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Innovation Drain in the Automotive Industry: A Wake-Up Call

by Ingolf Klammer June 2019
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Read about talent acquisition and retention in the automotive industry

By Ingolf Klammer, Partner in the Stanton Chase Düsseldorf Office and Regional Practice Leader Industrial EMEA

Take a look at the streets of any modern city and you will see little evidence that the car industry is on the verge of major turnaround. In New York, Paris, Shanghai, and other major metropolitan areas, city streets remain congested with the usual Volkswagens, Toyotas, and Fords with traditional combustion engines. There are few, if any, signs that this picture is going to change soon. But predictions of the car industry indicate a major upheaval, with an estimate that by 2040, over half of the newly sold cars will be electric. For the car industry, this means a dramatic change.

In today’s rapidly evolving automotive industry, leaders need a clear vision for the acquisition and retention of talent. Breaking headlines indicate that automotive OEMs face strong competition from start-ups that are developing electronic and autonomous vehicles. Nevertheless, when asked about their thoughts on the matter, auto manufacturers suggest an entirely different situation. Certainly, their figures are probably slowing down in some production lines — however, they are reluctant to predict any long-term trends. Instead, they believe there is a need to remain agile and grounded. And to do so, as PwC points out, they’re focused on attracting talent with the technical and soft skills to excel in a continuously advancing industry that increasingly depends on innovation, collaboration, and versatility.

In this white paper, we’ll examine how the automotive industry is changing, the influence this transformation has on leadership talent acquisition and retention, and how Stanton Chase can support automotive OEMs in their search for top talent.

The Dramatic Shift Transforming Talent Acquisition and Retention

In five years, the automotive industry will look completely different from what it looks like today. A massive shift is underway. In order to reduce greenhouse gas emissions, the use of fossil fuels needs to be reduced. As such, a major focus in the automotive space is on powertrain electrification. Electric vehicles, hybrids, and fuel-cell-driven vehicles are being developed and sold in greater numbers. At the same time, advanced driver assistance systems — or ADAS — are also being designed. ADAS technology includes both hardware and software and will ultimately enable driverless vehicles. Manufacturers that have previously relied on traditional technologies are now pressed to keep up with this shift.

It should be clear that these developments affect the people side of the business. Although the auto industry retains core competencies in traditional technologies such as engines and transmissions, the new technologies are enabled by high-tech products and software. As a result, automotive manufacturers are now competing with high-tech companies for top talent. Consequently, talent acquisition and retention need to take on a different form altogether.

The Talent Drain in the Automotive Industry

Our Stanton Chase executive search consultants see a fundamental change occurring in talent acquisition and retention. What follows are some of the most significant trends in Germany and the U.S.

In Germany, our executive search consultants see a focus on new ideas, creativity, fun, and motivation among candidates. However, outstanding leaders who form the backbone of the German automotive industry communicate that they’re looking for new opportunities because their companies are too hierarchical and they therefore can’t implement their creative approaches and ideas for new processes or workflows. Many are frustrated and feel stuck. And even more surprising is the fact that these automotive executives are willing to leave their industry — which is quite unusual.

Why is this? Is it because automotive OEMs — although they provide excellent quality and processes — have an image of not creating exciting products? Is it because executives see their children joining in demonstrations — often alongside scientists — for a sustainable future and the preservation of the environment?

In the U.S., auto manufacturers are trying to recruit top tech talent away from Silicon Valley companies. However, wages are typically higher on the West Coast than in Detroit — and the climate is much more pleasant — so it’s challenging to make the switch appealing. And according to Forbes, automakers will only be able to successfully recruit top tech talent by effectively changing their corporate culture, as well as creating a working environment and brand that appeals to candidates who are otherwise more attracted to companies such as Google, Amazon, and Facebook.

The Need for Cross-Industry Hires

To effectively attract top tech talent to the automotive industry — and retain them — auto manufacturers need to change their mindset.

Instead of focusing on the lack of top talent, organizations need to concentrate on their values and move forward. They need to train their people in new technologies, start investing in them, and create spaces where talent can pursue their career goals.

For example, Ford recently acquired Michigan Central Station, which it will transform into a comprehensive campus complete with work spaces, residential living areas, retail spaces, and restaurants. By 2022, the new campus will be home to 2,500 employees. Moreover, Ford is redeveloping its Dearborn Campus into a more collaborative, innovative, and attractive place to work.

In some cases, the talent already exists inside the industry — but they need to be recognized and drawn out effectively by leaders who recognize their potential. Traditional top-down methods of management need to be reevaluated, and key retention practices need to be examined as the automotive industry landscape changes.

In other cases, it may prove effective to lure top talent away from high tech. One prime example of this was Ford’s recent recruitment of Tim Stone, formerly an Amazon executive, to be the company’s new CFO, as The Wall Street Journal reports.

In addition, auto manufacturers need to highlight their innovative projects to show how they’re competing with tech companies. For example, Bosch has now invested in fuel cell technology for hydrogen-powered vehicles. At the same time, companies are focusing on developing new products from recyclate, since the technology and waste are readily available. Just think of Samsonite’s ECO bags, which are made entirely from recycled plastic bottles. And a Swiss/German technology and gear parts automotive supplier has invested in a German electric motor manufacturer in a bid to develop EVs.

Another strategy some automakers are using is to purchase cutting-edge startups. For example, in April 2019, Ford invested $500 million in Rivian, an electric-truck startup, according to Barron’s. This provides Ford with access to Rivian’s unique “skateboard platform” that delivers power to each wheel through four independent motors.

The Value of Working With an Executive Search Firm

Our Stanton Chase executive search professionals can assist in identifying, attracting, and retaining top leadership talent to bring your organization into the future. As Rich Kolpasky, Managing Director in the Stanton Chase Detroit Office, explains, “The automakers’ challenge is that while they know their own industry, their understanding of the high tech world is limited. That’s why they need assistance to determine what actions are required to attract top talent away from high tech and into the automotive industry. Stanton Chase offers the advantage that we intimately understand both worlds — the automotive and high tech industries, both technically and culturally. Therefore, we’re able to help automotive manufacturers to prepare effective strategies to recruit the right talent.”

 

Sources

https://www.cnn.com/2019/05/15/business/electric-car-outlook-bloomberg/index.html

https://usblogs.pwc.com/industrialinsights

https://www.forbes.com/sites/manishmadhvani/2019/03/21/securing-top-tech-talent-is-key-to-car-manufacturers-survival/#71b8545f1fea

https://www.wsj.com/articles/ford-names-former-amazon-veteran-as-next-finance-chief-11553173749

https://www.fool.com/investing/2018/06/25/how-detroit-automakers-are-trying-to-win-the-talen.aspx

https://www.barrons.com/articles/ford-rivian-electric-truck-vehicles-51556124350

 

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