, Honda, Nissan, Mercedes, and BMW, and that is to be a serious player in terms of sales and volume in the US, you have to produce in the US. Also, with the weak dollar and strong Euro, Yen, and strengthening Yuan, it also makes sense to have a US factory, with North and Central American sourced components, producing vehicles for the world market. 

With the announcement of this factory, should also come the announcement of intentions for a powertrain and stamping facilities. Each of these will prove to be quite an economic catch for another community in the US or Mexico. There should also be the expectation that the factory will have the flexibility and capacity to support both Volkswagen and Audi production. Since the Toureg / Q7, Tiguan /Q5, and Passat / A4 all share platforms and powertrains, it is very probable to see the factory producing complete vehicles, or at the least, vehicle assemblies for both models. Expect to see a sedan as a first model followed by a small SUV.

In addition, there should be enough people left at Volkswagen to understand what went wrong with their first US manufacturing venture in Pennsylvania. Hopefully, Volkswagen will recognize that the factory culture that has been perpetuated with the Audi Production System (APS) is a much more conducive business model to production success in the US. If they are wise, the factory will launch with this concept.

This July 4th will provide Michigan, Tennessee, or Alabama with another reason to celebrate in the form of a new German corporate resident.

Implications: Autmotive OEM's have saturated the US market, and now must ride out the economic downturn. The astute OEM's are right-sizing for the US market,and the wisest among them are using US capacity to support the explosive growth of sales in China, Russia, India, and Brasil. What should emerge are more OEM US manufacturing operations that are supporting world car platforms. US factories could become significant exporters of certain models.

Analysis: What is happening in the US market is not neccesarily a bad thing for both domestic and transplant automakers. Just as bitter medicine might improve the morning after hangover and lead to better health, the slow down in US sales should force the OEM's to right size themselves for the domestic market and to develop more flexible manufacturing capacity to supply a worldwide market.
It is no secret that the United States vehicle sales growth per 1000 people is not a double digit sales growth market. The US already has more than 800 vehicles per 1000 people, a mature Used car market, and a proliferation of brands and models. The US, whether there is an economic downturn or not, is a flat market at best for vehicle sales for years to come. The only shame may be that the OEM's, particularly the domestics, did not see this coming sooner. But then, the domestic OEM"S have been through several resurrections and rebirths in the past. Not too many years ago, in 1979, Chrysler would have been given up for dead if not for Lee Iacocca's approach to the US Congress. And Ford and GM have had their share of boom and bust as well. So what the automakers are experiencing doesn't exactly fit the bill of a dot.com type bust. It is more of a deja'vu.
The domestic OEM's will shed capacity. This will mean the reduction of brands - it is conceviable that Pontiac, Saturn, Plymouth, Mercury and Hummer could disappear. Certain SUV and light trucks models will also become history.  Also, manufacturing capacity will either be shuttered or reallocated.
The real bet is that both domestic OEM's and transplants will  more seriously look at their North American manufacturing capacity to provide vehicles for the world market. North American automotive factories will become exporters of automobiles to the BRIC markets. GM and Ford are already receiving a substantial portion of their volume sales from these emerging markets. And Toyota, Honda, Mercedes, BMW, and Volkswagen are all aggressively building sales and distribution networks for these markets. And the potential is there. With China, Russia, and India each having less than 200 vehicles per 1000 people, the volume grow potential is enormous. China is experiencing a 10% growth in sales per year, and this is predicted to continue for decades. Russia is experiencing a 13% growth is automotive sales and is accelerating. And India experienced a 102% jump in Premium / Luxury cars sales and had a 25% growth is sales volume, overall, in 2007. So these markets are ripe for sales, for brand recognition an brand development, and to receive import volume from US factories. And the demand will not simply be met by vehicle manufacturing in those countries.
BMW already ships X5, Z4, and X6 to 140 worldwide markets from the South Carolina facility. Mercedes produces a ML and GL class of vehicles for the world market in Alabama. Honda and Toyota are now beginning to utilize US factory capacity to supply the Russian market in particular. And to highlight the potential for the domestics, just use the Buick brand as an example. While Buick may be fading in the US, if you travel in China there is a very good possiblity that your limousine is a Buick. The brand has a presence and cache' in that market. Why not export US built Buicks to China? 
So now the potential is definitely there for the domestics to do the same. What it does mean is that the domestics need to configure their factories to support multiple models and multiple markets. The days of a factory being dedicated to a single model are probably numbered. In stead, we should see more flexible manufacturing capacity, delivering a world product. And with the dollar a deflated currency when compared to the Euro and the Yen, the profitability of export of US dollar sourced and built cars makes even better sense.
My perspective in that the domestic OEM's, and the utilization of both domestic and transplant manufacturing capacity are undergoing a very healthy process. If they can emerge leaner, with fewer brands, better utilized capacity, and a world car presence, we will surely see Ford and GM continue to produce and sell cars for years to come. And it also might be nice to see Toyota emerge as the largest exporter of cars, out of their US factories, to the world market in the next decade or so.

