Global viewpoints: technology leads the way
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Alliances
Covisint is an example of how OEMs and suppliers from around the globe are partnering to achieve ends—parts cost savings, in the case of Covisint—that otherwise may not be possible. "No one is big enough, smart enough, or rich enough to go it alone," said David Cole, Director of the Center for Automotive Research at the Environmental Research Institute of Michigan, during the SAE 2001 World Congress in March.
General Motors Corp., in particular, has made big news recently in forming cross-continent alliances. In addition to strengthening its relationships with Isuzu, Suzuki, and Fuji Heavy Industries (Subaru), the world's largest automaker recently formed alliances with Italy's Fiat and Russia's AvtoVAZ. The industry has been "consolidating faster in the last few years than at any time since the 1920s—and of course this time it's on a global scale, and it's affecting OEMs and suppliers alike," GM President and CEO Rick Wagoner said at a recent SAE Congress function. "Some are buying, some are allying, and there's no real way to know at this point which strategy will work better in the end." According to Wagoner, the three main drivers of consolidation are the need for a global sales footprint, the advantage of a multibrand strategy, and the potential for economies of scale.
As Dana Corp. Automotive Systems President Bill Carroll noted during the SAE Congress, the nature of partnerships can range "from a handshake to equity." Dana has been active in this arena with its recent acquisition of a stake in Getrag, and Carroll said the company plans to make more moves.
 Internet vehicle sales are on the rise. Click to enlarge |
The DaimlerChrysler merger is the highlight of the recent consolidation wave, at least among OEMs. The company subsequently acquired stakes in Mitsubishi and Hyundai. It acquired engine maker Detroit Diesel Corp. in October and, most recently, formed a "global alliance" for powertrain and fuel systems with off-road equipment maker Caterpillar Inc. DaimlerChrysler and Ford are partners in the Xcellsis fuel-cell joint venture.
In the past year, Ford Motor Co. acquired Land Rover, agreed to create a joint venture with Navistar to build commercial vehicles, formed a joint venture with Getrag for manual transmissions, and began negotiations with French automaker PSA Peugeot-Citroën for joint telematics development.
Consolidation in the heavy truck sector also has been dramatic, with DaimlerChrysler/Freightliner buying truck maker Western Star; AB Volvo bought Renault V.I./Mack from Renault.
 America's best-selling passenger car for 2000, the Toyota Camry. |
Consolidation is one of the many trends redefining the automotive industry. As Cole said at the SAE Congress, "It's hard to imagine a more interesting period than the one we're experiencing in this industry. Of course, it's much more than just interesting, and I think we would all agree that it's challenging and stressful—a time of incredible opportunity." Though "resource-short" in terms of people, money, and many other things, "We're looking at an explosion of knowledge and certainly an explosion of technology," he said.
Dana Corp. CEO Joseph Magliochetti believes one of the bigger changes the industry has seen recently is greater reliance by OEMs on large suppliers to provide modules—something that will require a new type of relationship between OEM and Tier 1. He noted that the Big 3 in 1999 used an average of about 2000 suppliers each. By 2005, that figure is expected to plunge to 175. "In the wake of this shakeout, it is clear that the 'collaborating suppliers' that remain will need to become more closely aligned with their customers."
As OEMs will build a more strategic relationship with their supply chains, these suppliers must become increasingly responsible for "design-stage" engineering of complex components and modules to assure a more rapid speed to market, according to Magliochetti. "From the supplier perspective, we believe that modularity offers a tremendous opportunity to enhance value and speed the vehicle development process," he said. "On a more practical level, this concept also enables the OEMs to simplify current assembly methods and achieve greater efficiency... I believe that the sooner we truly embrace this modular trend in North America, the sooner our industry will maximize performance—in terms of quality, efficiency, and shareholder value."
As part of AEI's look at the North American automotive industry, the Big 3 and five major suppliers were asked for their insights about the importance of technological innovation.
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