Consolidation shouldn't come as a surprise in a business that loves to boil down every word and phrase into an acronym. Unigraphics Systems now is officially UGS. Its major shareholder is Electronic Data Systems, better known as EDS. Structural Dynamics Research Corp. prefers to be known as SDRC. And now UGS is buying SDRC for $950 million in cash. The deal should be consummated later this year. Hopefully the new company won't be named UGS/SDRC, but it's possible. After all, we're talking about the CAD/CAM/CAE (computer-aided-design/computer-aided-manufacturing/computer-aided engineering) business here.
Analysts say the deal will make the new company an industry giant, and a true rival of the biggest in the CAD/CAM field, Dassault Systemes.
But beyond the specter of a new blizzard of acronyms, there lie potentially serious culture change issues among Ford Motor Co. engineers and designers — and those at suppliers — who use SDRC software to create new products.
That's because UGS isn't just any software company. There are three major automotive customers in this marketplace — General Motors Corp., Ford and DaimlerChrysler — and three major suppliers, UGS, SDRC and Dassualt Systemes' CATIA. Now GM's supplier is buying Ford's.
Going forward, analysts believe UGS will adopt some of SDRC's best products, but that UGS systems will dominate the new company's product portfolio, forcing Ford engineers and suppliers to adapt. That's because each computer engineering system is unique and requires highly specialized training. If you're a supplier, you have to have separate systems to support the design and engineering needs of each automaker. In the automotive computer engineering world, these systems sometimes are less compatible than PC and Mac personal computers.
These types of changes seldom sit well in the trenches, among the ranks of the thousands of engineers and designers who create new vehicles and components. In the 1980s, former Chrysler engineering chief Francois J. Castaing caused a near mutiny within the automaker's engineering ranks when he phased out the in-house computer engineering system in favor of Dassault Systems' CATIA software.
Since UGS clearly is taking over SDRC (the new company will be headed up by UGS CEO Tony Affuso), analysts are starting to question what this acquisition will mean to Ford's product development structure. In 1996, Ford created a comprehensive new product development strategy called C3P (it combines the three “C's” of CAD/CAM/CAE with yet another acronym: product information management (PIM), which was based on SDRC software. At the time, the five-year, $200 million contract with Ford was believed to be one of the biggest deals of its kind ever signed.
Ford spokespersons say they now are trying to analyze the impact of the coming merger, but would not provide further details.
Robert Nierman, the executive who heads up UGS's automotive programs, says the company is going to focus on making sure there is minimal disruption at Ford and its suppliers, and that the products and systems Ford engineers are familiar with will be continued, at least in the near term. “Ford will be a big thing with us. We're not forgetting our friends,” he emphasizes.
