In 2003 Detroit's big three carmakers, GM, Ford, and DaimlerChrysler, accounted for only 60.2 percent of...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
In 2003 Detroit's big three carmakers, GM, Ford, and DaimlerChrysler, accounted for only 60.2 percent of the vehicles sold in the United States, the lowest number ever. The market share loss has been greatest in the U.S. pas- senger car market, where foreign producers walked away with 55 percent of the market in 2003, up from 34 percent in 1993. For most of the last decade, strong sales of sports utility vehicles, where Detroit dominates, have held overall market share losses in check, but now foreign producers such as Toyota, Honda, and Kia are going after that seg- ment too, creating huge potential problems for Detroit. The American automobile makers have responded by trying to reinvigorate their passenger car business and coming out with a host of new designs. Just as impor- tantly, they are trying to cut the costs of developing and producing those cars. The old rule of thumb was that it took four years and cost $1 billion to design a new car and tool a factory to produce it. To recoup these costs, Detroit would typically sell a car for seven years before developing a new design. Unfortunately for the American for example, the goal is now to reuse 40 to 60 percent of parts from one car generation to the next, thereby reduc- ing design time and tooling costs. At Ford, the number of parts has been slashed. For example, Ford engineers now choose from just four steering wheels, instead of contem- plating fourteen different designs. Another important trend has been to reduce the number of platforms used for car models, as Japanese producers have long been doing. Honda, for example, builds its Odyssey minivan and its Pilot and Acura MDX sports utility vehicles on the same platform, and it has added a pickup truck to the mix. Currently Chrysler bases its vehicle fleet on thirteen distinct platforms. The com- pany is trying to bring this down to just four platforms, reducing the product development budget from $42 bil- lion to $30 billion in the process. Ford and General Mo- tors have similar aims. The platform for GM's new small car offering, the Pontiac Solstice, will also be used for its new Saturn coupe and perhaps one more GM car. As GM develops its next generation of Chevy Silverado and GMC Sierra pickups, it plans to reuse much of the exist- ing platform, cutting development costs in half to nearly $3 billion. Over the next eight years, Ford plans to use its Mazda 6 sedan platform (Ford owns Mazda) as the basis for ten new vehicles. The idea, according to Ford's head of operations, is to engineer it once and use it often. Hand in hand with changes in design philosophy, the Detroit companies are retooling their factories to reduce costs and make them capable of producing several car models from the same line. By doing so, they hope to be able to reduce the breakeven point for a new car model. GM's Solstice, for example, is forecast to sell around 25,000 units a year-too few to recoup fixed costs under the old design-and-build philosophy. But GM has cut de- sign costs by using a common platform and common parts, and it has cut tooling costs by investing in flexible manufacturing technologies that can be used to produce multiple designs based on the Solstice platform from the producers, the Japanese shortened the life cycle of a typi- cal vehicle to five years, and by lowering development and tooling costs, they have been able to make good money on their car models. Now the American producers are trying to strike back. Typical is Ford, which has reduced its product de- velopment time by a quarter since the late 1990s and con- tinues to reduce it by 10 percent per year. Ford now de signs almost one-third of its models in less than thirty months. One reason for this progress has been the in- creased communication among designers. Ford designers used to work in different teams and did not share enough knowledge about parts and platform design. Now teams get together to see how they can share the design work. Moreover, design teams are trying to use the same parts in a wider variety of car models and, where appro- priate, use parts from old models in new cars. Detroit auto designers used to boast that new models were completely redesigned from the floor up with all new parts. Now that is seen as costly and time consuming. At General Motors, same basic line. GM has also worked hard to get unions to agree to changes in inflexible work rules. Assembly line workers now perform several different jobs, which re- duces waste and boosts productivity. Similarly, Ford hopes to have 75 percent of its production built on flexi- ble assembly lines by 2010, and, if successful, its invest- ments in flexible factories could reduce annual costs by some $2 billion a year. Critics say that the new vision coming out of Detroit is not that new. Although the techniques being discussed will reduce development time and tooling costs, Japa- nese automakers have been pursuing the same tech- niques for years. The critics fear that Detroit automak- ers are chasing a moving target and that when they arrive in the promised land, it will be too late, since their global competitors will have already taken competition to the next level.54 Case Discussion Questions 1. How have lower development and tooling costs given Japanese auto manufacturers an advantage in the marketplace? 2. What steps are the Detroit automobile makers taking to reduce product development time and tooling costs? If they are successful, what are the implications of these initiatives for (a) the number of car models they can sell and (b) breakeven volumes for an indi- vidual model? Will these initiatives benefit Detroit's customers? How? 3. The Japanese producers have been pursuing for years many of the methodologies now being intro- duced in Detroit. Why do you think it has taken the Detroit automakers so long to respond to their foreign competitors? 