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Archive for the ‘Auto Industry’ Category

Here is an interesting factoid for you: 24% of all the vehicles manufactured right now are built on just ten platforms. What’s more, by the end of the decade that number is expected to grow to 30%. The number comes from an Automotive News article that looks at some of the consequences of the trend (With the push for standard parts, quality is key, Aug 6).

First, why automakers are trying to move in this direction is clear. Being able to build multiple model off one basic platform saves a ton of money in product development as well as tooling and build manufacturing facilities. Further, they benefit from a bit of risk pooling; if one model is not selling particularly well, that may be offset by another that can be built at the same plant. Thus, even if a model slumps, all that expensive capacity is till being used. (See this post from last fall on how Ford is cutting its number of platforms from 15 to 9.) Globalization also plays a part in this. What kinds of vehicles sell well might vary across different continents, but if European, Asian and North American models can all be built on the same platforms, manufacturers with a global footprint can be ever more cost competitive.

But what about suppliers? With purchased components making up a significant chunk of the cost of a vehicle, car makers would like standardization there. In a perfect world, you would have the same break system on every model built on a platform, but that brings challenges.

“The requirement that we face is clearly to develop products from the outset in such a way that they can be used in all the platform derivatives without the expense of making changes,” said Sabine Woytowicz, regional quality director at Valeo in Germany.

But with mass standardization, a part with a quality problem can now be supplied to millions of vehicles. That puts a premium on quality. …

Martin Thier, director of corporate quality management at the Mahle Group, said: “When obtaining an order, we check its feasibility for both product development and manufacturing even more closely.”

It comes down to “knowing precisely what you do, what you can do and how good you are at it.”

For example, he said, there is now a more intense interest in investigating how an inconsequential error in one part would produce an effect in a different component.

(more…)

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When you thing of the auto industry, you likely focus on big players like Ford, General Motors, Toyota and Mercedes. Names like Magna International and Denso may not mean a whole lot to you. But you should know those names. They likely make more of your car than you realize. “Mega suppliers” like Magna and Denso have been growing for years and in the process have been sifting the balance of power in the industry (Age of mega supplier heralds danger for carmakers, Financial Times, May 18).

There are now 16 major car manufacturers that sell more than 1m vehicles a year. But those cars are built from parts supplied by just 10 major component makers – meaning that under the individually styled bodywork, cars are sharing more parts.

Whether a driver chooses to buy a BMW, an Audi or a Mercedes-Benz five-door saloon, the chances are high that the anti-lock brakes will be built by Continental, the battery will come from Johnson Controls, and Denso will have provided the exhaust

Bosch, the world’s largest automotive supplier by revenue, reckons that at least one of its parts is built into almost every new car sold anywhere in the world – regardless of brand, market, price point or geography.

The article goes on to note that the top ten suppliers capture 60% of the revenue generated by the top 100 suppliers.

Given this situation, two questions seem relevant. First, how did automakers find themselves in this situation? Second, what are the implications for how the industry functions? (more…)

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Check out this spiffy graphic from Automotive News on the evolution of auto assembly in Mexico (Japanese automakers march into Mexico, set up export base, Mar 10).

0310-MEXICO-MAP

That expansion has to a large extent come at the expense of the rest of the North American industry as this graph from the Chicago Federal Reserve demonstrates.

AOS-Chart-1

Note that overall assembly capacity has declined. That’s not too surprising. The industry was generally seen as being overcapacitated, and the Big Three took the never-let-a-crisis-go-to-waste route to reduce the number of factories and resize their business. But Mexico clearly gained and it is forecasted to gain even more. Here’s another graph from the Chicago Fed.

AOS-Chart-2

It should be noted that this growth is driven by Japanese brands. GM is the only US or European firm to open a new plant following NAFTA. All the action lately has been due to the likes of Honda, Mazda and Nissan. Given this growth in capacity, it is not too surprising that Mexico is expected to pass Japan this year and Canada next year to become the top source of imported cars in the US. But why has there been such a rush invest there? (more…)

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Ford has a new version of its F-150 pick up coming out. That per se isn’t all that exciting to me, but everyone says that thus truck is a big deal because of it represents a shift from steel to aluminum. Here is how Dan Neil put it in the Wall Street Journal (Detroit’s Big Three Are Returning to Excellence, Jan 17).

