Automaking's full of acronyms: USCAR, NHTSA, EPA, CAFE. So, why not add another?
This year's Traverse City gathering - officially the University of Michigan Management Briefing Seminars - served as the launching point for the newest of the bunch.
AOESA (Automotive Original Equipment Suppliers Assn.) doesn't quite roll off your tongue, but organizers hope it will provide a greater collective voice for its members.
The move represents an expansion of sorts by the Motor & Equipment Manufacturers Assn. (MEMA) Through the years, the automotive aftermarket has been a prime MEMA focus.
Auto industry veteran Neil De Koker, formerly withCorp., will serve as managing director of the organization, which will be based in metropolitan Detroit.
AOESA, which is expected to draw several thousand members, will provide benefits and services to companies supplying original equipment materials, components, subsystems, systems, modules, equipment and contracted services to motor vehicle manufacturers. In particular, it gives a voice to small to medium companies within their industry, Mr. De Koker says.
The new group eyes a number of activities including cooperative research; participating in OEM and government regulatory activities and complementing other organizations working on behalf of the industry.
Industry observers say such an idea has been kicking around for a long time. "They've been doing it for years," says one. "Now, they're trying to add structure. They want a strong voice."
David Cole, director of the Office for the Study of Automotive Transportation at University of Michigan in Ann Arbor, agrees. "I've thought about this since the 1980s, when we formed OSAT (Office for the Study of Automotive Transportation)," he says. "It (original suppliers group) was one of the things lacking in the automotive supplier industry. I think AOESA is extremely important. Neil saw the need for it. Without Neil, I don't think this would happen."
Stallkamp: Can't we all just harmonize?
While the view from the windshield of a300M sedan is pretty much the same in Michigan as in Munich, the windshield wiper pattern couldn't be more different.
From the headlights to the taillights and the side-impact standards in between, the dream of a world car crashes upon the rocks of parochial national regulations that are maddeningly similar, yet too different for common parts, says Thomas Stallkamp,Corp. president.
Even the crash dummies have to maintain their own ethnic dissimilarities between the U.S. and the rest of the world, he says.
It becomes more important as Chrysler merges with-Benz AG to become DaimlerChrysler and looks for ways to exploit the merger in expanding markets.
"What I'm talking about here gets right at the heart of whether or not the dream of an interconnected world marketplace actually comes to fruition. Or whether outmoded notions of over-zealous national sovereignty, cultural arrogance and, yes, de facto non-tariff trade barriers add to the things that are standing in the way of that dream," he says.
It's an issue that gains new converts as companies move from their traditional base to new shores - as evidenced by a 1997 lament fromNorth America President Victor H. Doolan.
"We can clone a sheep, but we can't clone a," he says, noting that BMW has to build a different Z3 for virtually each of the more than 70 countries where it is sold.
Mr. Stallkamp warns that the next wave of deharmonization will come in front-impact tests as the U.S., Japan and Europe each work toward different ways of saving the same basic human beings' lives.
He advocates suppliers and OEMs alike to put pressure on their governments and get behind efforts like Working Group 29 and the Transatlantic Business Dialogue to ensure that harmonization comes at a faster rate. - Jeff Green
Supplier capacity study completes first phase
When TRW's Peter Hellman spoke at last year's U-M Conference he asked a tough question: How many supplier plants does the industry really need?
He reasoned that an overcapacity crisis is inevitable if every supplier follows its OEM customers into every new market.
Mr. Hellman proposed a study of supplier capacity around the world to validate a new model for globalization. A year later, he reports that the U-M's Office for the Study of Automotive Transportation has completed the first phase of the study.
In addition, a four-member advisory board has been formed with executives from Chrysler,, and to keep the process tightly connected to the world of OEMs.
The next phase of the two-year study is supported by RobertCorp., Tenneco Automotive and TRW, with each company contributing $50,000 to study global production of fuel injectors, exhaust systems and power rack and pinion steering.