4. If the Detroit companies successfully implement their new operating strategies, do you think they will gain a competitive advantage in the marketplace? In 2003 Detroit's big three carmakers, GM, Ford, and DaimlerChrysler, accounted for only 60.2 percent of the vehicles sold in the United States, the lowest number ever. The market share loss has been greatest in the U.S. pas- senger car market, where foreign producers walked away with 55 percent of the market in 2003, up from 34 percent in 1993. For most of the last decade, strong sales of sports utility vehicles, where Detroit dominates, have held overall market share losses in check, but now foreign producers such as Toyota, Honda, and Kia are going after that seg- ment too, creating huge potential problems for Detroit. The American automobile makers have responded by trying to reinvigorate their passenger car business and coming out with a host of new designs. Just as impor- tantly, they are trying to cut the costs of developing and producing those cars. The old rule of thumb was that it took four years and cost $1 billion to design a new car and tool a factory to produce it. To recoup these costs, Detroit would typically sell a car for seven years before developing a new design. Unfortunately for the American for example, the goal is now to reuse 40 to 60 percent of parts from one car generation to the next, thereby reduc- ing design time and tooling costs. At Ford, the number of parts has been slashed. For example, Ford engineers now choose from just four steering wheels, instead of contem- plating fourteen different designs. Another important trend has been to reduce the number of platforms used for car models, as Japanese producers have long been doing. Honda, for example, builds its Odyssey minivan and its Pilot and Acura MDX sports utility vehicles on the same platform, and it has added a pickup truck to the mix. Currently Chrysler bases its vehicle fleet on thirteen distinct platforms. The com- pany is trying to bring this down to just four platforms, reducing the product development budget from $42 bil- lion to $30 billion in the process. Ford and General Mo- tors have similar aims. The platform for GM's new small car offering, the Pontiac Solstice, will also be used for its new Saturn coupe and perhaps one more GM car. As GM develops its next generation of Chevy Silverado and GMC Sierra pickups, it plans to reuse much of the exist- ing platform, cutting development costs in half to nearly $3 billion. Over the next eight years, Ford plans to use its Mazda 6 sedan platform (Ford owns Mazda) as the basis for ten new vehicles. The idea, according to Ford's head of operations, is to engineer it once and use it often. Hand in hand with changes in design philosophy, the Detroit companies are retooling their factories to reduce costs and make them capable of producing several car models from the same line. By doing so, they hope to be able to reduce the breakeven point for a new car model. GM's Solstice, for example, is forecast to sell around 25,000 units a year-too few to recoup fixed costs under the old design-and-build philosophy. But GM has cut de- sign costs by using a common platform and common parts, and it has cut tooling costs by investing in flexible manufacturing technologies that can be used to produce multiple designs based on the Solstice platform from the producers, the Japanese shortened the life cycle of a typi- cal vehicle to five years, and by lowering development and tooling costs, they have been able to make good money on their car models. Now the American producers are trying to strike back. Typical is Ford, which has reduced its product de- velopment time by a quarter since the late 1990s and con- tinues to reduce it by 10 percent per year. Ford now de signs almost one-third of its models in less than thirty months. One reason for this progress has been the in- creased communication among designers. Ford designers used to work in different teams and did not share enough knowledge about parts and platform design. Now teams get together to see how they can share the design work. Moreover, design teams are trying to use the same parts in a wider variety of car models and, where appro- priate, use parts from old models in new cars. Detroit auto designers used to boast that new models were completely redesigned from the floor up with all new parts. Now that is seen as costly and time consuming. At General Motors, same basic line. GM has also worked hard to get unions to agree to changes in inflexible work rules. Assembly line workers now perform several different jobs, which re- duces waste and boosts productivity. Similarly, Ford hopes to have 75 percent of its production built on flexi- ble assembly lines by 2010, and, if successful, its invest- ments in flexible factories could reduce annual costs by some $2 billion a year. Critics say that the new vision coming out of Detroit is not that new. Although the techniques being discussed will reduce development time and tooling costs, Japa- nese automakers have been pursuing the same tech- niques for years. The critics fear that Detroit automak- ers are chasing a moving target and that when they arrive in the promised land, it will be too late, since their global competitors will have already taken competition to the next level.54 Case Discussion Questions 1. How have lower development and tooling costs given Japanese auto manufacturers an advantage in the marketplace? 2. What steps are the Detroit automobile makers taking to reduce product development time and tooling costs? If they are successful, what are the implications of these initiatives for (a) the number of car models they can sell and (b) breakeven volumes for an indi- vidual model? Will these initiatives benefit Detroit's customers? How? 3. The Japanese producers have been pursuing for years many of the methodologies now being intro- duced in Detroit. Why do you think it has taken the Detroit automakers so long to respond to their foreign competitors? 4. If the Detroit companies successfully implement their new operating strategies, do you think they will gain a competitive advantage in the marketplace?
