Erich Merkle loves cars, and he is one of those lucky people whose passion and career have collided at a happy intersection.
“One thing I have to live with every day of my life is that I’m never going to be able to drive all the cars that are out there before I die,” said Merkle, an auto industry analyst based in Grand Rapids.
“I can’t leave the industry. Quite honestly, it’s all I know how to do. There’s nothing I would love to do as much as what I’m doing. What I do — for me, it’s fun. I enjoy it. I love it. I will eat, sleep and breathe it, and I have no problems doing that. I really have to work at turning it off. Because I enjoy it so much, it can be all-consuming.”
The painful contractions of the auto industry have brought forth Merkle’s new business: Autoconomy.com. He was striking out on his own around the same time that the industry went into spasms in 2009.
Formerly an analyst with IRN Inc., the Grand Rapids-based consulting firm for middle-market suppliers, Merkle had joined accounting firm Crowe Horwath to provide insight into the auto business for its clients. But shortly afterward, the firm decided to change direction. Merkle, with a passion for all things automotive, decided to hang his own digital shingle on the World Wide Web. Autoconomy.com provides a weekly “macro” overview analysis of the auto industry and the economic factors that affect it. Merkle also does consulting, speaks at meetings and conferences across the U.S. and is a frequent source of quotes in the media.
Merkle said the market for his $139-per-year online newsletter ranges from Tier One suppliers to the tool shops that support the smallest of automotive suppliers, from auto manufacturers to dealers.
“They all have a similar need from a forecast or a market perspective. There’s not a shortage of folks out there that want to know: What are the future trends? Where is the industry going?”
Instead of a crystal ball, Merkle relies on economic analyses from a variety of sectors.
“I’m taking economic factors, economic conditions, and tying it back to auto,” he said.
“Suppliers and dealers should be very interested in what happens in the health market. They should be very interested in what’s happening in terms of consumer confidence. They should be very interested in what’s happening in terms of retail sales. They should be very interested in the performance of the stock market. They should be very interested in the value of homes.
“So there’s a lot of data out there that we’re seeing as though it’s outside the purview of the auto industry that I try to bring in, and then tie it back and make the connection to the auto industry.”
Those looking for reams of data detailing every aspect of autos would need to find another source, he said, because his newsletter takes a different approach. “It’s more of a macro overview, a pulse on the market,” Merkle said.
His analysis also reviews new products from the perspective of how they fit in the marketplace. For example, recently he had the chance to try out a new crossover from Cadillac.
“Sometimes I have a unique opportunity to drive vehicles that people have not yet driven — test drives and things of that nature,” he said. “I will report back on my experience with that drive. Now, a lot of people will say Motor Trend, Car & Driver, they can do that. But I don’t get into the 0-to-60 time, I don’t get into the braking of the auto. … I get into more of the market conditions: Does it fit the demographic requirement and needs of the market, how it’s changing, where it’s going, and what kind of volume can we expect? Will it be successful or will it not be successful in the industry? So it’s a much different approach.”
The auto industry has always been a big part of Merkle’s life. He and younger brother Mark grew up as the sons of GM machinist John Merkle and his wife, Barbara, a dental assistant. At first, the family lived in Wyoming, then moved to Newaygo’s Bills Lake when John Merkle transferred to what was then the new GM plant in Coopersville.
“My father worked for General Motors all his life, so really … we were always talking about new cars, talking about the automotive business or talking about the daily events or the news of the day in automotive. It was very much dinner time or evening conversation.”
He claims his first love was the Mako Shark Corvette, circa 1968-72. “I was 4 or 5 years old at the time, but there was just something about that car — I loved it,” he said.
His collection of car magazines outgrew his bedroom, much to the annoyance of his mother, but Merkle couldn’t bear to part with any of them “because I never knew when I had to go back and look something up.”
Merkle graduated from Newaygo High School, then earned an undergraduate degree in business from Eastern Michigan University and an MBA at Wayne State University, soaking up every car-related course or opportunity he could.
“There isn’t really a program out there for us. It’s not like I can go to Davenport and go through their auto analyst program,” he said.
“From a personality perspective, you have to be willing to walk in two worlds. One is the objective world where you look at economic data and historical auto data. You have to be comfortable with numbers and be able to analyze those numbers — get them so they speak, so they talk to you. But you also have to walk in the subjective world — when I talk about vehicle design and what’s going to work in marketplace.
“The other piece: You have to love the auto industry. There are a lot of people who are nuts about cars out there, but you have to really love the industry and love the product. I can appreciate a good vehicle and great design from any automaker anywhere in the world.”
Admittedly not much of a mechanic, Merkle doesn’t kick the tires when he tests a new vehicle. With a practiced eye, Merkle looks at factors most consumers don’t even realize influence their car-buying decisions.
“I’m not forecasting soup or soap. I’m forecasting dreams,” he said. “I’m forecasting someone’s aspirations, goals. No one buys a new car because they have to — not in this country, they don’t. They buy a new car because they want to. It’s not transportation, it’s image. I mean, you wear it. You wear the car. That’s the difference between a new vehicle purchase and a grocery store item.”
So what does Merkle look for in a new car?
“When you walk up to a car, it’s almost like you have to take it all in. So I’ll look at it from multiple directions: front, front-quarter view, side, rear-quarter view, rear. And I look at the proportion. … Are the proportions appealing? Then I also look at the flow of the design. Does it interrupt my eye when I go from the front-quarter panel and my eye runs to the back of the car? Believe it or not, there’s a lot of cars out there that don’t flow very well at all.”
He looks for the “level of interest in the sheet metal,” a design detail at which he thinks the Detroit auto companies can excel. “Maybe a little bit of chrome, but not too much,” he says, sounding a bit like a wine connoisseur.
“Now when you get inside the vehicle, I think this is where a lot of the automakers in the past have fallen short, especially the Detroit Three,” Merkle said. “Oftentimes, you have a crummy interior. … They were trying to save money, so they were taking money out of the vehicle. The seats weren’t always very comfortable; the fabric was cheap. It didn’t convey the feeling of quality.”
But Merkle said he thinks those days are gone, and auto manufacturers are near parity in terms of quality.
“When you look at an interior, there are many, many, many parts. You’ve got knobs, you’ve got buttons, you’ve got all kinds of things going on in that interior. But when it all comes together, it should look like one part, like it’s carved in stone. That’s what conveys that look and that feel of quality.”
Starting an auto-related service firm when the industry is at its lowest point since World War II may seem a bit counterintuitive, Merkle said. But he has confidence that the industry will survive.
“I’m starting a company as the industry has been in decline. And what I find is really unique is that a number of businesses and companies have been started during periods of upheaval,” he said.
“So while auto sales are low — they are actually going to peak at just a little over 10 million units sold in the U.S. this year — and when you measure that … and adjust it for population growth or the percentage of real GDP, you will find that we haven’t had a year of auto sales this low at any point after World War II. So this is an incredibly depressed environment.
“But I do know this: that people will come back and they will buy cars as the economy recovers and as it improves. So while this is a tremendous time of volatility, I would still rather get into the auto industry now.”