In The Headlines
Is the Golden Age of Driving Behind Us?
People, particularly young adults, are not driving as much as they used to. Today only 77% of Americans ages 20 to 24 have a driver’s license, down from about 90% in the early 1980s. For the first time since the advent of the automobile, the collective number of miles traveled by car is in decline. Since peaking in 2004, it has dropped by about 9%.
What is driving this trend? The rise of a new kind of city living–and working–is a big factor. Young professionals, including those with families, are increasingly opting for urban life. And cities, even Los Angeles, are responding with new or improved public transportation systems, bike-sharing programs, and more pedestrian-friendly thoroughfares. Companies, in turn, are moving back to cities or opening satellite offices downtown to be close to the talent. Technology is playing a role as well. The proliferation of mobile-app-based ride services like Uber, Lyft, and Sidecar all but eliminates the need for car ownership. Also, Google’s driverless car, once the stuff of science-fiction flicks, is fast becoming a reality.
While driverless vehicles will not erase the need for cars, they could certainly put a dent in demand and further our emotional detachment from automobiles. Google and its proponents claim that unmanned cars will cut down on accidents and inefficient driving and even reduce the space that offices need to allocate to parking (the cars could just move themselves around). “We think the self-driving car is going to work and be far safer than human drivers,” says Silicon Valley venture capitalist Marc Andreessen, going on to predict, “In 10 years it will be quite common, and one day we’ll think it was lunacy we ever let a human behind the wheel.”
This collision of technology, lifestyle changes, and attitudes represents a major shift in the way Americans think about driving. Research suggests that young people today are more ambivalent about auto brands than previous car-craving generations were. The romantic ideal of the open road and cross-country drives has given way to crippling, stress-inducing traffic, high rates of road fatalities, and safety issues.
After taking a major hit in the last recession, U.S. car sales have steadily grown for the past few years. But the 15.6 million automobiles sold in the U.S. last year is still significantly lower than the 16.7 million sold in 2003. Analysts expect the recent growth to start slowing over the next five to ten years as aging baby boomers exit the market and millennials–many of whom would rather own the latest smartphone than a new car–enter it. In short, the golden age of driving may be in the rearview mirror.
“The car is no longer the gateway purchase to adulthood,” says Sheryl Connelly, Ford’s global trends expert. Virtually every major carmaker has set up shop in Silicon Valley. From tinkering with self-driving cars to investing in their own ride-sharing services to opening high-end driving schools for teens, they are aggressively looking for new ways to propagate their relevance and ensure that the new generation of consumers will still want to buy their cars–even if it is just to rent them to others via mobile-connected sharing services.
These trends represent a potentially game-changing shift for car manufacturers. Automakers need to find alternative revenue sources in urban regions of the world, where a combination of smarter cities friendlier to public transportation, and young people more prone to sharing than purchasing vehicles, will mean fewer car sales.
And car companies need to find a way to rekindle young America’s passion for vehicles, a fervor that wasn’t lost so much as replaced by a different kind of shiny new toy. “It’s wild to me how phones have seemingly destroyed all the sex appeal of cars for young people,” says Jason Duckworth, president of Arcadia Land Co., a developer of walkable neighborhoods outside Philadelphia. “To them, cars are just another way to get around and no longer loaded with the symbolism they once had.”
Harley Davidson Rolls Out a Kinder, Gentler Hog
The name Harley-Davidson does not necessarily call to mind quiet efficiency, but a planned rollout of an electric motorcycle is generating a lot of buzz for the Milwaukee-based company.
Following the introductory announcement, interest in them quickly swamped the Harley-Davidson website for more on the electric endeavor known as Project LiveWire. The motorcycle maker, whose storied highway cruisers are as loud as they are large, will take 22 electric bikes on a U.S. tour starting next week to solicit reactions that will help shape the environmentally aware vehicle’s development. Depending on the feedback, the no-exhaust Harley may or may not be added to the company’s roster of 30 models.
Harley’s chief marketing officer, Mark-Hans Richer, says the company likes to route some of its research and development decisions through its customers. “We couldn’t imagine this sitting on a turntable at a show with models handing out brochures,” he said. “It needed to be something real, something that customers could have a firsthand experience with.”
Harley fans will have a chance to ride the bikes and, more importantly for the company, so will people who do not own a Harley—or even ride motorcycles, for that matter. Electric bikes, like Harley’s recent growth in appeal to female riders, are a chance to expand the pool of buyers. “All our outreach group members think Harley-Davidson is very cool, and our job is to make it more relevant to them,” Chief Financial Officer John Olin said at a recent meeting with investors.
For much of its 111-year history, Harley sold choppers as fast as it could to buyers it knew well—wealthy, middle-aged American white men. The recession changed that. Revenue in 2009 fell almost 25% from a year earlier. Chief executive officer Keith Wandell, hired from auto-parts maker Johnson Controls, Inc., cut costs and pushed Harley to try to expand its customer base to women, younger drivers, non-whites and non-Americans.
