It takes money to make money, or so the saying goes. Likewise, it takes money to design and make a car — easily topping $1 billion by conventional platform standards.
So it has been a rough ride the past year for automotive engineers who have to do their jobs on shoestring budgets. Of all the money that gets spent in creating a new car, the most important expense is that of design, build and validate. That goes for complete vehicles as well as the thousands of parts that make up the whole.
The marketing folks might argue with that point, but let's face it: A well-made product often sells itself. And for a product to be well made, it takes money and plenty of time — hence the 3- to 4-year cycle times for new model development.
Even after the often tortuous process of making a prototype, the engineer needs lab time, track time, winter testing, summer testing, finite element analysis. Dynamometers aren't cheap, and neither is operating them. Engineering shouldn't skimp, lest the freeways become littered with delaminated tires and rolled-over SUVs. Then the costs really start stacking up.
But in these extraordinary economic times, there are no sacred cows. Every day seems to bring news of another company in the auto industry that must downsize for survival, and engineering has not been spared.
The Big Three have cut back on contract engineering services, andCorp. is laying off 139 skilled-trades vehicle builders for a month at its Engineering Validation Center in Pontiac, MI. These union employees are a big help to the engineers by building prototypes and training other hourly workers. It's unclear how the layoff will affect GM engineers in Pontiac.
Supplier engineers haven't fared any better.Corp. reported in February that it is cutting 400 engineering positions worldwide by the end of June in a move to lower research and development costs.
The tension among automotive engineers due to this harsh economic climate is plainly evident in the findings of WAW's 24th Annual Engineering Survey. Roughly two-thirds of the 685 engineers we polled (324 OEM and 361 supplier) say programs they are working on have been delayed for production, and that the recession is affecting the health of engineering at their companies.
“If things don't improve soon,” writes one supplier engineer, “I see at least a 20% reduction in our engineering staff.”
Furthermore, roughly half of the engineers we surveyed say that fellow engineers in their departments have lost their jobs in the past year due to belt tightening at their companies.
“More work is expected for less pay and benefits,” another supplier engineer writes. “It is harder than ever to do a thorough engineering job up front. There seems to be more resources to fix it after.”
At least the economic downturn is indiscriminate, as most engineers surveyed say that specific engineering disciplines have not been targeted for layoffs or buyouts at their companies.
More than a quarter of the engineers surveyed say their pay has been cut or frozen within the past year, although the no-raise policy appears to be slightly more common for supplier engineers (32.7%) than for OEM engineers (29.3%).
“Buyers and bean counters continue to gain authority,” a supplier engineer writes. “The fat is gone. Flesh and bone is now being devoured.”
OEM engineers surveyed were no more upbeat than their supplier counterparts. “Engineers are being asked to do more and more of the non-engineering functions,” writes one, “things that are secretarial and administrative in nature, since those jobs have been eliminated.”
Some OEM engineers are downright bitter:
“Head counts are being reduced at the working level, but upper management is still fat and overpaid.”
“I am tired of doing the work of two people and working overtime to accomplish it.”
“I believe management is using Sept. 11 as an excuse to make headcount reductions they planned all along.”
“MBAs are killing GM.”
“Research money has vanished.”
The impact on quality is another open wound, as more than two-thirds of the engineers we surveyed say that cost pressures are hurting the engineering quality of future vehicles. That's 72% of supplier engineers surveyed (up from 68.7% when asked last year) and 66.7% of OEM engineers (up from 64.3% last year).
“Cost-cutting pressure has us sourcing parts previously thought to be sacred cows,” writes one supplier engineer. “We know quality will suffer.”
An OEM engineer agrees: “Quality is talked about, but cost drives everything we do.”
If there's any question as to which takes priority, the engineers in our survey quickly put the issue to rest.
Half of the Supplier engineers and 40% of the OEM engineers say cost is their top priority with regard to their current or most recent product development program, followed by quality. All other “priorities” (environmental impact, fuel economy, weight reduction, the use of new technology — even safety) are no priority at all, according to our survey.
“Cost reductions at OEMs have severely reduced quality,” writes a supplier engineer.