Implications: The alliance of Freescale and Chery to develop MCU and chipset technology means tremendous potential for Freescale growth in Asia. Freescale's recent acquisition of SigmaTel could give Freescale an avenue to grow share of automotive multimedia and infotainment chipset applications. Freescale is well positioned to continue to be the dominant semiconductor supplier to the worldwide automotive market, driven by continued strong demand for chipsets for new applications, resulting in greater numbers of chipsets per vehicle, and strong vehicle unit sales in Asia and in Eastern Europe.

Analysis: Freescale does it again. With this alliance, Freescale is assuring that it's chipsets are well positioned to find their way into Chery automotive applications and into applications for other Chinese automotive manufacturers. This is a crucial move for Freescale,  opening up the door for specific chipset applications for hybrid technology, active safety, and infotainment multimedia.

Freescale is currently the dominant supplier of semiconductors to the automotive market, and has been in this position for 17 years running. This is significant in that the global automotive semiconductor business is worth $19 billion, and is growing by more than 10% per year. Freescale has 10% of the worldwide automotive chipset market and 21% of the North American automotive chipset market. With China positioned to surpass the United States as the single largest automotive market by 2015, this alliance with Chery makes even better sense.

Freescale has also developed a reputation as a pioneer in Flexray technology, and CAN and LIN flash memory technology. Flexray MCU applications are already present in the BMW X5, for example. And Freescale has already pioneered chipset applications for the mild hybrid technology co-developed by GM, BMW, and Daimler. Also, active safety applications are continuing to grow, and Freescale is well positioned to have semiconductor applications for these critical pre-collision and collision avoidance features such as airbag and seatbelt smart loading, lane departure applications, and pre-collision radar technology. It is no wonder that half of the chipset applications in many vehicles are Freescale semiconductors. And in some vehicles, such as luxury sedans, this can mean no fewer than 100 specifc ECU applications. In automotive semiconductors, a reputation as an innovative supplier is important.

Finally, Freescale has completed a recent acquisition that should better position the company for a niche that has previously been the stronger domain of semiconductor manufacturers SMSC, NXP, and Inova. The purchase of Sigmatel, with a core competence in semiconductor applications for portable media players (PMP), portable navigation devices (PND), and global positioning (GPS), puts Freescale in a prime position to have stronger offerings for the automotive telematics, infotainment, and multimedia ECU applications.

In my assessment, Freescale is making the right moves, on multiple fronts, to remain the dominant player in the burgeoning automotive semiconductor market.

Implications: The significance or the emerging markets in Russia, India, China, and Brazil should not be underestimated by any automotive OEM who wants to experience significant growth in the future. In addition, the implication that raw material sourcing and pricing as well as manufacturing and logisitcs cost control will be the focus of tremendous OEM attention is accurate. Finally, the prediction that U.S. sales will remain flat and will shift in types of vehicles sold should prove true.

Analysis:  I do think that Carlos Ghosn, in one discussion with students at Korea University in Seoul, has given a fair assessment of the appropriate focus and strategies for growth for the automotive OEM sector.
The focus will be four world economies that are experiencing a significant transformation of  average wages and salaries, as well as continuing to developed a diversifed portfolio of export products and markets. From there, it becomes simple mathematics since people with new found purchasing power will certainly purchase cars. Currently Russia has about 140 cars per 1000 people, China about 20 cars per 1000 people, and India with about 8 cars per 1000 people. Comparatively, Germany has about 850 cars per 1000 people and Japan has almost 500 cars per 1000 people. Then we factor in population, with China, India, and Russia accounting for 40% of the planet's population. If China, alone, were to reach the level of Japan, this would mean more than 572 million automobiles. And the surge is just now beginning. Last year was a global automotive record year, with more than 70 million units sold.

Most of the serious OEM players in China and Russia in particular are experiencing 12 to 20 percent sales gains year over year since 2005. and there is no sign that it will let up. India and Brazil are following, with tremendous growth as well. While the U.S. languishes and will continue to have flat or slightly increasing sales, the emerging markets are ripe for manufacturing, marketing, and sales. Those automakers who have more of a global sales presence, and also have global platforms will see the greatest growth and financial benefit. Those manufacturers who are too US or Western Europe centric and who have U.S. dedicated platforms will suffer the most. For example, forget about the full sized pick-ups and SUV's, and watch compact pick-ups and moderate sized SUV will experience global growth. Entry level and small car sales growth will be most explosive. In addition, luxury marques, with a global presence, will do better than those that are only US or Japanese market focused. So expect strong growth for Mercedes, BMW, Audi, Rolls Royce, Bentley, and Porsche more so than Cadillac or Acura. Expect to see the sales of these luxury marques in China and Russia surpassing the sales in the U.S. and in Western Europe.

In addition, Carlos is right regarding the focus on raw material prices. Commodity components will continue to get hammered on price, forcing the manufacturers to make wise decisions on how to source raw materials, and where to manufacture the parts. I would also expect to see more consolidation and acquistion among these Tier One companies. Examples would be companies producing plastic injection molded hang-on parts, interior trim conponents, metal components, rubber components, hoses, lines, and common components. Exceptions will be manufacturers producing components that do not transport well and have high variant mix, such as glass and tires.

