Former General Motors CEO Dan Akerson shared a few constructive words of caution for Apple the other day, in response to the revelation that the Silicon Valley tech company is developing its own car, code-named “Titan.”
The Detroit News interviewed the retired executive, whose primary concern is with a high-margin company like Apple perhaps rashly tossing its hat into the ring of a low-margin heavy industry like automobiles. “If I were an Apple shareholder, I wouldn’t be very happy. I would be highly suspect of the long-term prospect of getting into a low-margin, heavy-manufacturing” business, he told the newspaper.
Apple’s contribution to the automotive industry, he says, ought to be restricted to something more up their own alley: developing infotainment operating systems and electronics for cars. “Look at the margins of an iPhone versus a car,” said Akerson. “I’d rather have the margins associated with the phone.” Case-in-point: The Detroit News reports that in Q4 of last year, Apple posted a gross margin of 39.9 percent. GM’s gross margin was around 14 percent.
“[Apple had] better think carefully if they want to get into the hardcore manufacturing,” Mr. Akerson said. “We take steel – raw steel – and turn it into car. They have no idea what they’re getting into if they get into that.”
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Pundits and Apple fans have long mocked Palm CEO Ed Colligan’s comments about how Apple couldn’t possibly “just walk in” and compete in the cell phone market. Akerson’s comments are being received in much the same way and generating a lot of laughs in the tech. community: http://daringfireball.net/linked/2015/02/18/hairball I think GM should give him a quiet little nudge and remind him that he doesn’t speak for the company.
Clearly, Akerson is no longer CEO (and I don’t think a lot of tech. folks get that…or care). I think his comments were meant to highlight the fact that Apple already outsources much of its manufacturing and would be unlikely to get sidetracked with such things as auto production, but that’s not how it’s being taken. With the amount of cash Apple has on hand and how successful and focused they are, I definitely wouldn’t discount some sort of transportation initiative. They could easily buy out Tesla or another company with production capabilities or come up with a completely new concept that would make our existing cars seem as archaic as a something like a Palm Pilot or Walkman.
Building cars seems like an unlikely distraction for Apple. I think they’re more likely to try to compete with Google to get their software embedded in dashboards as a followup to CarPlay. That said, even if this idea is somewhat far-fetched, GM should take this as a wakeup call and look at everything they do through the eyes of, “How would Apple approach this?” It’s incredibly difficult to get right, but GM could stand to make LOTS of improvements when it comes to build quality, consistency, cohesiveness, seamlessness, software quality, communication, and over the air support for existing customers via software updates and firmware upgrades.
I am sure given enough money and time Apple could do it,
I really think they would be better suited to develop drivetrains and systems for the cars on the market first and then look to this later on. Building a car company is not easy for even established companies let alone a start up. The government regulation and all the systems you have make a Cell Phone look like a science fair project.
Also I feel Apple could make a killing on systems and parts for all MFG.
It is like the gold rush. All the folks who went there to mine gold did not all that good. They worked hard and some made some most did not. Now the folks who did make the money were the folks selling supplies that the people needed. They were the ones who made SF area what it is today with their old money as they would say now.
My though is Steve Jobs would not have made this choice. Apple is a electronics business not a automotive engineering firm. Companies always do better in their core business vs. getting into thing they have no experience at.
Goodyear tire diversified into the oil transportation business. This hurt them for years till they got out after a hostel take over attempt. They got back to tires and have made a lot of money since then as one of only two American owned auto tire makers.
Don’t think I am not an Apple fan. I love my I6 accept for I tunes.
If apple can build something to compete with the luxury automakers, then I welcome the competition and look forward to reduced pricing all around!
I wonder if they’ll put the same logo on the cars… Perhaps a sleeker bite will be missing from the apple.
I wonder if they will offer a case cover for it. And will my lightning adaptor fit it. LOL!
All kidding a side Apple could do it but it will not be painless or easy. Just look at the struggles of Tesla in China where they are having a difficult time with installing dealers. Also because they are not working with Chinese local distribution they are suffering set backs as the market is not free and the local channels are tied to the government that can help or shut you down. It is a very corrupt system there but what are you going to do? Fight it you will lose and you will lose in the largest and fastest growing market in the world.
Seeing Apple already does a lot of business there that may be their ace in the hole. They know who to pay off already.
People tend to forget China is not a free market even if they have KFC.
Low margin? If that’s the case, why do the auto companies end up with billions in the bank, just a few months after an economic upturn?
One word: volume. =)