“We are so cost-focused and are asking suppliers for piece-cost reduction that suppliers are quoting future projects higher to make up for the 5%,” writes an OEM engineer. “Then we cost these quotes with our Asian alliance suppliers, who are cheaper. Thus our work goes out of USA.”
As the engineering ranks shrink due to the economy, the intellectual capital is leaving from many companies.
A whopping 70% of supplier engineers and 75% of OEM engineers say that future programs will suffer from a lack of knowledge and expertise with so many senior engineers taking buyouts or early retirements.
“Buyouts will hurt OEMs but can move knowledge down to suppliers, if engineers go to work for suppliers,” writes a supplier engineer.
“We are not grooming the new generation for tomorrow,” writes another. “More time is spent on systems and monitoring metrics than hard-fact, hands-on work!”
Of course, there are always people who see a silver lining in such dire circumstances.
“It has been good at getting rid of the fat in some programs and also many old-timers that were inhibitors to progress. Unfortunately, it hasn't yet reduced much of the excessive middle management,” writes an OEM engineer.
“It has put added pressure on efforts to streamline processes and eliminate waste, making my job easier,” writes another.
“Relentless push to reduce structural cost, while improving quality and functionality — not all bad for either the consumer or the industry.”
Still the abundance of written remarks (nearly 200) from those surveyed show that the economy is taking a serious psychological toll on automotive engineering. “The best-engineered cars in the world,” writes a supplier engineer, “still need a strong economy to sell.”
You Get What You Pay For
A strange dichotomy is at work in the realm of automotive engineering: It's common knowledge that OEMs are outsourcing more design and engineering work. Whether the service provided is of significant value apparently is open for debate.
Some 69% of OEM respondents say their companies have been outsourcing more design and engineering work, and roughly the same percentage say that outsourced engineering is no better than, or even as good as, engineering performed internally.
For suppliers, who are on the receiving end of the outsourcing trend, the numbers are quite different, of course. Only 28% of supplier respondents say their companies have been outsourcing more design and engineering responsibilities. Yet 70% of supplier respondents also agree that outsourced engineering isn't as good as or better than engineering performed internally.
What's going on here? How can outsourced engineering be so popular when the engineers themselves say the work is substandard? Because, as our survey has already illustrated, management most often makes these decisions based on cost. Whether the company getting the job can meet all expectations is less important than the price at which the service is rendered, survey respondents say.
For instance, a surprising 32.4% of OEM respondents say their companies have recently pulled back engineering work in-house that was previously outsourced. Why would the OEMs reverse course and bring this work in-house? Outsourcing was popular a few years ago when the industry was humming and engineers had more work than they could handle. Now, as programs are delayed and, in some cases, canceled, OEM engineers need work, and outsourcing is less critical.
This year's survey confirms that the automotive engineering shortage is much less severe than in recent years. Last year, 69.4% of supplier respondents said there was an engineering shortage at their companies, compared to 48.8% this year. Likewise, 60.7% of OEM respondents identified an engineering shortage at their companies last year, compared to 42.9% this year.
Several OEM respondents hold their supplier counterparts in low regard because of problems attributed to outsourced engineering.
“Suppliers don't know how to be system integrators and full service,” writes one. “The outsourcing proved to be more costly in time and money,” writes another. Other OEM engineers complained that outsourced programs were not completed on time and stumbled due to miscommunication and poor quality.
Another OEM engineer refers to “management schizophrenia” on the part of their own companies. “First they demanded outsourcing. Then they yelled, ‘Get that stuff back!’”
Oddly, many written remarks from supplier respondents reflect similar sentiments — that outsourced engineering suffered from quality, delivery and pricing issues.
Still, the significance of outsourcing cannot be overlooked. “Contract workers do the bulk of engineering work at the Big Three,” writes an OEM engineer. “Contract workers are the first to go when money gets tight. No employee enthusiasm.”
Another OEM engineer writes that contract engineers don't deserve the blame. “Squeeze the suppliers, contractors and in-house staff to a point where soon they will break. More with less is a destructive formula.”
