It was a telephone call from then UK prime minister Tony Blair that prompted Martin Leach to form Magma, the multi-faceted automotive industry consultancy and service provider.
The call came in 2005 asking if the former head of Ford of Europe, Mazda and Maserati could help save MG Rover which was going into administration.
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“One of the first things I did was contact PwC but was told they couldn’t deal with me because I wasn’t a company,” said Leach. “So I got together with some other contacts and we formed Magma – so called because Magma possesses a lot of energy, forms its own path, is solid and enduring.”
While helping to ease MG Rover’s path towards China, Magma has since spread its own wings working within – and outside – the automotive industry on globalisation, turnarounds, repositioning, growth activities, mergers, post acquisition integration, cross-cultural integration, divestment, partnerships, joint ventures, motorsport, downturn planning and downturn survival.
That’s quite a mouthful, but they are all areas in which Leach has been personally involved down the years. In terms of the future, however, he believes the auto industry needs to shake off its past.
“The industry is risk averse,” he said. “Selling an idea to a carmaker means you have to make someone look good as well as having high added value and a profitable business case. There are lots of people running their careers rather than the business.
“The breakthroughs are coming from people coming into the industry with new ideas.”
Even so, it’s a difficult time for start-ups in the industry. Leach said: “You can see why people believe there are opportunities with new technologies and alternative fuels but from car company start-up to cash breakeven is reckoned to be about 12 years, so this is not an area where people who have money like to put it.”
Carmakers, he said, should take a bite out of Apple’s business model and directly engage with customers rather than sticking with an outdated dealer network model.
He wonders why an industry that invests trillions of dollars in designing and manufacturing vehicles then “does its best not to be involved with the end user”.
The industry, he said, needs to better engage with the people who buy its products.
“Look at the Apple model where the manufacturer goes straight into the front line with the customer. This is one of the most successful and trusted businesses in the world.
“Visits to car dealerships are falling as people increasingly do their research online and many of them still don’t trust dealers. There needs to be a huge move towards customer satisfaction via online and social media to draw manufacturers into relationships with consumers.
“The dealer distribution model has been with us for decades. It costs a fortune and is diminishing in influence. The industry needs to find ways to reduce the time and money it spends on this model – just as it has done right through the design, engineering and manufacturing systems using new technologies to take cost out and reduce lead times.”
Leach said there is a need to find new ways of dealing with customers. “The number of people wanting to actually drive a car before buying is declining and this is partly due to model complexity. The chances of a dealer having the car to the exact specification required is remote.
“Customers may want to try the car for a few hours or just 30 minutes – they may only want to see if it fits in the garage. Why not have regionally-based demonstrator fleets and take cars directly to the customer?
“This would reduce the financial burden on dealers and free them to concentrate on the more profitable aspects of their business such as service, repair and used vehicles.”
Leach is recently back from China having attended the Shanghai Motor Show, although compared to the event in Beijing a year ago, he felt the Chinese industry seemed to have gone backwards with local brands losing sales.
He added: “Like Russia, the market in China is looking for short cuts to get things done quickly rather than concentrating on core competences. That said, the Chinese are drawing in a lot of engineering talent because engineering tends to follow manufacturing. The risk to other countries is that they then lose specialist jobs.
“The balance in terms of manufacturing presence has shifted east. Up until 10 years ago, manufacturing was centred on the US, Japan and Europe but this axis is falling away. If you could afford two new plants now you would put one in the US and one in China.”
