Summary
Restructuring plans are simple; “What do we design?”, “What do we engineer?”, “What do we manufacture?”, “What do we assemble?” Brand it, Market it, Sell it and get rid of the rest.
Analysis
Much has been made of the GM and Chrysler LLC bailout and the deadline for both to submit their respective plans to become solvent and self sustaining. One would think these are or should be basic day to day business planning objectives of any consciousness management team, but somewhere in time and possibly due to generous prior market share of the largest market in the world these basic fundamentals got lost. After reading countless articles of opinions and excuses on this subject I sat down and scribbled four (4) basic points that have proven successful with other global competitors facing similar business climates.
One question I am asked quite often; “why can’t the Detroit Three make a small car at a profit when the Europeans and Asian OEM’s can”. The Detroit answer has consistently been everything from labor cost, legacy cost, heath care cost and retiree benefit cost. Albeit, all true and contribute to the disparity, but are only part of what I believe is a much bigger contributor. I believe Detroit’s entire business model is flawed, they approach the design, engineering, tooling, testing and validation the same as they would a luxury SUV; design from scratch, build all new parts and running the full sourcing process with all their might and expensive massive resources. Quite simply you only have to look at the VW, Tata and Toyota philosophy on all of their vehicles and specifically the price sensitive small cars to understand the answer.
Component re-use.
Limited proliferation.
Fewer options.
Smart value added options.
Toyota and Volkswagen apply this philosophy across all brands using common off the shelf components that can be integrated into designs that at a glance you would never guess it is the same part, already designed, tooled, and validated. The sourcing is pre-determined and the only negotiation is volume discount. There are many examples but one study I conducted for coat hook proliferation on all North American vehicles proves my point.
Toyota had two (2) different designs.
GM had forty-seven (47).
Coat hooks are an extreme example but this is how all components (large & small) are developed and sourced by Detroit. The preproduction cost is enormous and the complexity to the supply base translates to higher cost to the OEM. Simply put “restructuring” the Detroit Three is much needed and well over due, unfortunately the supply base has been squeezed and forced to make these changes as a means of staying in business so the “shadow positions” at the OEM’s as we referred to them will simply go away leaving many with few options of employment movement downstream.