— Tom Murphy
Engineers Remain Wary of Covisint
Covisint, the auto industry's private business-to-business exchange, is supposed to be much more than a tool for online purchasing. The 2-year-old company wants desperately for the exchange to be a portal for collaboration, a tool that should save precious time for engineers. But it appears that engineers are even more uncertain than they were last year about the prospects for Covisint shaving time from product development cycles.
“This is a purchasing tool, not a product development enhancement.”
“Poor communication can be conducted via Internet just as easily as via phone or in person.”
“This is the ‘next big thing’ so they all jump on the bandwagon. The reality: It will be understaffed, underfunded and forgotten about in five years.”
“Suspect quality issues will ultimately be the demise of Covisint.”
“Just another way for OEs to squeeze their suppliers. Just more suppliers out of business.”
“Just a smoke screen. Do you think Cadillac will use aturn signal?”
“Covisint will likely be responsible for marginal time savings/reductions. Cost reduction is more likely as suppliers squeeze their margins to ‘not lose’ business in the online bidding process.”
“Don't trust blind commodity sourcing.”
“It will end up being a costly fiasco.”
“Not intended to save time, but money.”
“In the old days …”
Which one type of engineer is in the greatest demand in the automotive industry? Ask that question of an engineer in the twilight of his career, and you're liable to hear something akin toCarvey doing his grumpy old man skit on Saturday Night Live.
“Body in white — new engineers out of school have no idea how a car is assembled.”
“Engineers who can pass their knowledge onto young engineers. We're retiring the brain trusts of the companies.”
“He needs common sense and logic.”
“Many young engineers and managers lack experience with vehicle systems. They know the theory but not the real world.”
“The only ‘good’ design engineers are retired or about to retire. Young engineers cannot read or understand design.”
“Too many people call themselves engineers who are just project managers.”
Finally, we always get some entertaining responses when we ask that open-ended question: What engineering curriculum would you pursue if you entered college as a young student today?
More than two-thirds of our respondents say they have not considered an engineering job in another industry. Still, other respondents, if they were back in school, would have their eye on aerospace, computer and electronic engineering.
Others say they would consider an even more drastic career route: Common Sense 101, plumbing, doctor, pharmacist. Here's our favorite: scented candle making.
How the survey was done
For the third year in a row, our engineering survey is the product of professional research. For years, we tried to do the survey ourselves but could not call it anything more than an unscientific opinion poll.
But the Media Marketing Research Department of our parent company, Primedia Business Magazines in Overland Park, KS, began conducting our surveys in 2000, and we can state with confidence that this 24th Annual Engineering Survey is a direct representation of attitudes held by North American automotive engineers.
The sample consisted of 685 engineers working in the North American automotive industry, including 324 OEM participants and 361 supplier participants. All of them are WAW readers.
The mail survey was conducted between Dec. 1, 2001, and Jan. 8, 2002. Primedia Research sent 1,200 surveys to North American light vehicle OEM engineers and 1,061 surveys to engineers working for suppliers of systems/components, engines and independent design services. All participants describe themselves as engineers working in design, R&D, quality, testing or reliability.
The effective response rate was an astounding 31%, largely due to post cards sent in advance of the survey itself. Primedia Research sent the post cards because of the anthrax mail scare in the wake of the Sept. 11 terrorist attacks.
As in the past two years, Primedia Research built the OEM sample based on production market shares for North America.Corp. produces 35.4% of the vehicles in North America, so GM engineers make up 35.4% of the OEM engineer sample.
The same formula was used for the rest of the auto makers, includingMotor Co. (21.6%), DaimlerChrysler Corp. (15.9%), America Mfg. Inc. (6.7%), Toyota Motor Mfg. USA Inc. (4.8%), Motor Mfg. Corp. (4.3%) and others (11.3%) such as Volkswagen de Mexico SA and BMW Mfg. Corp.
The supplier sample is a broad cross section of engineers working for Tier 1, Tier 2 and Tier 3 parts makers. Special care was taken to ensure that the largest suppliers were not over-represented in the survey.