Has engineering outsourcing gone too far?

Take a close look at our survey results, and you'll see that OEM and supplier engineers are generally in agreement when it comes to questions about e-engineering, Covisint and even career opportunities in automotive engineering.

But start asking questions about outsourcing of engineering work, and the responses part ways like a fork in the road.

For instance, most OEM respondents (73%) say their companies will outsource more engineering work in the next five years, compared to only 44% for suppliers. Of course, this outsourced engineering work lands in the suppliers' laps, and it's a trend that many OEM engineers find troubling.

“By outsourcing, we are exporting our technical expertise, which will present problems long-term,” writes one OEM survey respondent.

A supplier respondent suggests that partsmakers also are looking for engineering houses or lower-tier suppliers to take over this engineering work.

This passing of the engineering buck creates the impression that no one really wants to handle the down-and-dirty work of product development and testing, that there's always someone one floor lower ready for the job.

Just how “ready” suppliers are to handle component and system engineering appears to be in question. A whopping 50% of OEM respondents say they are aware of a vehicle program being delayed because a supplier couldn't handle the job on time or within spec.

“Some suppliers require much OEM manpower to ensure that they meet target requirements,” writes an OEM respondent.

“Most suppliers do not have the resources to adequately test their products in all possible scenarios,” writes another.

Just how good is outsourced engineering? Not very, according to our survey. A surprising 59% of OEM respondents say that outsourced engineering is not as good — and certainly not better than — engineering performed within their own companies.

OEMs often choose to outsource work to suppliers as a cost-saving strategy. So is this trend affecting the safety or durability of new cars on the road? It appears so, according to our study.

When asked if cost pressures are hurting the engineering quality of future vehicles, 64% of OEM respondents and 69% of supplier engineers say “yes.” Those numbers are up from last year's survey, in which 55% of OEM respondents and 63% of supplier respondents agreed.

The Firestone tire recall is a glaring example. It has cast a dark shadow over the future of Ford Motor Co.'s relationship with its long-time tire supplier and may cause automakers to rethink how much engineering work they outsource to suppliers, responding OEM and supplier engineers say.

Firestone has struggled to rebuild consumer confidence after last summer's recall of 6.5 million tires because federal regulators found them to have defective treads.

In mid-February, safety officials reported 26 more deaths from accidents involving Firestone tires. The death count now stands at 174. Most of the tires were mounted on Ford's top-selling Explorer sport/utility vehicles. Tread separation appears to have caused many of the vehicles to roll over.

OEM engineer comments

“‘Engineering’ in my company (GM) is becoming more of a ‘program management’ task. I am not sure that we are maintaining a sufficient level of technical expertise.”
“Besides core components (engines, axles, transmissions, body), my company is becoming an assembler of parts with cost as a bottom line #1 objective. BAD IDEA!!”
“Increase in outsourcing since Daimler takeover!”
“The area I work in is expected to be reduced by up to 50% in 5 years.”

Supplier engineer comments

“China & India have reduced social status & pay for U.S. engineers.”
“No outsourcing — just overload existing engineers.”