One of the unintended side effects of last month's strike by the UAW against General Motors Corp. was to reinforce one of the most entrenched and inaccurate factoids in automotive media mythology.
We're talking about the mispereption that GM buys 70% of its parts from its own Delphi Automotive Systems, while Ford Motor Co. buys 50% of its vehicles' content internally and Chrysler Corp. keeps only 30% of its parts business in-house.
Along with those numbers comes the premise that GM can't possibly compete until it farms out just as much as the competition.
"It's just not true, but you keep seeing those numbers over and over," says Dan Luria, who has dissected annual reports and other internal numbers to come up with what he contends is a more accurate picture.
The real numbers, says Mr. Luria, are more like 45% for GM, 39% for Ford and 36% for Chrysler.
The 70-50-30 catechism came from a 1988 report by the University of Michigan's David E. Cole and was based on educated guesses more than anything else.
Since then, we've seen Inaki Lopez tear up and rebid every supply contract on Gm's parts lists. DelphiAutomotive System, as the Dayton strike proves, no longer counts on every brake contract for every GM vehicle. Last year more than 30% of its business came from customers outside GM's North American operations.
Meanwhile, Chrysler has decided to make engines itself that it used to buy from Mitsubishi Motors Corp. No matter how much the world has changed those same numbers show up in news accounts.
So what makes Mr. Luria's methodology any more trustworthy? The truth is the amount of outsourcing is constantly changing. But Mr. Luria uses the assumption that 38% of a vehicle's cost comes from final assembly, stampings and powertrains, which all of the Big Three source, at least 90%, internally.
The remaining 62% comes from subsystems such as interior trim; safety systems; steering and suspension; engine controls; exhaust and emission controls; heating and air conditioning, and fuel delivery.
Then he estimates the percent of each subsystem that each automaker sources internally. He still finds that GM is more vertically integrated, especially in steering and suspensions (Delphi Saginaw Steering), chassis electronics (Delphi Packard Electric) and HVAC (Delphi Harrison Thermal Systems). Those are all areas where Delphi is quite cost-competitive.
But the overall outsourcing gaps among the three are much smaller than conventional wisdom suggests.
"It doesn't follow that if Chrysler is 36% insourced that GM has to be at 36% to flourish," Mr. Luria says. "If some of that in-house parts production is so uncompetitive, why are they getting work from other companies?"
