Entries in Auto Industry (93)
The other day it struck us. Yes we had an epiphany to the extent of cost cutting that is rampant in all areas of production, manufacturing, and retailing.
We have often made reference to Power Point pilots, and spreadsheet jockeys in the processes of saving money, and cutting costs.
In the auto industry, one supplier cuts costs, the component is subsequently sub par, and a myriad of manufacturers initiate recalls. Yes...they are all using the same component, from the same supplier.
Lets assemble vehicles "somewhere" (ideally with low labor costs), lets cooperate with a plant that builds components for a few manufacturers (to save money) while creating an optic that its all separate, and all independently trained. Agreed many of these initiatives are empowered by technology, and were a mere figments of the imagination a few years ago.
Go to any retailer, prices are either up, and/or quality is down to control costs. Lets not even talk about the service that is provided my a myriad of retailers.
The value equation is a constantly moving target. Understanding the value received for the funds that are used is increasingly challenging.
Do we have to say that the "brand value" is inexorably becoming a "ball of grey" as it constantly morphs from one cost cutting vector to another in the ongoing effort to bolster the bottom line.
Is it a surprise for the consumer to gravitate towards the lowest cost denominator since its all a complex ball of grey.
What do you think?
The GM ignition switch issue, is a blunt reminder that although the product is thousands of dollars, often the pennies command the product.
We quickly forget or overlook that in the under belly of this business there is an unglamorous aspect that is driven by pennies.
For some reason the Pinto gas tank of a few decades ago comes to mind. Back then too it was probably pennies to solve the problem. Interesting how things have a tendency to come back and resurface.
In an age of social media with an increased level of transparency, reinforced by e-mail strings which often show the apparent facts, can be treated as a "smoking gun" and in most cases get sucked in the "ether" of corporate e-mails that get lost on a server.
It boils down to "Who will make a decision to spend hundreds of thousands of dollars to solve a problem" lets go a step further "Who will put their ass on the line", lets go another step "Who will jeopardise the well being of their family, and mortgage payments to do the right thing".
On a wider scope, we are increasingly seeing common platforms, common components, global sourcing, slicing and dicing pennies; which can create problems and issues that cost millions.
Think about this in some meeting somewhere: "You know we saved half a penny here, a quarter penny there, and another quarter penny over there, for a total of one penny over 1.5 million units for a saving of $15,000 looked real good on the spreadsheet"...then we had to recall a million of them at a cost of $100. each".
In the business we always read about the manufacturer that found ways to save even more money, source from all over the planet, lower the price, and sell a model like crazy. That particular model that sells like crazy, has got "cost savings" plastered all over the vehicle, with parts coming from all over the planet where labor is cheap. It becomes an inexpensive globally sourced platform, that can be embellished with "touch point" features to increase the price and profitability.
Then with about 25,000 kms on the model the comment "This vehicle is pretty loose for only 25,000 kms...gotta wonder what will happen in another 25,000"...."Funny its showing accelerated wear and tear"..."Surely the life expectancy of the components has been finely calibrated to exceed the warranty time frame".
Think about this 100 years ago, Henry Ford started a revolution by paying assembly line workers $5.00 a day (double the going rate).
An informative fireside chat on social media and the auto industry, moderated by Chris Baccus (we have known Chris for a few years).