Light trucks are one of the outstanding sectors for the American automobile market, and also highly profitable for Detroit’s automakers. They are inexpensive to build, when compare with the others, and their prices are quite high due to the high customer demand and relatively few Japanese competitors. Light trucks seem to be the predominance in U.S. market and have gained nearly 50 percent of the U.S. automobile market. In this sector, there are many players such as GMC, Ford, Toyota, Isuzu, Mitsubishi, and Nissan. GM try to capture this market by place GMC in the high market with its V8 engine, and Isuzu in the low market by using its diesel direct-injection engine as a strong point.
Another trend, which is influencing the automobile industry, is consumer preference for safety and special features, such as airbags, antilock brake systems, power steering, and compact disc players. Many consumers tend to choose the car that can provide most important feature in the acceptable price. As a result, the luxury car in the medium price range like Toyota Camry, and Honda Accord is growing more significantly these days. In addition, most of Japanese automakers have increased their market share in the U.S. through the new luxury image brands, such as Lexus, Acura, and Infiniti.
The Geography of Production
In automobile development and manufacturing, geography always plays the main role. In the past, automobile factories have been set up tightly in the same neighbourhood with the significant concentration in Detroit, Stuttgart, and Nagoya. As a result of just-in-time theory, most of the car parts suppliers tend to locate near their assembler customers, in order to achieve short and fast supply line. GM, like many other automakers after the economic recession in the 70’s, tries to search for cheaper labour forces. Some of GM’s factories has been relocated and established in the lower wages locations, such as Mexico, Thailand, Spain, and Eastern Europe.
Competitiveness and Production Strategies
Today, one of the most important issues for the automobile industry is competitiveness in cost, quality, and products. Automakers cannot survive in the market if they ignore any of these areas. GM as the leading player in this industry is also trying to develop its product to achieve the optimal performance in every dimension.
Manufacturing Plant Performance
Although, GM has its assembly plant all over the world but the main bases of GM’s production are still in North America. In February 2003, GM produced 477,700 vehicles (191,570 cars and 286,130 trucks) in North America, compared to 463,000 vehicles (215,000 cars and 286,130 trucks) produced in February 2002. These production figures include joint venture production of 14,150 vehicles in February 2003 and 8,000 vehicles in February 2002. Additionally, GM North America’s current First-quarter production has been forecasted at 1.43 million vehicles (584,000 cars and 846,000 trucks).
Multiple Product Lines
The ability to assemble multiple product lines in a single plant is the strategic advantages of manufacturing flexibility that has been widely discussed over the past decade. Companies that are able to produce a variety of products in their manufacturing plants have a number of advantages. The Japanese car manufacturing plants are the highest levels of product variety. GM North America ‘s plants have been dedicated to only few models. However, GM is trying to develop its multiple product lines in many plants by following the Japanese steps, Toyota is the first company that use this strategy. Today, GM’s car design philosophy is aim to design the different models from different brands to be more similar than before in order to gain the comparative advantage of economies of scale and customisation. There are many GM’s model that quite similar to another by using the same chassis, for example Chevrolet Corvett and Pontiac Firebird, or Chevrolet Zafira and Opel-Vauxhall Zafira. These cars use the same chassis but different in details. Some models such as Zafira are completely the same even though it has three different brands. The reason is to maximise the customers’ needs and values because some brands such as Opel are undesirable for customers in some regions. As a result, GM try to solve this problem by switch the brand to Chevrolet in order to gain customers’ trust in the quality of the cars. The grand touring sport model like Chevrolet Corvett and Pontiac Firebird also use the same chassis and engine but different body and interior in order to achieve the product diversification strategy. Chevrolet Corvett has been planned to catch the young customer market while Pontiac Firebird has the conservative mature customers as its target group. By using this strategy, GM can gain the customers in different market by use only one production line.
Product Development Performance
At this moment, every automakers including GM are facing the challenge to create “best in class” vehicles and maintain a corporate reputation for performance and value. In order to achieve this goal, GM are trying to be expert at managing the development process, including involving suppliers as design partners. Product development includes understanding customers’ needs and desires by developing the concepts, systems, components, and tools to deliver the vehicles in quantity at the competitive cost and quality. Over the past decade, U.S. automobile industries have popularised in the minivan, sport utility, and light truck vehicle classes. The continued success is result from the attention to demographic trends, customer tastes, design innovation, and transportation needs. American automakers including GM try to maintain the simultaneous abilities to advance the state of the design art, respond to new or latest customer demands, and continually refine existing vehicles types by exploring the better ways to organise itself to perform the challenging product development functions.
