Wander down the aisle of any appliance store these days and you'll notice that the $197.99 pricetag on that 19-in. color TV automatic washer are not much different than what the average consumer shelled out in 1970.
Drive down the road to the nearest auto dealer, however, and the average sticker now hovers near $20,000, or almost five times more than the $4,000 or so sticker on a nicely loaded new car 25 years ago. During that time the cost of living has tripled.
We know today's TVs and washing machines actually offer many more features than their predecessors, but are cars that much better? As window stickers on 1996-model cars and trucks ratchet a little higher than 1995, it appears automakers are headed toward a collision course with the average American's ability to pay.
"Millions of people who typically bought new cars in the past are no longer able to afford them," simply states Alan Baum, an analyst with IRN Inc. of Grand Rapids, MI, whose Autofutures forecast tracks the industry.
The issue of affordability, an increasingly bothersome burr under every automaker's saddle, dominates industry thinking in the `90s. It's a big challenge: keeping a lid on prices without shaving discernible quality or the goodies Americans have come to love in their cars and light trucks.
Even the luxury niche, where affordability is less crucial than in other market segments, can't ignore the debate. And Japan's automakers, trapped between a strong yen that forced them to hike prices and a weak home market that demands they be lowered, have made an art form of reducing costs in ways unnoticed on the showroom floor.
Meanwhile, cost-cutting by the U.S. Big Three automakers proceeds amid suspicion they've used Japanese price boosts to justify their own price hikes.
Don't expect full disclosure from automakers on their cost-containment strategies, suggests David E. Cole, who directs the Office of the Study of Automotive Transportation at the University of Michigan Highway Transportation Research Institute. "When you translate cost reduction," he explains, "you're ultimately talking about reduced labor somewhere along the line." This forces companies to be "extremely careful" about what they reveal - especially at a time when new labor negotiations are pending as they are in 1996, he adds.
With engineers and designers leading the charge, the industry-wide campaign to contain or cut costs focuses on:
* Parts proliferation: Does Ford Motor Co. really require 15 different cigarette lighters? Or does General Motors Corp. need 26 different windshield-fluid caps? And why does Chrysler Corp. require 59 different minivan wiring-harness options?
* Bad design: Engineering drawings blind to the costs of high-volume engineered scrap, excessive parts and needless manufacturing and assembly operations are verboten. The new credo calls for incorporating tomorrow's materials and manufacturing technologies.
* Suppliers: They must cut costs, expand in-house research and development, and assume more responsibility for product performance.
The anti-parts-proliferation revolt is in full swing across the board, drastically editing inventories on a raft of options, from steering columns and converters to brake boosters and ignitions. A few examples make the point: Next year, GM will offer one power-steering pressure switch; in 1992, there were 12. And radiators: Of 125 to choose from in 1993, only 66 will be offered in 1996.
Ford is dousing its dome lights - from 50-plus options to seven, for a 2% cost savings per year. In addition, it has standardized a single, remote-controlled transmitter key for across its starting line-up for `96. Esimated savings on the fob alone: more than S7 million. Likely to disappear soon: Expensive keyless entry pads on Ford models, which duplicate fob functions.
At Chrysler, cost-cutters trimmed the minivan's wiring-harness options - a $300 per-vehicle cost - from 59 to 44, and dropped steering-column-shroud options from 40 to 10.
There's also a drive to increase the use of common pieces on vehicles. If a component doesn't help give a vehicle a distinctive look or appeal, it's slated for commonization.
As option inventories shrink and commonization becomes epidemic, the gospel of lower costs through design excellence sweeps the industry. GM spreads the word in its formal education and training center. Chrysler designers and engineers indoctrinate one another monthly in informal "Tech Club" meetings.
Ford, reported to be eyeballing the GM training model, has reshuffled its Product Development Group into five separate centers to clear the decks for the cost-cutters. The move could pay off in "billions of dollars" saved by the year 2000, says Ford Automotive Operations Group Vice President Jacques Nasser.
GM has built its Knowledge Center in Warren, MI, as the mother temple of the corporation's doctrine of lower costs through improved design. Last year, the center drew some 9,000 engineers, designers, tool specialists, manufacturing experts and others. All returned to their plants and divisions to reinvent GM.
Joe Joseph, the center's manager, preaches that design accounts for only 5% to 15% of the total cost, yet influences 70% of initial product cost. If the wrong material and manufacturing processes are selected, he points out, "no matter what you do after you start, you probably can't get competitive."