But now, without further eloquence, the news: Ford changed the game this week when it unveiled its aluminum-intensive pickup truck, the 2015 F-150, that is as much as 700 pounds lighter than a comparable steel-bodied vehicle. In an industry that celebrates the power of small numbers and incremental weight savings, 700 pounds is a staggering figure, and it is weight savings that directly and proportionally improves hauling and towing capacity and fuel economy, which are prime metrics in the truck segment.

Wait, Upper West Sider, don’t rush off to the wine column. To the casual observer, the anticipated 3 mpg (20%) increase gained by Ford’s high-tech “light weighting” (a term of art) may seem marginal, but I assure you it is a figure of immediate and national consequence. … By virtue of the hundreds of millions of miles rolled up by the F-series annually, you are looking at the single biggest real-world advance in fuel economy in any vehicle since the Arab oil embargo.

So all that aluminum gives us a game changer — and not just in the realm of fuel economy. Automotive News reports that it has major implications for Ford dealers and their body shops (Ford dealers will gear up to fix new F-150, Feb 3). Ford’s collision marketing manager (that’s just a great job title) says that 80% of repairs on the new F-150 can be done in a standard body shop but that other 20% is going to require special capabilities — in part because aluminum dust reacts badly with steel parts so aluminum work must be kept physically separate from the rest of the shop. All told, a dealer needs to spend 30 to 50 grand in order to be ready for the F-150.

How is Ford going to make that happen? (more…)

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I spent this weekend in Miami (OK, Coral Gables) teaching the core Ops class for an executive MBA section. One of the topics we usually cover in the core (especially with execs) is the cash-to-cash cycle. The cash-to-cash cycle (intuitively) measures how long it takes a firm to capture the gain on its investment in inventory. Mathematically, it consists of days of inventory plus days of accounts receivable minus days of accounts payable. Thus when a firm purchases inventory, it takes a while for those goods to sell. It may then need to wait to collect cash from its customers. However, it may get credit from its suppliers so time in inventory may be offset by the time it has to pay its suppliers. Taken together, these measures give an idea of how effectively a firm uses its working capital. It also may suggest where the firm should target improvement. For example, benchmarking might show that its accounts receivable is out of whack with industry norms so that could be a real opportunity to pursue.

As I said, I had to teach this stuff this weekend. Fortuitously for me, Supply Chain Insights just happened to publish a whole report on the cash-to-cash cycle packed with data and eye candy (Supply Chain Metrics That Matter: A Closer Look at the Cash-To-Cash Cycle (2000-2012), Nov 11). To start with, here is some data on how cash-to-cash cycles vary across industries and over time.

table

(more…)

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Three weeks ago, I had the pleasure to visit one branch of my extended family and BMW Welt (BMW World), the “multi-functional customer experience and exhibition facility of the BMW AG, located in Munich, Germany.” Supposedly, BMW Welt is the second most popular tourist destination around Munich, after Neuschwanstein Castle which inspired Disneylands’ Sleeping Beauty Castle. If you like architecture or cars, you should visit BMW Welt.

OK, but this is the Operations Room, so what else is worth knowing? It turns out that this month, BMW starts selling in Germany its long-awaited i3 (the USA will have to wait until 2014) and here’s some personal pictures to highlight three aspects:

(more…)

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The National Highway Traffic Safety Administration maintains a website that users track how many motor vehicle recalls there have been this month. As I am writing this, there have already been 17 in November. As the graphs below show, there have been an increasing number of recalls in recent years affecting an increasing number of vehicles.

recall

Those graphs come from an Automotive News article (Despite quality improvements, costly safety issues continue to dog automakers, Oct 28) that gets to an interesting question: If the general quality of cars has improved, why are there so many more recalls?  (more…)

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