In 2006, only 25% of its revenue came from outside the U.S. Now, the company forecasts that in 2014, 40% percent of sales will be in foreign markets, which is where more than half of its dealerships are located. Harley has also changed how it develops new models, using focus groups and clinics and opening up test-runs to a wide circle of consumers and dealers in the U.S. and overseas.
It is a savvy strategy to broaden the motorcycle market overall. What is more, the brand is probably strong enough to withstand some tinkering. The “repurchase intent” among Harley owners is higher than 80%, so there is little risk that Harley owners will be jumping on a BMW anytime soon.
As for the signature Harley sound—the snarling chop, the company has an electric version that is a kind of stereo simulation. Richer likens it to a fighter jet landing on an aircraft carrier. The sound is “high-toned,” he says, “but still very strong.”
Sources:
1. http://bit.ly/1liqXdH – Fortune
2. http://buswk.co/1psPUD2 – BusinessWeek
3. http://bloom.bg/Ugsnvq – Bloomberg News
The Good News Is . . .
• Level 3 Communications announced that it agreed to buy TW Telecom, a provider of business Internet connections, for $5.68 billion, as consolidation continues in the telecommunications industry. Level 3 will pay $10 a share in cash and 0.7 of one of its shares for each TW Telecom share, bringing the value of the offer to $40.86 a share. In addition, Level 3 will also acquire about $1.6 billion in debt. Buying TW Telecom will make Level 3 a significant provider of network services like Internet access and online-based voice calling to businesses.
• FedEx Corp., a leading package delivery service, reported earnings of $2.46 per share, an increase of 15.5% over year-ago earnings of $2.13. The firm’s earnings topped the consensus estimate of analysts by $0.10. The company reported that revenues rose 3.5% to $11.8 billion. Management attributed the company’s performance to higher volumes and operational efficiencies at FedEx Freight, increased volumes and yields at FedEx Ground, and better revenue and cost performance at FedEx Express.
• The number of Americans filing new claims for unemployment benefits dipped more than expected last week, indicating a strengthening in labor market conditions. Initial claims for state unemployment benefits slipped 6,000 to a seasonally adjusted 312,000 for the week ending June 14, the Labor Department said on Thursday. The four-week moving average for new claims, considered a better measure of underlying labor market conditions as it irons out week-to-week volatility, fell 3,750 to 311,750 last week.
Sources:
1. http://nyti.ms/1pcNM41 – NY Times Dealbook
2. http://www.cnbc.com/id/18080780/ – CNBC
3. http://bit.ly/T24zKg – FedEx Corp..
4. http://www.cnbc.com/id/101772587 – CNBC
Planning Tips
Tips for Creating a Will
A Will is the most practical first step in estate planning; it makes clear how you want your property to be distributed after you die. If you do not have a Will when you die, your estate will be handled in probate, and your property could be distributed differently than what you would like. It may help to get legal advice when writing a Will, particularly when it comes to understanding all the rules of the estate disposition process in your state. Some states, for instance, have community-property laws that entitle your surviving spouse to keep half of your wealth after you die no matter what percentage you leave him or her. Below are tips for creating a Will.
Decide what property to include in your Will – To get started, provide some basic information. This includes your name, where you live, and the date you have signed the Will. Your Will should also state that it is your Last Will and Testament, and that it takes the place of any Will you made before. Next list your significant assets. Then decide which items should (or must) be left by other methods, outside your Will.
Decide who will inherit your property – For most people, it is not hard to decide who gets what. After you make your first choices, do not forget to choose alternate (contingent) beneficiaries, too, in case your first choices do not survive you.
Choose an Executor to handle your estate – Every Will must name someone to serve as Executor, to carry out the terms of the Will. Be sure that the person you have in mind is willing to serve in that role. Give your Executor the right to manage your estate. This small but important step saves time and money. That is because your Executor can start to deal with your estate right away. If you do not take this step, your Executor will have to get the court’s permission before they can carry out your wishes. Ask your Executor to pay off all your debts and final costs. This includes costs like your mortgage, loan payments, funeral expenses, and final income taxes.
Show that you have read and understand your Will – Your Will should record when and where you signed it. Two people who are not named in your Will should sign it as your witnesses. In addition, if you have life insurance or retirement savings plans, check to make sure you named the people who will get the money after you die. Their names should be on the papers you signed for those plans. If you only name them in your Will, your loved ones may get less.
Put your Will in a safe place – Several copies of the Will should be made and placed in separate locations. It is usually not a good idea to put it in a safe deposit box because other people do not usually have access to it. There is no need to file a Will with a court until it is used, but tell your spouse, children, other heirs, and especially the Executor of the estate where they can find it.
Sources:
1. http://bit.ly/1uUVbEJ – US News & World Report
2. http://1.usa.gov/1ud3snh – USA.gov
3. http://bit.ly/1li3jyv – NoLo.com
4. http://bit.ly/1sxK48P – WikiHow.com
5. http://bit.ly/1p7MppB – Consumer Reports
6. http://bit.ly/1mcgjWk – GetRichSlowly.com
