That there is global overcapacity in the auto industry is a given. Just how much excess plant, people and equipment there are isn’t entirely clear. Dr. David Cole, president of the Center for Automotive Research (CAR; Ann Arbor), suggested at the recent Automotive News World Congress that there could be as much as 25% overcapacity. Despite the fact that there are too many factories chasing too few consumers, companies continue to add capacity, not subtract it. The evident thinking among the people who are adding is “The vehicle buyers will want our stuff—it’s the other guys who have the excess capacity.” Which may be wishful thinking. What can companies do to maintain (or grow) their necessary share of market? The answers are (1) simple, (2) do-able, (3) effective.
1. Design. No matter what the product—whether it is an iMac or a Mont Blanc, a Mini or a Ferrari—great design makes a huge difference. People will go out of their way to get cool products. They’ll line up. They’ll spend a premium. And as is sometimes noted—usually by designers, who have a bit of correct self-interest in this regard—the cost of executing a bad design is no less expensive than achieving a good design. Yet how many companies continue to turn out ho-hum, mediocre (to be generous) automotive products? How many of these products have, in effect, designed-in overcapacity from the start (i.e., no matter what the plant capacity is, it is too great)?
2. Engineering. There is a vast array of computer tools available today to facilitate engineering. While many of these tools are routinely employed, in too many instances the structure of the engineering organization inhibits optimal deployment of these capable tools. For example, instead of having, say, the people who run finite element analysis (FEA) integrated into the development process, the FEA folks are treated as though they are a service department to the people who are doing the developing. That is, a request is put in for FEA of a particular part or assembly, and that request goes into a queue. The analysis is (eventually) performed, and the results are sent back to the requesting organization. While that’s certainly better than not doing it at all, wouldn’t it be far better if the people who could do the analysis were interacting in real-time with those who need to engineer the products? There is tremendous leverage that can be realized through the actual—not merely the rhetorical—integration of engineering disciplines throughout product development.
3. Manufacturing. This is the proverbial no-brainer. Naturally, the Toyota Production System is something that companies of all sizes need to methodically—religiously—practice. In an industry that is all about cost-downs, there is absolutely no room for waste of any type. While there are various other types of improvement processes and practices (whether it is total quality management or agile manufacturing), the Toyota Production System is still fundamental. Essential. While I am skeptical that any other company will get as good at it as Toyota, companies that don’t pursue it undoubtedly have their own excess global capacity.
None of this is quantum physics. It is worth noting that real success can be found through a combination and orchestration of the three things cited here. When they are worked together, the result is much greater than the sum of the parts. As for those who don’t do this, they’re going to end up with negative numbers—and red ink—on their hands.