Expert Answer:
Related Book For
Applied Statistics In Business And Economics
ISBN: 9780073521480
4th Edition
Authors: David Doane, Lori Seward
Posted Date:
Students also viewed these general management questions
-
Toyota has built a huge manufacturing company that can produce millions of cars each year for a wide variety of consumers. Why was it able to grow so much bigger than any other auto manufacturer?
-
It has often been pointed out that 60 percent of strategic alliances fail. What are the reasons for this?
-
Toyota Motor Corporation produces passenger car brands Lexus, Toyota, and Scion. A recent annual report includes the statement that The consolidated financial statements include the accounts of the...
-
The income statement information for 2010 and 2011 of the Connor Company (a sole proprietorship) is as follows: Required Fill in the blanks labeled (a) through (g). All the necessary information is...
-
What are the advantages to the modular programming approach?
-
Refer to the North Valley Real Estate data, which report information on the homes sold last year. Assume the 105 homes is a population. Compute the population mean and the standard deviation of...
-
Coca-Cola's 2004 financial statements reported the following itemswith 2005 figures given for comparison (adapted, in millions): Compute Coca-Cola's rate of return on total assets and rate of return...
-
Gifford, Lawrence, and Ma share equally in net income and net losses. After the partnership sells all assets for cash, divides the losses on realization, and pays the liabilities, the balances in the...
-
You are property manager of several properties. As you focus on staffing the numerous positions at your properties describe the different factors and skills of candidates that you are taking into...
-
Robertos Honey Farm in Chile makes five types of honey: cream, filtered, pasteurized, mlange (a mixture of several types), and strained, which are sold in 1 or 0.5 kg glass containers, 1 kg and 0.75...
-
|Q1. A thin sheet of iron is in contact with a carburizing gas on one side and a decarburizing gas on the other at temperature of 1000C. (a) Sketch the resultant carbon concentration profile when a...
-
Q1. What is the correct pricing strategy for Marketing Mary? Open Source - Free, Software as a Product, or Software as a Service? Why? Q2. Do you think companies need to focus on inbound marketing?...
-
1. Discuss the rise and fall of offender rehabilitation. What can be said about the sociopolitical causes behind the recent renewed interest in rehabilitation? 2. What evidence do the authors offer...
-
Early one morning, Tom was driving his tractor at 4 a.m. on a road near his northern Ontario farm. Both the weather and driving conditions were excellent. Tom was driving at a normal speed when he...
-
At a meeting with Andrew and Olivia, you asked the entrepreneurs some questions to help you recommend a specific legal form for their business. Your notes from the meeting are below. They have...
-
What are the key considerations when designing seismic-resistant structures to mitigate the effects of liquefaction in earthquake-prone areas ? Explain
-
The velocity vector is v(t)=The acceleration vector is a(t)=The velocity vector at t=0 written as a product of the speed anddirection is v(0)= The equation \( \mathbf{r}(t)=(4 \sin t) i+(4 \cos t)...
-
Define relevant costs and discuss: (1) whether all future costs are relevant for decision making and (2) whether variable costs are always relevant and fixed costs are always irrelevant
-
Which type of data (cross-sectional or time series) is each variable? a. Mexicos GDP for each of the last 10 quarters. b. Unemployment rates in each of the 31 states in Mexico at the end of last...
-
Which type of data (cross-sectional or time series) is each variable? a. Value of Standard & Poors 500 stock price index at the close of each trading day last year. b. Closing price of each of the...
-
July sales for Melodic Kortholt, Ltd., average 1 = $9,500 with 12 5 $1,250. August sales average 2 = $7,400 with 22 = $1,425. September sales average 3 $8,600 with 32 = $1,610. (a) Find the mean and...
-
Canada's Wonderland is an amusement park in Vaughan, Ontario. Over 3.5 million people visit Wonderland each year between May and October. It covers 330 acres and has more than 200 rides and...
-
The accounts of Custom Pool Service, Inc., follow with their normal balances at June 30, 2020. The accounts are listed in no particular order. Prepare the company's trial balance at June 30, 2020,...
-
Refer to exercise E2-17. Record the transactions in the journal of Joseph Ohara Dental Clinic Ltd. List the transactions by date, and give an explanation for each transaction. Exercise 2-17 Joseph...
Study smarter with the SolutionInn App