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Asian Automakers Spend Less to Tool Up

Detroit auto makers spend more, yet neither Big Three nor suppliers benefit.

by on Mar.09, 2009

Detroit makers spend more, get less, for their money, says new study, yet could bankrupt suppliers, in the process.

Detroit automakers spend more and get less for their money, says a new study.

Detroit’s automakers are spending more and getting less when it comes time to tool up for new products, reveals a new study.  Yet, Detroit’s approach to working with its suppliers threatens to break the back of partsmakers now struggling for their survival.

On average, it costs the domestic Big Three eight percent more to create the tools that are used to produce their products – a significant portion of the cost of every new car, truck and crossover – reports the Harbour-Felax Group.  And Chrysler, the least efficient of the Big Three, spends 28 percent more than the study’s leader, Honda.

The report is significant for Detroit, since it reveals another gap that the Big Three must close before being truly world-class competitors, said Laurie Harbour-Felax.  But there are signs that domestic makers – General Motors, in particular – are making progress.  And, in another significant finding, the study shows that Toyota, the oft-perceived industry leader, is actually losing ground due to a production system that is becoming increasingly rigid and dogmatic.

With rare exception, manufacturers use outside suppliers for their tooling and there’s a sharp difference between the way Detroit and its Japanese Big Three rivals work with their vendors, noted Harbour-Felax.

“The leaders in the industry are involving suppliers earlier in the process, taking their ideas in design and development ideas, and forming a true collaboration” she noted.  “The Detroit Three, in contrast, are focused on (only) the price of components, at the end of the day.  That results in an adversarial relationship.  And, in today’s market, when suppliers find their backs against the wall, that doesn’t work anymore.”