Those suppliers producing components for the innovative and value added features should experience less pressure, but will have to differntiate themselves with R&D to deliver the best, most innovative products to the OEM's. Examples of such components would be Infotainment content - Harman, Fujitsu, Ibiquity, NXP, Wavecom are examples of suppliers; Chipsets / ECU / MCU content - Freescale, Atmel, SMSC, Inova are examples of some of those suppliers; Active Safety - Gentex, FLIR, Autoliv, Mobileye, Continental Teves are examples of some of those suppliers; and finally fuel systems and alternative fuel system systems suppliers - Mitsubishi and IHI for turbochargers, Robert Bosch and Continental for fuel system components, and a myriad of battery suppliers are examples of these suppliers.  These suppliers will continue to cooperate with OEM's through the varied consortiums such as M.O.S.T., Flexray, and LIN consortiums.

Carlos, you are right. The Korean students received the ultimate automotive industry elevator speech.

Implications: The GM Volt will contain a battery pack technology that is largely unproven and  largely untested to withstand automotive environmental and reliability requirements. In addition, the manufacturing of Lithium Ion battery packs on the scale that will be needed for Volt production is an environmentally unfriendly process that will offset much of the benefit of the Volt's "Green Friendly" marketability if Green saavvy consumers investigate the manufacturing process for this technology. The true cost of the Lithium Ion battery pack design, development, and piece price will have to be subsidized by GM, resulting in less "green" to the bottom line than any automotive company would like to see. GM's true hope is that "Green Hype" will lead to green dollars in the showroom.

Analysis:  GM has made an aggressive statement and claim regarding the capability of the Volt and the timing of a vehicle that is road ready. Lithium ion battery pack technology is still largely unproven as a viable and reliable large scale replacement to power produced by a fossil fuel internal combustion engine. The discharge/recharge and heat dissipation properties of Lithium ion battery packs are problematic and unresolved, and the technology and test data is simply not sufficient to suggest that a passenger vehicle, ready for 7 to 10 years of product life under varied environmental conditions, would be ready for the consumer market by 2010. That is extremely aggressive, and flies against current battery incremental development. Most OEM's have suggested that PHEV - plug in hybrid vehicles - would be best suited for several years of real world testing in fleet conditions. Examples are Postal delivery vehicles, utility reader vehicles, or in-town taxi services. Hence, vehciles that are in a serviceable and accessible fleet, driving in constrained conditions, where both the vehicle and the environment can be observed and measured by the OEM's.
Also, GM must make sure that the smoke and mirrors are in place to distract an exceedingly well educated public from understanding the environmental impact of the entire production process for Lithium ion batteries - from mineral extraction through chemical processing through manufacturing. The existing battery manufacturing process is significantly environmentally unfriendly to render the environmental benfits of driving a first generation PHEV mute. GM had better hope that the consumer will feel so magnanimous about themselves while owning their PHEV, that they ignore the environmental toll extracted to put that vehicle in their driveway.
Finally, the very raw materials needed for Lithium ion battery development and manufacture are themselves becoming more expensive due to higher demand and limited manufacturing capacity. So GM will have to heavily subsidize this development, manufacture, and delivery with a subsequent impact to the GM green dollar bottomline. And this does not begin to account for the risk management that must be in place to protect against potential warranty costs of PHEV issues.
My assessment is that this will be too soon, too unproven, and too unprofitable to assure a 2010 launch.

Implications: The merger of Sirius and XM satellite radio providers will not be a competitive threat to terrestrial radio or HD radio. Other competitive alternatives for the listeners ear will mean more entertainment choices in the future for those seeking audio entertainment. Sirius and XM need to fully market and develop satellite video as an alternative in mobile broadband development of video receiving capabilities.

Analysis: From an automotive OEM perspective, the Department of Justice ruling to allow the merger of Sirius and XM does make sense. The automotive OEM's, when it comes to entertainment, want to provide what the customer wants. And if they want multiple modes of audio entertainment, so be it. Most OEM's can testify to the experience that consumers are adding satellite radio to their vehicles as a compliment to terrestrial and HD radio, and to MP3/iPod AUX interface. It isn't so much a competition as it is a compliment, much the same way as the television netowrk and local broadcasting have been complimented by cable television. In some premium vehicles, you can find consumers selecting both HD and satellite, in addition to the base terrestrial radio receiver that is standard equipment. Also, as mobile broadband is extended to the car, the internet connectivity of the future vehicle will mean even more audio options for the end consumer. So satellite radio will be one of many options available in future vehicles.
And some of these future audio options could pose a risk to satllite radio fee structures, forcing more acceptance of advertising and corporate sponsoring to control subscription costs. But it is apparent, that the younger generations that have been exposed for much of their lives to subscription access cable and subscription internet, are more accepting of the subscription structure of satellite radio. The area of entertainment where Sirius and XM could perhaps have success even equal to satellite radio, is in the supply of satellite video in an on-demand and/or subscription model. Video capability will be more common place in the vehicle of the future, providing television and on demand movie access to those consumers choosing this content for their vehicles. And this market will also experience competition from the straming video content of the future mobile internet connectivity of the vehicle of the not too distant future.  The automotive OEM's intend to offer the total infotainment content that the future wired generations will demand. This connectivity will not only be in place for entertainment, but also for information, vehicle dynamics, and vehicle/occupant safety. Sirius and XM have the potential to be one of many providers of entertainment and information for this burgeoning growth of infotainment not only in the U.S. but for the rest of the world as well.

