You can write some beautiful music, but if you don't orchestrate it correctly, it's just notes on paper. , The same thing holds true with many of today's automakers: they continuously write what seems to be beautiful music with notes like teamwork, supplier involvement, outsourcing and global participation.
Although all the notes seem to be there, if you look at escalating new-car prices you have to wonder what happened to the sound. One would think that with all the restructuring going on in the last few years, all the proclaimed productivity improvements, the squeezing of suppliers with edicts of yearly price reductions of up to 15% or more, it would have some impact on car prices. It's gotten to a point now that the average American can barely afford to buy a new car.
So, what's going on? Why do car prices keep going up at these rates? If you look at washer and dryer prices over the last 10 years, they've barely increased at the rate of inflation. Yes, maybe a car isn't a washer, but I think the appliance industry does a better job of controlling costs. Car companies keep talking about the amount of money they spend on new models. Well, that may be so, but the fact is that model changes are becoming less and less frequent. In the past, car companies made at least front-and rear-end changes every year. These changes usually affected the lights, grilles, hoods and deck lids.
If you bought a current model-year car it had a look that was distinctly different than the previous year's model. Every three or four years there was a major change from the front to the rear. Now you can buy a car and keep it for two or three years and there is little or no change. Instead of having major changes every three or four years, it's now six or seven years.
I'm not saying that frequent changes are good or bad; what I am saying is that a tremendous amount of money is saved by making less frequent model changes.
Another point I would like to make is that in the past, just about all the design, engineering and development work was done inhouse. Now much of this work is done outside. This was supposed to lower overhead costs and make for a very competitive pricing environment.
Automakers also believed they could save overhead costs by reducing their supplier base and dealing directly with only a relatively few large suppliers. These larger, Tier 1 suppliers would now control the many smaller sub-suppliers that feed the system even to a point of frequently bankrolling their operations.
It's quite apparent that these programs have no impact on the total costs because the benefits that were to be realized focused only on parts instead of the total system, and despite all the restructuring and outsourcing, corporate staffs seem to be as large as they were 10 years ago. They busy themselves with endless "make work" projects such as going to seminars and meetings.
Years ago one person would go to an outside vendor to approve a set of tools; now it's 10 to 15 people. Many tools are now built overseas, which leaves a continuous stream of so-called experts traveling around the world to approve the purchase of parts and equipment.
This no longer can be done by a few people; it requires groups made up from people from the plants, engineering, platform teams, quality, purchasing and elsewhere.
Another point relates to the new concept of supplier relationships. Tier 1 suppliers now perform design, engineering, development, testing and manufacturing and. are selected because of their special expertise. Yet they can't make a move in any part of their operations - whether it be design, manufacturing or selecting sub-suppliers - without involvement of the automaker's so-called experts who failed to do the job when it was in-house, which probably is why the job was outsourced.
Still some people remain unconvinced. They think higher car prices are justified because of all the refinements that have been made. Washers and dryers are more refined, too, but without pricing them out of the market.
The notes on the automakers' sheet music look good, but they haven't been orchestrated to make the beautiful music people like to hear when they look at car prices.