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... ring are beginning to affect automaker decisions. (Lepree 34) While opportunities abound, the costs of moving beyond current industry product architecture and infrastructure are huge and the technological uncertainties are high. If hybrid drive trains win widespread acceptance, the commercial prospects for more radical technologies like fuel cells may be impaired. New materials pose their own dilemmas with respect to cost and product performance. Planning for end-of-life recycling of vehicles often conflicts with other trends in vehicle design and technological innovation.
Finally, the outlines of a mobility business model are still unclear. Figuring out how best preserve the bottom line and still go green will be the major strategic battleground in auto's New Economy. Even as bold new plans are formulated for cars of the future the industry has to determine who these vehicles will be designed and marketed to. Any automaker will admit that they would like to have the next world car. A world car is loosely defined as a model that has universal appeal if most if not all markets and a high profit margin. A world car takes advantage of globalization of resources within a firm, modular ization of parts and manufacturing techniques, and it also utilizes outsourcing in component and vehicle manufacturing.
On the other hand automakers still have to consider how much of their resources should they devote to the needs of specific geographic markets. North American buyers, although appreciative of an inexpensive and highly fuel efficient vehicle, tend to shy away from the generic look and smaller size that is traditionally associated with a world car. While some may argue that the American market is saturated (and in some ways it is compared to most Asiatic countries, for example), it still obviously has a huge market of buyers as evinced by our sustained market of new car buyers. As new drive trains are developed, each automaker will have to make a decision. They will need to consider whether or not to launch these power plants in smaller (and easier to develop) platforms, or should they try and make them work in larger utility vehicles and sedans? As important as product and market development is, manufacturing is also very important.
The two most important elements of manufacturing are (1) the OEM-supplier interface, where suppliers get the goods needed to the OEM for vehicle manufacturing and (2) the internal manufacturing operations of the OEM, where the primary focus is on the design and assembly of vehicles. As the industry enters the 21 st century, the traditional automotive business model will be constantly challenged and revamped as components are modularized and manufacturing techniques undergo changes to make them both more efficient and worker friendly. The auto industry now faces the same pressures to reconfigure the supply chain that has transformed the faster-clock speed high technology industries. Automakers are increasingly reliant upon large and sophisticated Tier One suppliers (suppliers that deal directly with the manufacturer) that take on design and logistics responsibilities and make investments in capital equipment and advanced technology development. Alliances among automakers and with firms outside the industry are increasingly common too (i. e.
NUMMI, Mitsubishi/Daimler Chrysler, etc. ) as the costs of developing new technologies and of serving global markets strain the resources of even the largest firms. It is readily becoming a reality that manufacturers have to place a constant demand on their suppliers to continually cut costs. This is a very difficult situation, as manufacturers simultaneously must outsource more and more of the production process. If they continue to pressure suppliers to cut costs, they stand a chance of loosing them. Some manufacturers, such as Honda and Toyota realize the reality of the situation, and have made efforts maintain relationships with their suppliers.
In a recent article in Wards Auto World this unique approach was discussed. It is the OEM-supplier interface component of the business model, however, that demonstrates the greatest differences between the domestics and Honda and Toyota. At no time during the past 15 years, except for the Tom Stallkamp era at Chrysler, has any domestic OEM acted with as much concern for maintaining good supplier relations as have Honda and Toyota. The way this approach is carried out was detailed as follows, The initial emphasis on quality when selecting suppliers carries over to the manner by which Honda and Toyota work with their suppliers... Honda and Toyota expect their suppliers to be around long-term. And if the supplier is not performing as expected, Honda and Toyota will work with the company to get its costs down or improve quality - whatever it takes to make the supplier's goods competitive.
On the suppliers end this may seem like the ideal situation in which your only client is just as interested in your profit margin as you are. This relationship does not come with a price though, more often than not it actually allows the automaker to exert more cost-cutting pressures. Still, our studies found that Honda and Toyota carry out all of their supplier interface activities while applying considerable price reduction pressure on parts makers. (Henke 48) On a manufacturing level, collaboration is the key to survival in the next economy. Automakers must be prepared to leverage relationships with suppliers, distributors, technology alliance partners, and customers more intensively.
Only those firms that skillfully develop and manage the capabilities of this extended enterprise will thrive. Each company is on its own quest for a unique advantage in the industry's new economic geography. Economic geography is really what will determine the paths taken by automakers in the years to come. Oil shortages and price raises can force an early hand on hybrid / fuel cell / electric development and implementation.
If an automaker is not ready, then they could suffer, as competitors who started their R& D earlier, will have faster product delivery. Again, economics will determine success and failure as automakers address such questions as, Will the car market continue to erode in favor of segment-blurring hybrids (hybrid hydrogen fuel-cell vehicles such as the Ford Focus FCV)? (Birch) and What happens to all existing models if and when fuel cell power trains break into the market? The answers to these questions, and other similar questions, involve massive manufacturing and financial commitments. To understand why economics so crucial, one must simply refer to the bottom line. Where are the customers?
Where will they be next year? What do they want? What do we have to overcome to deliver that product before our competitors? How can we deliver it with the highest profit margin possible? The first company that can provide all the right answers to those questions is the winner. Works Cited Birch, Stuart.
Ford's Focus on the Fuel Cell. web Christina, John. Can GM Save an Icon? Business Week. April 8, 2002: 60. Goisher, Steven.
Administration Shifts Strategy On Auto Fuels. The New York Times. 9 Jan. 2002: pA 1 (N) col 2. Henke, John. It's Not the Business Model.
Ward's Auto World. March 2002: 48. Lepree, Joy. A Greener Ride. Product Design & Development. Sept. 2001: 34.
Wolkomir, Richard. Yo-ho-ho! The Economist. 21 Feb. 2002: 42.
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