Implications: SiRF sites significantly lower sales of chips for PND devices manufactured by TomTom and Garmin. This Tier One supplier to the PND OEM's is a accurate sign of the future market for these devices. The PND product will be hit by a double whammy in the next few years. Those market factors are a reduction in consumer spending on PND's and a higher value content in automotive OEM navigation and infotainment equipment.

Analysis:      The performance that SiRF indicates for the first quarter of 2008 could be likened to the analogy of the canary in the coal mine. It is an indicator of things to come for the PND market. 
    If anyone has visited electronics or automotive shows in the last year, they might have seen concept applications of portable devices, that are positioned as original equipment from the automotive manufacturers that would render the PND obsolete. These devices, that the OEM's have designed with existing consumer electronics companies, would be handheld devices that would come as part of the original equipment of the car, perhaps integrated into a console or instrument panel. The device would be a PDA, micro computer, music device, cellular telephone, and navigation device all rolled into one unit. While in the car, the capability of the device could be tapped through the existing navigation hardware. The device would in addition, have the feature of being removable from the car and travel with the driver or a passenger. This unit would also have the built in advantage of being covered by the automotive OEM manufacturers warranty. This device is not merely concept, but is destined for application in our future automobiles.
    In addition, the navigation unit of the past is truly becoming an infotainment system. The automobile is becoming another node of the information and entertainment network. Navigation will have increasing real time capability for both convenience and for active safety. The added content of streaming video and audio, as well as access to Microsoft Office Suite applications, will assure that the OEM navigation devices are becoming an extension of the office and the home. And as this content is being added, the OEM price is stabilizing and even coming down. This is something the PND simply can't offer.
    Finally, as consumers are given more choices in electronic device capability, especially multi-purpose devices, the demand for PND will be squeezed. This content, being part of the automotive Original Equipment, in a portable device, will be the best indicator that the PND will be obsolete.
    It makes sense that TomTom and Nokia are both aligning themselves with the mapping data providers in order to position themselves for this eventual shift in hardware. Linking to the mapping providers will provide a Tier One experience platform for working with the automotive OEM's.
    I think it is also wise that SiRF is remaining cautiously optimistic with the mobile TV market. This application will also experience integration into existing OEM infotainment hardware. In other words, the consumer won't need the mobile TV, when they have one or two devices already in the vehicle that can serve as a navigation, personal computer, video, and television device.
    SiRF recognizes that the business model that represents 65% of their fourth quarter revenues is indeed shrinking. And this trend will continue. It is time for SiRF to aggressively tap other applications in infotainment, vehicle dynamics, and active safety for the chip set technology.

Implications: Porsche's takeover of Volkswagen should result in improvements for both companies. Porsche will have access to a much larger base of research and development capital for future Porsche models, will have access to Volkswagen distribution network and supplier base, and will certainly see financial benefits as a result. Volkswagen should benefit from Porsche's Marketing and Sales strengths for the Audi and Volkswagen brands, Porsche's manufacturing model and quality model, and will be able to spread research and development costs over a broader range of product.

Analysis: The relationship between Porsche and Volkswagen is a long one. The first Porsche produced in 1938, utilized components from Volkswagen vehicles. The Porsche 912, 914, 924, and 944 all either used Volkswagen components or were manufactured in Volkswagen facilities, or both. Even the modern Porsche Cayenne shares it's entire chassis with the Volkswagen Toureg, with the Audi Q7 sharing in much of the componentry of both. In March of 2007, Porsche raised it's stake in Volkwagen to 30.9%, which set in place the takeover evaluation mechanism in the EU and in Germany. Now, with this announcement, it appears that the deal will be done. And since Porsche is now deriving a significant portion of it's profits from the stake in Volkswagen, the acquisition makes perfect financial sense for Porsche.
There are other reasons that that this acquisition makes sense. The development and investment in the fuel, hybrid, electronic, computing, and safety systems of the future is substantial. To carry that on the the books would be extremely burdensome to a company the size of Porsche. Porsche will now have the ability to share this develpment and capital costs with the entire Volkswagen group - Volkswagen, Audi, Lamborghini, Bugatti, and Seat. For example, Porsche is planning the introduction of a diesel and a mild hybird variant. Access to Volkswagen Bluetec diesel technology, shared with Mercedes-Benz, makes sense.  In addition, Porsche will have access to Volkswagen's production and distribution network; both of which can be leveraged to provide capacity and flexibility in manufacturing and transportation of Porsche worldwide, especially in emerging markets such as Russia, India, and China. Porsche would also have a say and a stake in Volkswagen's soon to be announced North American manufacturing operations for stamping, engines, and vehicle assembly. Such a facility can be used as a hedge and as a efficient platform for the manufacture of shared platform models for Volkwagen, Porsche, and Audi.
As for Volkswagen, they will have access to a moe seasoned sales and marketing force, that can assist in boosting the product image and sales volume for both Volkswagen and for Audi. The leap of Porsche's North American Sales/Marketing lead to Audi, is evidence of the need within the Volkswagen Group of this specific expertise. In addition, Porsche will surely drive Volkswagen to adopt many of the manufacturing practices that have lead to higher levels of efficiency and quality in the Porsche manufacturing operations. Based on Volkswagen's quality indicators, this is sorely needed.
This move for Porsche comes at a perfect time. Porsche has the brains that Volkswagen needs, and Volkswagen has the brawn that Porsche desires. It appears to be a perfect match that will allow both companies to succeed well into the next decade.

