Platform consolidation gradually erodes supplier business

STAMPING JOURNAL® FEBRUARY 2005

February 8, 2005

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The Big Three are in the midst of a decades long process— platform consolidation. While it will make them more cost-competitive with the Japanese automakers, it also will take away business from tooling and stamping suppliers.

Japanese automakers are acknowledged as experts in the realm of platform consolidation: They can make many vehicles from one common set of basic components and tooling hard points.

For example, the Honda Civic®, a small sedan, is built on essentially the same platform as the Honda CR-V® (a small SUV) and the Honda Element® (a trendy, tall wagon). Other Japanese automakers, particularly Toyota, make similarly impressive use of a small number of platforms, and the Big Three are working very hard to catch up.

As the Big Three begin making more cars from fewer platforms, the result will be less business for stamping and tooling suppliers. Fewer platforms simply require less supplier involvement. The resulting savings are the automakers' reason for consolidating platforms—and a threat to suppliers.

Savings From Platform Consolidation

Using fewer platforms allows automakers to reuse components from vehicle to vehicle. Engines, transmissions, and steering and exhaust systems can be reused without spending the money to design and engineer new hardware.

On the manufacturing side, making a greater variety of vehicles from a smaller number of platforms allows for savings as well.

The Japanese automakers are very adept at redesigning new vehicles with the same hard points as the ones they replace. This reduces the need for tooling changes on the assembly lines making the new vehicle. The fewer the changes, the less time is needed for facility changeover during new-model introductions. On the downside, fewer changes mean less work for tooling suppliers, who are needed to make the changeover possible.

Flexibility

Most buyers will never know or care that the steering system in their Honda Civic is the same as in their neighbor's Element. Likewise, they're not likely to care that the seat hardware in their Toyota Camry® also is used in a Lexus®.

Problems start, however, when consumers see few differences between the models that share parts. As soon as they begin to feel that they're just getting a rebadged version of another car, demand slackens.

The Big Three learned that lesson very painfully in the 1980s. For instance, the Chevrolet Celebrity®, Oldsmobile Cutlass®, Buick Century®, and Pontiac 6000® were basically the same car with minor trim changes and different nameplates. Consumers weren't impressed, and Japanese automakers used the opportunity to steal market share from the Big Three.

This time around, the Big Three aren't making the same mistakes. Vehicles that share platforms and are made on the same assembly lines are styled and engineered differently. The Ford Five Hundred®, for example, looks nothing like the Ford Freestyle®, with which it shares a platform. Although both vehicles are built on the same assembly line at Ford's recently modernized Chicago assembly facility, they are sold in entirely different segments.

By making more vehicles on fewer platforms, Asian automakers realize greater economies of scale when purchasing parts ranging from tooling to stampings to seats to engineering services. Also, they attain a level of flexibility that has eluded the Big Three.

Making several vehicles on a single platform allows a single assembly facility to build a great variety of vehicles. When the market shifts and certain segments go out of style and new ones become popular, the Asian automakers are able to respond quickly by ratcheting up production of the popular vehicles made on a given platform, while reducing production of the less popular ones.

The Big Three Respond

The benefits of platform consolidation are not lost on the Big Three. In truth, they have made excellent use of some of their platforms. GM's GMT800® platform, for example, is used to produce pickups and SUVs in a range of sizes and prices across the Chevrolet, GMC, and Cadillac brands.

Nor do they lack for examples of flexibility: Ford's Wixom, Mich., facility at one time built up four substantially different vehicles on the same assembly line with differing front- and rear-wheel drive and body-on-frame and unibody construction characteristics. What the Big Three are striving for now is to combine flexible assembly operations with the engineering capability necessary to consolidate a greater range of their vehicles than in the past.

The Big Three's current product plans call for large levels of cooperation with their international partners: GM with Daewoo and Opel; Ford with Mazda, Volvo, and its European operations; and Chrysler with Mitsubishi, as well as its parent, Daimler. The vehicles resulting from these cooperations either have already hit the road or are near introduction.

The Asian automakers competing with the Big Three in the U.S. market have relied on platforms they use throughout the world. By turning to their international partners, the Big Three now are leveraging their platforms in a similar strategy.

Implications for Suppliers

What can suppliers expect from the platform consolidation trend? First of all, these changes will be gradual. A platform takes up to four years to engineer and bring to production. The cost can reach about $1 billion. These two factors, combined with the difficulty of revamping the product and production facilities necessary to consolidate platforms, mean that platform consolidation will be a powerful but gradual force in the industry.

As automakers consolidate platforms, suppliers can expect them to consolidate their supply base as well. This means more business distributed to fewer suppliers.

Suppliers with global capability will have an edge because platforms will be consolidated across the entire company enterprise, regardless of geographic boundaries. Automakers also are likely to continue their demands for greater engineering capability from their suppliers.

Suppliers who don't have either the scope or capability necessary to work more closely with automakers, and on a larger scale than ever before, may have to engage in joint ventures or consolidate with other firms.



Center for Automotive Research

Bernard Swiecki

Contributing Writer
Center for Automotive Research
1000 Victors Way
Suite 200
Ann Arbor, MI 48108
Phone: 734-929-0484
The Center for Automotive Research focuses on the future of the international automotive industry. Its overall objectives are to provide industry research and analysis, communication forums, and informational resources that respond to the changing needs of the international automotive and automotive-related industries.

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