GM Tackles Strategy in Wake of Souring Commodities

Implications: To say that GM sees the next horizon of cost savings within commodity substitution only paints a narrow view of the larger issue facing GM, Ford and Chrysler. North American automobile marketplace success dictates the need for innovative products with styling and performance demanded by its customers. Forward reaching innovation of established and new components / composites, engineered for safety and reliability, are just one step needed for these 3 to survive, and is good for the global industry at large.

Analysis: For years North American labor costs have been cited as the number one, noncompetitive burden these companies faced when compared with European and Asian producers operating in North America. But regardless of the weight placed there, this is just one example of a multi-decade postponement practice by what was once the Big 3 that reached into all aspects of a conventional design, build, and sell strategy. Rather than GM cost-managing itself out of business, GM has looked in the mirror, and the right analysis points to a holistic versus tactical approach to cost, design and innovation.

What successful company would not look at the cost of its materials, seeking value in substitution and innovation, particularly with promise of financial and performance benefits which, if managed appropriately, will find its way into influencing consumer choices boosting sales? Rather than approach this from the pure "cost reduction" play, is this an early sign of a newly reshaped engineering/purchasing/design team/finance group emerging that puts the supplier community, along with the commodity watch groups, on notice, something a kin to us all seeing more innovation to come out of GM's R&D and marketing departments?
 
Substitution in the automotive industry implies all components are the same, something that ignores the litany of Federal and State regulations, safety concerns, threats of litigation for product failure, and most importantly, the need for engineering precision in order for thousands of individual parts to work in a synchronized fashion. Rather than strapping in for lower supplier payments, smart suppliers should take this as notice, reinforcing the call to be part of an integrated design team that ultimately delivers vehicles that consumers demand at price points that make them attractive for everyone without compromise to safety, reliability, or performance.