Implications: Infrared technology, as developed by FLIR, is a technology that is suited for demands of future military, commercial, and thermography needs. So the expectations of future growth are indeed realistic. The technology supports security, safety, and efficiency, all of which are growing demands for the military, for vehicle applications, and for facility maintenance worldwide. And key partnerships are paving the way for FLIR to meet the volume of product this demand stream will require.

Analysis: FLIR markets infrared thermal graphic technology to primary markets. Those markets are military applications for night vision and heat sensing, commercial applications for transportation night vision and heat sensing, and for preventative maintenance and building infrastructue analysis. All three of these markets should expect to see more applications and higher volume of infrared thermal technology in the future.
For the world's military forces there is a growing demand for 24/7 warfare capabilities in all conditions. The days of fair weather warfare are no longer acceptable or efficient in this new era of virtual warfare. Today's militaries have to make use of equipment in all conditions to maximize impact and to reduce loss of equipment and manpower. FLIR and Raytheon infrared systems are one tool that allows this 24/7 efficiency and effectiveness of warefare. And as we continue to see the applications of remote warfare, whether through the use of drone aircraft or smart bomb and missile technology, the infrared thermagraphic technologies marketed by FLIR will be installed in military hardware. 
For comercial applications, the volume growth will be in automotive applications. One segment of passenger vehicle technology that will continue to grow, in terms of component volume and component expenditures, is active and passive safety features. Governments will continue to require mandatory changes, and the automotive OEM's will continue to deliver safer cars. Infrared thermal imaging will be used not only to provide night vision capability as it is in current BMW, Mercedes, Chrysler, and future Lexus/Toyota vehciles, but it will also find interior applications for occupant sensing to assist in smart airbag deployment. Automotive manufacturer are encouraged that infrared technology will be a real assist in reducing night time collisions and fatalities. Currently, a disproportionate numbers of collisions and fatalities occur in low light conditions. The infrared technology, when incorporated into the infotainment system, provides a very good driver assist for collision avoidance. 
The thermography applications will see demand as companies, governments, property/facility managers seek to reduce capital expenditures and repair expenditures to infrastructure, buildings, and energy grids. The thermography technology is already proven to greatly reduce the risk of costly repairs and catastrophic failures. This will become increasing important as infrastructure ages in the United States, Western Europe, and Japan and as emerging markets such as China, India, and Russia build and expand infrastruture, energy generation and conveyance, and industrial facilities. 
From my perspective, FLIR, Raytheon, and Mobileye have the right technology, for the right applications, at the right time.  

Implications: What is actually happening in the telematics, computing, and telecommunication seems to points towards a convergence of applications in single devices. The future relationship of the portable device industry whether PND, cellular phone, and PDA will also be impacted by and will impact what is happening in infotainment in the automotive OEM's. There is currently a large magnitude of collaboration among electronic device suppliers, semiconductor manufacturers, software providers, and automotive OEM's as the vehicle continues to move towards being another node on the computing and telecommunications network.

