Analysts: Toyota Recall Won’t, Shouldn’t Keep Industry From Consolidating Platforms

DETROIT – Toyota Motor Corp.’s recall problems notwithstanding, the rewards of global vehicle platform consolidation are well worth the risks, automotive analysts say.

Toyota’s spate of high-volume recalls – and the expected astronomical repair bill to come – result in part from the auto maker’s practice of spinning many models from a single platform. Toyota is recalling more than 8 million vehicles to modify accelerator pedals that could stick or get hung up on floor mats.

Laurie Harbour, president of consulting firm Harbour Results, puts the cost of making the fixes at a minimum of $2 billion, and says the repair bill could go as high as $4 billion. She predicts Toyota also could lose a couple of points of U.S. market share and see its vehicle residuals drop by $800 to $1,000 as a result of the recalls.

But in a roundtable here sponsored by the Society of Automotive Analysts, Harbour and others say the trend will be toward more platform consolidation, not less, because the potential financial benefits far outweigh such costs.

Harbour says an earlier study showed some auto makers were wasting $2,000-$3,000 per vehicle by not commonizing as many parts as possible among various models. Even in relatively small volumes of 500,000 units per year worldwide, that represents $1 billion-$1.5 billion annually in waste.

Lack of commonality also makes manufacturing more difficult and costly, because specific plants and tooling are needed to make disparate models that otherwise could be produced in a singlefacility, she says.

“If you do it wrong in product development, you do it wrong everywhere,” Harbour says. “That’s why (General Motors Corp.) had 35 assembly plants.

“Remember the W-car?” she adds, recalling a slate of midsize models produced by GM beginning in the late-1980s. “There were 95% different parts between the (Chevrolet) Lumina and (Pontiac) Grand Prix.”

Platform consolidation boosted number of Toyotas affected by recalls.

Commonality also is part of what historically gave Toyota and Honda Motor Co. Ltd. a quality edge over their Detroit-based rivals, because the Japanese auto makers were able to design a part once and utilize it across a wide range of models.

“Toyota and Honda had 80%-90% commonality,” Harbour says. “That’s why they killed (Detroit) in profitability.

“If you do it right, you save billions in engineering. The risk is, if you don’t do it right, you have the Toyota recall.”

Anthony Pratt, leader-automotive practice for PricewaterhouseCoopers, says global platform engineering represents a double-edge sword for suppliers.

“It reduces opportunities for suppliers to bid on new business,” he says. But it is “really lucrative” for suppliers that do land the high-volume, global contracts.

Harbour contends GM is furthest along among the Detroit Three in consolidating platforms. Ford Motor Co. is getting there on the engineering side, but still needs to do some work in adopting common manufacturing processes worldwide.

And, unlike GM, Ford has not combined its purchasing product-development and operations under one executive, she says.

Chrysler Group LLC, which underwent a shotgun marriage to Fiat Automobiles SpA as part of its emergence from bankruptcy last year, is just getting started.

“Fiat is not necessarily the world leader in (platform consolidation) either,” she says. “That’s what they’re trying to figure out now – how to do that for both (auto makers). But they have a clean sheet to start with.”

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