Mr. Joseph has festooned the Knowledge Center's vast exhibition hall with examples of GM's cost-cutting coups. They include:
* A new Cadillac Seville front-bumper system that reduces the number of parts by 49%, cuts assembly time by 56% and saves $51 per car.
* A Pontiac Firebird condenser, radiator and fan module that cuts the piece cost by 14% and assembly time by 37%
* A Chevrolet Caprice air bag/antilock brake control means 48% fewer paris and 30% less assembly time.
The Caprice engineering team relocated the control system from the trunk to below the instrument panel, eliminated a $13, 6.5-lb. (3 kg) wiring harness and $17 a car. "We probably built 600,000 of these since then," Mr. Joseph says. "A lot of money (saved)." Presumably what GM learned still will be valuable, even though Caprice and its sister cars, Cadillac Brougham and Buick Roadmaster, die after `96.
Individual GM divisions also have devised ways to keep a lid on prices. Oldsmobile, for example, midway through the `95 model year quietly eliminated standard leather seats on the Aurora, replacing them with fabrics.
When it comes to cutting cost, the richest paydirt lies in vehicle platforms. This explains why Ford will eliminate eight platforms, leaving 16. GM, meantime, is narrowing its basic engines from I I to five.
Platform-reduction also is at work across the Atlantic. Of 59 European platforms in 1993, only 35 will survive beyond the year 2000. At that point, Volkswagen AG, for instance, will have selected four platforms for projected production volumes of 3-million-plus cars annually.
Platforms that survive are being scrupulously examined for cost-cutting possibilities. Chrysler's 1996 minivan platform team analyzed the engineering, manufacturing and supply aspects of all vehicle systems. The analysis isolated numerous opportunities for cost savings, notably $20 on. the air bag system and $3.80 on the steering-column shroud. Overall, the team redesigned the vehicle with 15% to 16% fewer parts than the `95.
In the same time frame, Ford engineers gave the 1996 Taurus/Sable a lighter, simpler - therefore less costly - transaxle (the AX4N), for example. They also cut up 14 D-class (midsize) foreign and domestic competitive models to see what cost-cutting wrinkles they might discover. And they tweaked a Cray supercomputer to optimize 200 different metal gauges used in the `96 Taurus. One result? The new car is 17 lbs. (7.7 kg) lighter than its predecessor.
The new Taurus/Sable's increased length meant a floor pan 3 ins. (7.6 cm) longer than the `95's. To avoid added weight and extra steel cost, designers pinched the pan gauge down from 0.03 to 0.028 ins. (.076 to .071 cm) and stripped it of 18 lbs. (8.2 kg) of sound-deadening mastic.
Fighting poor engineering design and the runaway birthrate in parts and poor design have boosted shotgun marriages between Big Three automakers and suppliers. Chrysler used around 330 suppliers on the new minivan. That's 25% to 34% fewer than on the previous model. One of the objectives of the cut was "to try to get them to do a lot more R&D," says Thomas E. Edson, who managed the minivan platform engineering team.
On the minivan cooling module, a Tier 1 supplier quoted higher than the target cost. Team members discovered that the supplier assembled the module from parts bought from secondary sources. Team members persuaded the supplier to manufacture the parts and assemble them itself, enabling it to meet Chrysler's target cost.
Some price maneuvering belongs in the smoke-and-mirrors category, such as the shuffling of "standard" and "optional" equipment from one year to another, fogging up a vehicle's true cost. GM, for instance, makes antilock brakes optional on a number of models to ease sticker shock.
In the Chrysler Neon, the door panels have been "decontented" from fabric to textured plastic. German and Japanese companies use the same decontent and standard-vs.-options ploys, usually putting their own unique spins on them.
Toyota Motor Corp., which tops the heap in cutting costs without injuring quality, has reduced model complexity by 25% and de-proliferated parts by 30%. Check the bumper on the new Camry: nearly 20 fewer parts and 30 fewer fasteners.
Nissan Motor Co. Ltd. commonizes extensively. The VQ engine in the new Maxima is one of many spinoffs from a single basic design. The company saves by amortizing the basic engine's cost over many years and vast production volumes, explains a Nissan spokesman.
Nissan started commonizing components several years ago The new Maxima's QT rear suspension is a case in point. Smaller, lighter and with fewer parts than the suspension it replaces, the QT is easier to assemble and also is used on the Sentra, 200SX and other models in Nissan's lineup.