Analysis:  This article raises in my mind one of the most important analysis that needs to take place for anyone considering investment in the infotainment landscape. And that is what are the realistic trends in GPS navigation, bluetooth telephone, WIFI, Microsoft applications, and Satellite uplink/downlink for both portable and automotive OEM applications. If anyone is paying attention to the electronic trade shows and the automotive shows throughout the world, then it is apparent that there will be a convergence of device capabilities and a convergence of markets. As a result of this, the Nokia  acquisition of Navteq and the TomTom acquisition of Teleatlas makes perfect sense as a positioning move for future developments. There is the realistic potential that the PND market will be obsolete for most automotive applications in 5 to 7 years.  Apple, among others, have worked with the automotive OEM's to showcase devices that will be portable cellphone, navigation, and PDA devices. There is reasonable probability that your car of the near future will come with a device that is integrated into your car, direct from the factory, but is also portable so that it can be taken with you once you leave your car. Such a device would be cradled in a center console or on the instrument panel. When this occurs, then Garmin's and TomTom's current PND market will begin to shrink and eventually become redundant. The portable device manufacturers are working with the automotive OEM's to create this integrated product. The multifunctionality, portability, and coverage by an OEM's manufacturers warranty will all be reason for consumers to abandon the PND. The article raises the concern of the issues of complexity in integrating all of these capabilities. But this is already being addressed aggressively by companies such as Harman, Airbiquity, and NXP. For example, NXP has already developed a fully programmable vector processor that essentially enables mobile devices to support multi-mode and multi-standard platforms. This development is also able to handle the transition from 3G to 4G. This means that semiconductors already exist that allow end users needs to have a single device that is able to support multiple standards such as GSM, UMTS, HSDPA, Bluetooth, WiMax, UWB, Wifi, and Edge, among others on a single device.
The car of the future will truly be another node on the mobile internet. The OEM's with partners, will become mobile virtual network operators. In essence what is currently available with GM's Onstar, BMW's ConnectedDrive, and Ford's Wingcast are just the tip of the iceberg in terms of what is coming for connectivity, machine to machine communication, and voice driven user interface.  This is also one area where there is a high level of collaboration between the OEM's and the technology providers, as evidenced by the participation in MOST and Flexray consortiums. By bet is on convergence of devices and more partnerships between the OEM's and the device providers that will leave single use devices obsolete and the PND market a shrinking venture. 

Implications: GM may be in a better position to become a truly global automotive OEM, where as Ford may be too late. Much of the global potential for both of these companies will be determined by the segment that they target for sales and for volume growth. Finally, key alliances with other automotive OEM's will be necessary. No matter, GM and Ford will both have a very difficult time being profitable global players.

Analysis:      GM and Ford may be showing up to the global party too late. Both have conceded that their domestic market share will continue to erode to both Asian and European competition. And based on the Detroit Auto show, GM is the only one of the US Big Three who had any semblence of any hits at the show. But in a depressed market, with the exception of the premium segment, even this isn't a remedy. Both Ford and Chrysler are continuing to prove they are both outmatched and outclassed by Asian and European OEM's.
     Both companies, like other automotive OEM's, have to chase those exploding markets of China, India, and Russia. But the questions to ask are does either company have the right products to sale, and can they sale them at a volume that will be profitable?
      Ford, while enjoying record sales in parts of Western Europe and parts of Asia / Pacific Rim, is reaching those records sales through very low margin models. The Focus, Festiva, and Ikon are not highly optioned, highly profitable units. "It will take this fish monger a lot of fish sales to make a profit." GM is in a similar position in China and in Eastern Europe / Russia. Both companies are going to be in for a hard fight. 
    For Ford, this might be the final show down - the fight for life or death. If Ford cannot make it in global sales, outside of domestic sales, it is doomed in the ability to remain the "Ford of our father's". Also, with the sale of Land Rover and Jaguar, Ford will not have any high margin marque brands that can deliver higher margins in those emerging markets. Volvo is not the answer, as demonstrated by recent sales volume and response at the auto shows. And nor is Mazda.
    GM may be in a better position if it can successfully leverage Opel and partnerships it now has in China and India. But in both of those countries, emerging automotive OEM's will put a lot of pressure on the low margin entry and mass market car market that seem to be GM's core competence in Europe and Asia. GM is exploring the premium segment reputation that is enjoyed by Buick, especially in Asia, and Cadillac in Eastern Europe. But those markets will be tough to dominate with the likes of Mercedes, BMW, and Audi already enjoying aspirational lifestyle status among the growing upper middle class and wealthy in India, China, and Russia. 
    If GM and Ford cannot sale both mass market vehicles and premium segment vehicles in the emerging markets, then we will surely see a future where both companies are mere fragments of their pasts.

Implications: Jaguar and Rover have a very distinct brand identity that could be easily corrupted or destroyed by the wrong direction and decisions regarding manufacturing, technology, and marketing. Also, in order to maintain pace with other premium brands such as BMW, Mercedes, Audi, and Lexus, Tata will have to invest in R&D, technology,and supplier partnerships that have not been part of the operations of Tata.

Analysis: The first thing that Tata must understand is that they are not purchasing just any premium brands. For example, BMW is known as "The Ultimate Driving Machine" no matter where it is manufactured or marketed. This is the product marketing goodwill that has immeasurable value for the brand. Mercedes, and to a lesser degree Audi, are known as aspirational brands throughout the world markets, again where location of manufacture is not all important. As a final example, Lexus, in the 'Pursuit of Perfection", can be marketed and manufactured as a no-fuss luxury car in Asia and in North America. But Jaguar and Land Rover are both marketed as British luxury cars. That "British" aspect is vital to the marketing psychology of those two brands. In other words, they are British icons. BMW recognized this with Rolls Royce - it must remain a bespoke British vehicle, and with the Mini - a British icon, as well. Another example is Volkswagen production of Lamborghini - it must remain an Italian sports car.  Tata will have to recoginze that for brand survival, "British motorcar" is very important to the consumer's decision to purchase Jaguar or Land Rover. To produce these marques in another country, especially India, would be a huge mistake. In addition, the Tata name should not be used often in association with either of these brands. They have to work to keep that presence as low-key as possible. The second question is will Tata be able to finance the research and development to keep the Jaguar and Rover brands competitive against the other premium brands? This is a critical time in the automotive industry as we experience rapid development of new technologies that are supporting improved fuel economies, alternative fuel technology, computing and infotainment technology, and active and passive safety technology. This has not been a demonstrated strength of Tata in the Tata brand vehicles. The existingTata vehicle market has not required this technology, nor the investment that is required to develop and deliver it, to this point. So from somewhere, Tata will have to quickly learn or develop strategic partnerships to assure they are not left behind in the "technological dust". This too would mean the end of the Jaguar and Land Rover brands. So, on the manufacturing and branding side, Tata needs to allow the British branding to remain and rein supreme, and then on the technology and development side Tata has to aggressively step forward and determine how to assure these two premium brands remain in step, technologically, with the German and Asian premium brands. This could be an interesting case study, as Tata takes control of these two brands.

