Common parts cut car costs

Mike · 2006-10-29T03:42:50+00:00

Common parts cut car costsBy Michelle KrebsMOTOR MATTERSPublished October 27, 2006Detroit automakers suffer a $2,400-per-vehicle profit disadvantagecompared to Japan's top automakers, according to a new study, butcontrary to what company officials say, it isn't solely the result ofuncontrollable health care costs. Laurie Harbour-Felax, president of the newly formed Detroit-basedconsulting firm Harbour-Felax Group, and her father, Jim Harbour, werefrustrated hearing that health care costs were to blame for Detroit'swoes. What they found was, indeed, skyrocketing health care costsaccounted for the bulk -- $1,500 -- of the $2,400 profit gap. But theremainder was made up of some items that the automakers could control.They found the controllable portion falls into three major areas:revenue per vehicle, labor issues, and product design and partscommonality. "Revenue per vehicle is a huge issue," said Mrs. Harbour-Felax inan interview. "In 2005, Detroit automakers instituted employee pricingprograms and huge incentives that killed them." She notes that when GM dropped employee pricing, lowered incentivesand shifted to value pricing, the profit picture turned arounddramatically. The study examined labor issues, such as absenteeism, relief timeof workers, the number of job classifications, and quantified whatthose factors cost automakers. It was several hundred dollars pervehicle, depending on the manufacturer. The information in the studycertainly will be used by automakers to negotiate their nationalcontracts with the UAW, which expire in September 2007. The third part of the profit gap is in product design and productcommonality, or the lack of commonality. "I believe that's the biggestarea of opportunity," said Mrs. Harbour-Felax, who visited 50 supplierplants to get a sense of how well manufacturers are doing incommonizing parts -- or not. Detroit automakers have talked the commonizing game for 20 years,but, she said, organizational structures,...

Oct 29, 2006 40 Replies

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And why the banks and insurance companies try to use the fraudulently low NADA values for loan and total-out value. I learned this a couple of years ago on a total out. Stood my ground and documented value with KBB and real-world sales - which were remarkably in agreement. Told them I'd see them in small claims court if they insisted on using NADA. They paid me the KBB.

Oh man! Don't tell the ACLU that! They'll kill that program for sure. Although, it is a liberal dilemma: Whether to encourage people to be here illegally or try to hurt people economically in the name of "saving the environment". Tough decision for them.

Bill Putney (To reply by e-mail, replace the last letter of the alphabet in my address with the letter 'x')