Keep it Simple, Stupid

When General Motors Corp. made the bold move earlier this year to make antilock brakes optional — instead of standard — on a number of vehicles, it sparked quite a debate as to whether “decontenting” would become an emerging trend as Big Three auto makers try to stem further market share erosion by keeping vehicle prices down.

Respondents to Ward's 24^th Annual Supplier Survey demonstrate how passionate the debate has become. When asked what features they consider to be “recession proof,” meaning not at risk of falling to the axe of decontenting, our survey respondents offered a vast array of opinions.

First, nothing in the auto industry is recession-proof, a number of respondents insist, which suggests that few things on a car today remain sacred. (Although one respondent wryly says, “Car will need 4 wheels.”) Heck, in this emerging age of fuel cells and hybrids, even the internal combustion engine has to justify its existence.

More than half of OEM respondents say they are witnessing attempts by auto makers to remove certain standard features in a move to reduce vehicle prices. The trend is less apparent to supplier respondents, as less than 30% say they are aware of decontenting. More than 40% of supplier respondents say they are not sure if decontenting is occurring.

The lively debate among our respondents as to what specific features are “recession-proof” suggests that decontenting decisions must be causing some major internal battles between OEM and supplier engineers and their bosses.

For instance, the burgeoning field of telematics is both a target of scorn and admiration. Many of our respondents say navigation systems, integrated cell phones, Internet links and DVD players are gimmicky gadgets that must go.

Among the comments from our supplier and OEM respondents:

“Go back to basics and forget about gadgets. The aftermarket can take care of those who ‘must’ have them. Use the engineering resources to develop better, more reliable cars.”

“Anything that can distract the driver (e-mail) should not be in a car.”

“We are out of control on the electronics side of cars. Do we really need all the gadgets?”

“Let the tuners do the customizing.”

“People already have everything that they need. It's just a fricking car. All this stuff is just candy, and everybody grows tired of the same candy for lack of substance.”

“Telematics, e-mail in vehicles is just a passing fad.”

“Low price and function are recession proof, in my opinion. Everything else on a car is a luxury.”

“Return to the KISS principle: Keep It Simple, Stupid.”

Others say these electronic features must stay because they will usher the auto industry to a new level of profitability as consumers realize that their vehicles can be mere extensions of their homes and offices.

Our survey respondents were stingy with favorable comments with regard to whether telematics devices were recession-proof:

“Internet links and cell phones are here to stay, and auto makers will adopt.”

“GPS and telematics are high-end features that can be afforded by their target consumers regardless of the economy,” writes a supplier respondent.

Still, a number of survey participants mention XM or Sirius satellite radio, back seat TVs and e-mail as recession proof, and at least two respondents say DVD (digital video disc) has secured its future in automotive applications, although that technology is barely out of its infancy.

As for the increased power necessary to drive these new devices, our survey respondents seem evenly divided into two camps.

There are those who believe an expanded 42-volt electrical architecture will be essential to accommodate all these features and will contribute to better fuel economy and improved braking. “42-volt is coming, and it is crucial,” writes an OEM respondent. “Any component that can adapt to 42-volt will emerge victorious. … 42-volt is a major advance in auto technology, and it's environmentally friendly.”

Then there are those who see a 42-volt system architecture as a mere passing fad that lacks the robustness necessary to survive the demanding automotive environment. “I would be surprised if 42-volt becomes more than a niche in the next 10 years,” writes a supplier respondent.

In this year's supplier survey, we asked respondents to identify the categories in which vehicle content was increasing or decreasing the most.

Our respondents identified chassis/suspension as the segment where decontenting is most prevalent, perhaps driven by news of GM's decision to make ABS standard on fewer vehicles. Likewise, respondents identify information/entertainment far and away as the most popular segment for new content on vehicles. Take a bow, digital radio, OnStar and GPS.

But is anything really recession proof? Our survey respondents compiled a long list of technologies that should weather any economic downturn: electric power steering, drive-by-wire, tire pressure sensors (which have the benefit of a U.S. government mandate), run-flat tires, side airbags, modern diesels (in Europe), stability control, roll control, adaptive cruise control, collision-avoidance systems, continuously variable transmissions and variable valve timing. One respondent, who probably lives in Anchorage, says heated seats are recession proof.

This trend toward decontenting is troubling for a number of survey respondents:

“Content will be removed to improve product profitability, not to reduce pricing to the consumer.”

“Cheaper materials are not giving customers what they want.”

The Big 3 are stripping content from vehicles, but I have not seen this reflected in vehicle pricing.”

“We make ABS systems. See what GM did, and the others will follow.”

Is your company currently doing business with a Japanese or European OEM transplant in the U.S.?

Do you agree or disagree with the statement, “There is still room for suppliers to make further price cuts while being profitable”?

Will the industry see more passenger cars and cross/utility vehicles based on body-on-frame architectures?

Does your company need to get bigger by acquiring another supplier?

Do any suppliers your company interacts with need to acquire another supplier?

Has your company recently pulled back any work in-house that was previously outsourced?