Some Japanese automakers excise cost so deftly that the scars never show. Rear spoilers on some models are cheaper, for example, because the Japanese don't require a finished surface on the bottom where the the piece joins together. The reason: No one sees the underside. U.S. automakers, however, still cling to a more costly fully finished surface, WAW sources say.
Underbody parts on some Japanese models also get fewer undercoats of paint than body surfaces that show. On the Toyota Corolla, the heads of screws holding upholstery fabric to the underside of the armrests are no longer painted to match the fabric. Also, a small button on the new Camry's clock radio has been eliminated on models sold in the U.S. (Japanese drivers use the button to set the time when radio stations chime the top of the hour.)
Mazda Motor Corp. and an increasing number of other automakers now reserve genuine leather in seats for body-contact surfaces only; the rest of the seat is vinyl or another cheaper material. And why double-stitch seats when single stitching cuts labor costs, boosts seat durability and gives a more tailored finish? That's what Mazda is doing on all of its lines.
Gone are the assist grips on the `96 Mazda 626 DX and MPV DX. Also, labor costs of painting the "P" and "R" on the PRNDL (gear selector) red and the other letters white have been lowered by painting all letters white. Another Mazda subtlety: A simple, flexible radio antenna on the 1996 ES replaces an expensive, electrically powered retractable one - a trend rapidly catching on throughout the industry.
Mazda 626 LX, 626 LX-V6 and 626 ES models equipped with door-trunk opening fobs cut costs by eliminating trunk locks. Research showed that fob-equipped owners use a key. to open the trunk only 8% of the time. To pinch price, the company does not pair lock and electronic opener.
Mazda is one of several automakers minimizing trim-option combinations to save money. The Auto Alliance plant in Flat Rock plant proposed a reduction of $195 in 1996 pricing on the 626 and MX6 if the company's sales arm ordered cars equipped with specific standard equipment. The move would reduce the assembly time devoted to meeting specific-equipment orders. Getting the right content "is tough," says Bob Hammon, product planning director at Mazda Motor of America Inc. "We work on it every day in Japan and at Flat Rock. The price pressures are so great we've got to make some hard decisions."
Mazda also contains costs in more conventional ways; to wit, the Protege 323 instrument panel. Engineers developed a lower panel fittable in a single action plus a glove box with the fewest parts of any in the industry. The 323's instrument panel has 50% fewer parts than the old one and costs 20% less. The company also cashes in on the rewards of commonizing. The Flat Rock plant in 1987 began commonizing frames that eventually included the 626, MX6 and Ford Probe.
Meanwhile, Germany's luxury automakers prove that, no matter the market segment, cost containment is a gut issue globally. Witness the new E-Class Mercedes, which premiered in the U.S. Nov. 8, with $2,500 worth of extra standard equipment. The 1995 E-300 diesel, E-320 and E-420 are priced at $39,900, $43,500 and $49,900 respectively, while the `95s cost $41,000, $43,500 and $52,500.
German engineers held the new series to a specific cost target. They did it by using one-piece body side construction and maximizing the applications of modular assemblies in the instrument panel and wiring harnesses. Also, they greatly boosted the role of supercomputers in the design phase. Dealers settled for smaller margins, too.
And BMW: Earlier this year the company showcased its new $20,000 318ti with a sticker figure about $5,000 lower than its former entry-level model. BMW's secret? It borrowed the rear suspension of a phased-out 3-Series BMW and settled for a simpler instrument panel. Another cost cutter: Substituting a standard whip-type radio antenna for a relatively expensive automatic-retractor type.
In the U.S, meanwhile, the car-price-to-wage ratio ramps ever upward, escalating the affordability debate, which also involves currency exchange rates. A Chrysler illustration says it all: At 80 yen to the dollar, a Dodge Stratus boasts a 4,715 advantage over the Honda Accord. At 110 yen to the dollar, the Accord tops the Stratus by $1,470.
For U.S. consumers, here's a reality check the showroom sticker never lists: In 1975, the average automobile cost the equivalent of 18.8 weeks of median-family income. Today the cost is 26.6 weeks - and is on track to hit 30.7 weeks in 2005.
Clearly, price will become increasingly crucial in the "customer satisfaction" wave that's the rallying cry of every automaker selling in the U.S. marketplace. It's one thing to keep them happy after they buy, but quite another to keep prices within their means so they can afford to buy a new vehicle in the first place.