Implications: Predicting which model or brand will be hot is difficult for anyone to do on the micro scale. Predicting which technologies, trends, and markets will see growth and penetration on the macro scale is less difficult to do. Astute investors will look for the strongest players in certain segments.

Analysis:  There are certain guarantees; technology that improves fuel economy and reduces emissions will see greater implementation in all automotive companies, infotainment content will grow not only in premium but in mass market vehicles, active and passive safety content will see more development and implementation in all automobiles, and markets such as India, China, and Russia will see double digit sales increases so the OEM's already in those markets will do very well.
Historically, automotive fuel economy has steadily increased in the last 40 years. And now with greater concern on fossil fuel dependency, coupled with envirnomental concerns we will see accelerated development and implementation of technologies that improve internal combustion engine efficiency. Through the implementation of diesel technology, mild hybird technology, regenerative technology, and battery applications we will see fuel economies meeting and surpassing the new CAFE standards. Expect to see investment in these technologies and launch of these technologies in 2008 and beyond.
Our automobiles are also growing in electronic, computing, and semiconductor content each year. In 2008, we will see more units with navigation, MP3 capability, bluetooth, HD radio, satellite radio, and even the introduction fo Microsoft Office Suite content. This will move from the premium brands into the mass market vehicles as well. Content is going up.
In 2008 our vehicles will become even safer. The use of sensors for crash avoidance, lane departure, airbag control, stability control, engine and transmission control will continue to grow. Expect to see more applications of CMOS technology, infrared technology, and radar technology to assure our vehicles are safer. With this, we will see many connections to those already involved in the development of the infotainment sector.  Our vehicles are becoming safer devices for driver, passengers, and pedestrians and others in traffic.
Worldwide units sales will grow. A developing middle and upper class in China, India, and Russia will demand more vehicles in the premium and mass market segments. Fully expect to see these consumers as early adopters of the technology we are already expecting in the West.
Once again, the wise investor will research the OEM's and Tier suppliers who are already leading the innovation and implementation of technologies for each of these guaranteed factors.

Implications:     Semiconductor suppliers are on the forefront of an innovation and content wave that will continue to flood the automotive market.      The total content per car will continue to grow, along with the total number of automobiles per capita will grow, especially in emerging markets sure as India and China.     Infotainment, personalization, fuel economy demands, and passive / active safety content will be the drivers of this technological flood.     The On Semiconductor move is a smart play, as access to the markets, access to innovation, and as support of capital investment in research and design become even more important.