Recently, the GM’s attempt to achieve the leadership in every markets is can be obviously seen. In the past, the unnecessary customers’ requirement has been ignored but now GM is trying to attain the customisation. During the long period, GM has changed itself from Ford mass-production system to Toyota customisation philosophy. Every little things about customers’ requirement have been taken into account. Each model has product diversification in itself by divided the main model to many sub-model with different engine, interior, and exterior. Every detail of the car could be changed even wheels, special colour, or engine specification in order to match the customers’ needs.
Some markets that have very small target customers like “Niche Market”, which were neglected in the past, are becoming more important to GM today. It can be seen by the acquisition of GM and some small brands such as Saab and Subaru. These two brands have their target customers as the unique and performance-lover people. Saab has brand image as the leader who bring the aircraft technology to the car industry and Subaru has its unique “Boxer Engine” as the strong point. However, after the acquisition period, GM tries to change these two brands to become more international and common to every customers by using different strategies. Saab has been changed to be one of the GM sub-brands. Today, all of Saab model are using GM’s engine and chassis as well as the other brands such as Chevrolet, Opel, Vauxhall, and Holden. For Subaru, GM use totally different strategies. Every Subaru things are still the same as before but GM has tried to present the outstanding character of Subaru cars by being a supporter in many motor sport events such as World Rally Championship in order to create the strong brand image for Subaru. Another good example for Niche market is Hummer. Hummer is the cloning of its big brother “Humvee”, which is the special vehicle for military purpose. Hummer is exactly the same as Humvee but GM differentiate it by reduce some aggressive character and add some luxury and comfortable feature. As a result, Hummer has been recognised as the number one four-wheel drive vehicle in the world and no one can even compete to achieve this position.
Another progress of GM’s attempt to develop its product is the engine development. Since the oil price shock in the early 70s, the automobile production trend, which was lead by Japanese automakers, has tended to emphasis on the low fuel consumption engine. Before that period, most of American automobile identity was known as the big V8 engine and rear wheel drive pattern. Every American cars use this pattern as their standard to produce the cars. But after the Japanese automakers presented the new type with small engine and front wheel drive to the market, many car manufacturers tried to follow their step. Front wheel drive is cheaper and easier to produce because this pattern uses fewer parts than the others. GM tried to develop this new perspective in the late 80s. Most of GM’s cars have been changed to use the smaller block engine and front wheel drive in order to reduce cost of production and become more economy. Even the Cadillac Seville, the flagship model of Cadillac, also changed itself to the new pattern, V8 engine with front wheel drive. Nevertheless, some of traditional sport models such as Chevrolet Camaro and Corvett are still using the old philosophy of American sport car, which is big OHV engine with rear wheel drive. This pattern is more expensive to produce but it is also more reliable and it can present the Americanisation of the cars very well, which is used to attract the American customers from the classy German and Italian sport cars.
Supply Chain
Supply Chain Policies
The world’s automobile manufacturing sector consists of about 20 large multinational corporations. However, the automobile supply sector includes thousands of firms ranging in size from a few employees to more than 100,000 firms. The automobile supply chain management involves close, trusting relationships with long-standing suppliers that are intimately involved with the development and production of the components and subsystems that they provide. So this outsourcing philosophy can reduces the overall project lead time and the engineering resources required for product development. However, GM has totally rejected this philosophy. GM insists on exerting extreme price pressure on its suppliers and aggressively negotiating division of the returns to innovations in supplied parts and subsystems. Some believe that this posture was responsible for the company’s slow recovery from the recession of the early 90s. As a result, GM estimates saving of 4 billion USD per year from this approach. GM is relying on its strong technical capabilities and its ability to bargain suppliers down on price to achieve its cost reductions. In contrast, another American automaker, Chrysler, do the different things. Chrysler is encouraging its supplier-partners to find more ways to cut cost through cooperation and incentives to split gains.
Supply Chain Management
Only 29 percent of U.S. suppliers had relationships with their most important customer that could be classified as partnership relationships. GM has actively moved away from partnership relationships with its suppliers. The average length of contracts that GM offers in 1993 has fallen about 40 percent from 1.8 years in 1989. GM also has set up a system of worldwide competitive bidding, saving an estimated 4 million USD per year in the prices that it paid for parts between 1992 and 1994. However, some suppliers refuse to supply new technology to GM due to its policy requiring quotes from prospective suppliers and compete technical information on the product and its manufacture, free of any claims of confidentiality. Therefore, this one-way partnership relationship is become unacceptable for some GM suppliers. GM officials accept that this policy means that GM will have to continue doing most of its product development in-house. This strategy could result in GM’s losing the advantages of supplier participation in product development.
Conclusion
From the information above, it can be seen that GM are trying very hard to maintain its position as the number one automaker in the world. GM tries to use every possible strategies such as cut the cost down and product differentiation. The strongest point that I saw is GM has enough brands to place in every market positioning from military vehicles to exotic sport cars. However, in the automobile market today, everything changes so fast so these strategies must take some time to prove that they are work or not.