The goal of phase two: to find a model or models in supply globalization that will reduce costs for the entire industry, improve profitability and achieve global efficiency. - Tom Murphy
Se habla Y2K?
Depending on which expert you listen to, the predicted Armageddon for the globe's computers on Jan. 1, 2000, "is either viewed as much ado about nothing," says Dan McNicholl, chief information officer for GM's North American Operations, or as having "high potential for causing global economic collapse."
"If our supply chains fail, we fail," Mr. McNicholl, tells the U-M Conference.
But the Automotive Industry Action Group (AIAG), the task force organized against the Year 2000 problem (short-handed to Y2K) isn't taking any chances. It has developed a self-assessment program for suppliers to assess vulnerability and organize strategies.
For suppliers still outside the AIAG link, the window of opportunity is narrowing fast, says Robert Booth, executive director of the Year 2000 Readiness Program at GM. For suppliers who still haven't bought into the self-assessment protocol, "the risks go up extremely beyond the first quarter of 1999."
AIAG has found a number of critical problem areas, including the plant floor and supply chain. Mr. Booth says the AIAG is still finding 10% to 15% of suppliers who have plans that do not meet the industry-recommended timeline.
The feared Computer Armageddon - if it should strike - won't be a one-year disaster, predicts Frank Burke, an executive with Magna International Inc. It will reverberate through 2001 or 2002. "There's no magic bullet to kill this thing," he says. "There are no simple solutions. It's going to take a lot of hard work. And you're not going to solve the problem; you're just going to mitigate the risk. Therefore you have to go and do a proper due-diligence (search) of your factory floor and throughout the processes in your business." - Hugh McCann
Supplier ranks to be halved
"We're looking at consolidation of epic proportions," says William Carroll, president of the Automotive Components Group at supplier Dana Corp. of Toledo, OH.
Some experts predict that automotive suppliers may decrease by 50% from pre-1997 levels, he says. "Among North American suppliers alone, more than 26% were for sale or have been sold in the last six months. Now that's dynamic change."
Mr. Carroll should know something about consolidation. His company has been heavily involved in it in recent years.
Earlier this year, Dana acquired Echlin Inc., a maker of brake parts and other components. Mr. Carroll confirms Dana wants to enter the brake business now that it owns Echlin. - Tom Murphy
Quotations from Chairman Jack
On the heels of the strike settlement in Flint, GM Chairman John F. (Jack) Smith Jr. made some observations both during and after his talk at the U-M Conference:
n Despite strike damage, GM feels that it can "comfortably" weather the next recession because it has lowered its breakeven point since the last downturn nearly seven years ago when GM was forced to postpone forward product programs.
n Regarding the impact on GM of the pending-Benz AG/Chrysler Corp. merger, Mr. Smith says that "I don't think we want to do anything crazy. We have a relatively weak position in the Asia/Pacific region. If something makes sense, we'll take a look." Pointing out that the DaimlerChrysler deal "created a certain amount of flutter" among other automakers, Mr. Smith quips that "maybe it just created work."
n Spinoff of the Delphi Automotive Systems unit and dismantling of its traditional vehicle divisions already were in the works before the Flint strikes, and were announced right after GM's board of directors OKd the moves in its monthly meeting in early August.
n GM may cut some sluggishly selling vehicle lines, but no decisions have been made. Mr. Smith allows, however, that coupes "have virtually disappeared" and that small-car sales are weak.
n Asia's economic problems - what he calls "Asia Two" - now focus on Japan, where banking and economic turmoil have weakened the yen. Mr. Smith fears that unless Japan's economy stabilizes, it could spill over to China, which so far has not devalued its currency. "If that happens, we would be in a deep crisis. And the Asian crisis isn't over yet; it's worsening." Still, GM remains bullish on the region long-term - especially China - he says. - Dave Smith
Carmakers drive toward next generation of lean manufacturing
As automobile manufacturers face the task of redefining, designing and implementing the next generation of lean manufacturing systems - a process of measuring and reducing inventory and streamlining production - there are lessons to be learned from the industry's early steps. So say executives speaking at the U-M Conference.