Analysis: The move by On Semiconductor to acquire Amis is precisely what we should continue to expect to see among those companies who are supplying and will supply semiconductor, ECU, CPU, sensor, software, and electronic hardware to the automotive OEMs. The players in this rapidly emerging and growing business are preparing for a content feast that will have many competitors jockeying for a piece of this market. In addition, more cars will be sold as emerging markets experience personal income growth. The facts are that electronic, computing, and sensor content in cars will grow to more than 55% of value content of any automobile that we buy in the future. Comparatively, this value was less than 35% just 5 years ago. Several things are driving this. Automobiles are becoming extensions of our virtual world. To have access to your Microsoft Office Suite, your on-demand video, your XM radio, your Ibiquity HD radio, your Clear Channel traffic data, your Navteq mapping navigation content - all simultaneously, is a reality for our future vehicles. And this content will not remain only in the Premium segment. We will see this roll into mass market vehicles rapidly, much as we have seen power windows, power door locks, and head impact airbags move into vehicles. All of this infotainment content requires vast amounts of semiconductor applications, along with broad bandwidth communication technology. In addition, antenna, ECU, and CPU innovation will continue to provide faster, cheaper, smaller content for automotive applications. Active and passive safety content will continue to rise in automobiles as EU, Asian, and US regulations require increasing safety measures not only to assure occupant safety but also to reduce the potential for accidents and to improve the odds of pedestrain and collision survivability. This Active and Passive safety content also requires vast amounts of microcontroller, algorythmn software programming, and sensor content. Sample applications to demonstrate the potential are lane departure detection, anticipatory crash sensors, smart airbag deployment, electronic stability control and active rolll technology, and night vision technology. All of these require semiconductor and computing content. In addition, the innovations to make vehicles more fuel efficient will provide a huge application for semiconductor, ECU, and software products. This is everything from renegerative brake technology, cylinder deactivation, transmission shift effieciencies, mild hybrid technology, and hydride and lithium battery technology. Finally, emissions control and full fuel cell and full hybrid innovations will demand even more semiconductors, sophisticated electronics, and computing capability, as we find alternatives to fossil fuels driving an internal combustion engine. Smart investors will follow what is happening with the consortiums such as M.O.S.T., Flexray, and ECVT to gain insight into the potential for these markets. Also, investors will need to understand the vertical integration impact of these technologies. It will not be just the OEM's and Tier One supplier who will invest and benefit. A couple of examples. Exxon-Mobil, with a partner, is developing a film that will have a direct application to automotive use of Lithium-Ion battery  technology. This film is a promising development towards heat dissipation safety for Lithium-Ion batteries. Lithium Ion has potential applications in mild hybrids. This is a simple example of possible Tier Three or Four impact. A more complex example would be Autoliv's application of far-infrared IR night vision to the BMW Nightvision product. It will not only be Autoliv who could profit from this volume application of IR technology. For this one application, we have Umicore developing a new material for the lens, we have FLIR producing bolometers as the primary component delivering unparalleled image quality, and we have Tyco Electronics producing an innovative VEMECH hermetically sealed housing for the camera. This sort of far reaching innovation impact will be more common place, than not, for automotive semiconductors, ECU's, MCU's, sensors, and software. So there are a lot of new names to automotive to watch in the Tier world such as Freescale, NXP, Inova, Fujitsu, Ibiquity, Mobileye, IEE, SMSC, and Texas Instrument.  Then the tried and true such as Gentex, Robert Bosch, Siemens / Continental, and Harman will continue to enjoy the tremendous growth in applications and in volume. Many suppliers are joining in this gold rush, because it is a sure bet. The developments to predict and follow will be those that will be similar to the On Semiconductor and  Amis deal, the Siruis  and XM deal, and the Navteq and Nokia deal. Expect to see a lot more of this as our cars become our computers, as our portable world extends deeply into our cars, and as our vehicles become uch safer and more efficient. Behind all of this will be electronics, computers, and software, along with all of the technology that supports this. Expect to see more mergers and partnerships to provide access to markets, to grow customer base, to provide access to technology, and to speed introduction to market  and spread development costs.

Implications: Tesla Motors struggles to develop a viable plug-in hybrid in indicative of deeper issues that have yet to be resolved with plug-in hybrid technology, specifically battery technology. The OEM's who are committing to a plug-in hybrid should be very careful in the commitments made to this product technology.

Analysis: Let's first be clear that Tesla's roadster is not a mass market product. The product that has been developed is a novelty, and should be analyzed as such. To utilize a Lotus platform, and to keep it exceptionally light in order to unburden the lithium-ion technology and to achieve any usable range, is indicative of the technology hurdles still before plug-in hybrids. Still as a major issue are lithium ion battery capacity. Capacity increases simply are not happening at a pace to meet the demands of automotive OEMs. Lithium ion technology has only resulted in a doubling of battery capacity in 10 years. This is a far cry from the 2 year doubling of capaity we have seen in chip technology utilized in automobiles. Tesla hoped to have a niche, boutique item that could achieve some range by minimizing weight. This has lead to safety concerns for the Tesla. You will not find the electronic and computing content in a Tesla that you will find in a mass market vehicle. This content adds weight and requires power, but it is content expected by mass market consumers and premium market consumers. Also, adaptations made to the transmission system to again make up for inherent capacity and reliability issues in the lithium ion technology have resulted in engineering reliability issues for the Tesla. In addition, the issues of heat build up and transfer have not been resolved by any automotive OEM. Exxon Mobil has a promising film technology that might help provide a shield for this heat phenomenon that will be tested by battery manufacturers and OEM's in the coming year. Tesla has not, to my knowledge, addressed this issue. This remains a huge stumbling block. My expectation is more setbacks as the Tesla tries to deliver a "real" car. At this point, a real car it is not. As for the OEM's, expect a cautious approach to lithium ion hybirds, especially plug in technology. At thsi point, technology is only remotely viable for short duration drives before the charge/recharge cycle must begin. Also, the issue of battery longevity is far from being optimized and has not been tested. The real world expectation may be OEM's, delivering small numbers of fleet plug in hybrids, for city testing in controlled conditions. This could be for city utility fleets (meter reader) or for postal vehicles. Bottomline, hybrid lithium ion technology is many years - at least 5 to 15 - away from being able to see mass market use in vehicles. And simultaneously, the OEM's are improving fleet fuel economy through diesel technology, turbocharging technolgy, regenerative energy technology, cylinder deactivation, sleep mode technology, and mild hybrid technology. These developments will outpace lithium ion plug in technology. Also, hydrogen fuel cell technology will continue to develop and will provide a viable alternative to plug in hybrid technology.