Lean manufacturing isn't something you learn in a book, says Eric Stevens, director of lean manufacturing systems for GM of Europe. "It takes years of hard work, preparation and support. It's a knowledge-based system."
Those lessons are particularly important as carmakers establish new plants in emerging markets. They include not overtaxing core people; getting labor on board; determining new methods of measuring success and establishing new reward systems.
For most companies, it also means doing a better job of convincing middle managers that protecting their turf and doing things the old way no longer pays. "We need to identify strategy to help management understand that they must walk the talk; model the ideas, says Peter Gritton, vice president,Motor Mfg. Kentucky Inc.
ForMotor Co., implementation of the next generation of lean manufacturing means changing the way the company measures plant performance. "Compensation and rewards used to be based on labor, overhead and quality," says Hank Lenox, director of Ford (Motor) Production System. "Now managers are rewarded on the total cost equation getting met."
And hourly workers face a challenge as well. "If you make more profits for the company, then profit sharing goes up," Mr. Lenox says. "But with new efficiencies, overtime goes down." Like, is turning to more immediate rewards by giving workers more responsibility for jobs well done. - Barbara McClellan
To grow, suppliers must 'Create new value'
Eaton Corp. President and COO Alexander M. Cutler says suppliers who want to grow and be a crucial partner for OEMs must aggressively invest in their own research and development.
"An organization's ability to bring real value to its customers increasingly is dependent upon having the necessary global scale of operations and the fi nancial ability to invest aggressively in innovation, training and world-class productive capacity," Mr. Cutler says in his presentation at the U-M conference.
He stresses that only suppliers with "superior rates of profitability and returns on capital will be the long-term survivors," in the inevitable increase in supplier consolidations and mergers. He notes that further mergers and takeovers in the supplier world will mirror the recent - and likely not yet finished - mergermania taking place at the OEM level. He says global vehicle production overcapacity, reckoned to be 20 million to 22 million units by 2000, will be the irresistable force that drives future consolidations and mergers at every level of the vehicle-making chain.
For suppliers, Mr. Cutler places particular emphasis on profit rate-of-return and reinvestment. He says more important than concentrating on maximizing traditional measures of Wall Street-pleasing performance, suppliers would do well to maximize profit growth rates - and to substantially reinvest those profits in research and new innovations.
As proof that automotive suppliers, as a whole, do not enjoy a stellar track record in this area, Mr. Cutler provides figures to prove that the industry markedly underperforms other business sectors in the critical area of profit growth rates. He adds that suppliers have become too conservative in making and then "transferring" their profits.
Changing this paradigm, Mr. Cutler says, is one way in which companies can assure they remain viable, becoming "value-creating" rather than simply a "low-price" supplier. Once that happens, suppliers who make good profits and wisely reinvest them likely will become the future "swallowers" instead of the "swallowees." - Bill Visnic
Catch him on the 'Net'
At Toyota Motor Sales, USA, Inc., president and CEO Yoshi Ishizaka shows up daily on the company's Intranet system, aka Toyota Vision, as a columnist. "Yoshi's Forum," as he calls it, is his personal take on important company events and achievements. On a slow news day he manages to flesh out his column with photographs and advice on how to boost Toyota's success. Mr. Ishizaka promises personally drafted e-mail replies to questions within 24 hours. Catch him at toyota.com.
Attendees split on WAW survey
In his long-awaited Traverse City speech, General Motors Corp. Chairman John F. Smith Jr. cited a July WAW survey of suppliers who identified GM as the best OEM to work with.
But a number of supplier executives grumbled that the survey must be flawed. They say GM continues to value price over engineering, and that keeping GM happy is never easy.
The survey is correct, and GM did rate first among the 250-some supplier respondents. But keep in mind that GM has a statistical advantage because respondents reported they dealt with GM more than other automakers.
Despite questions from some attendees, others supported the survey results, saying that GM is demanding and sometimes difficult, but sets clear rules in working with suppliers, and that supplier relations are improving. - Tom Murphy