Side-view mirrors show Detroit’s problems

Roland Jones Business news editor • Profile • E-mail

It’s no secret that like companies like Nissan and Toyota are outrunning their American rivals, but now a new study has put a number on the advantage Asian automakers have over Detroit’s Big Three.

U.S. automakers make an average of $2,400 less per vehicle than their Japanese counterparts because of less-efficient purchasing and manufacturing procedures, according to a study by the Harbour-Felax Group, an industry consulting firm based in suburban Detroit.

The study’s findings paint a bleak picture of the challenges the big American automakers face when competing with their Asian rivals. GM and Ford, the two largest, are busy working through massive job reductions and plant closures to restore their businesses to financial health and remain competitive, but Harbour-Felax Group President Laurie Felax does not think they are moving quickly enough.

“GM and Ford are doing a tremendous amount of work, but they don’t have 25 more years to execute [their restructuring plans],” Felax said. “So I think the study’s findings show they are moving in the right direction, but they need to move faster,” she added.

U.S. automakers are certainly struggling to keep up with their Asian rivals, according to the study, which looked at over 20 competitive business areas where Detroit’s Big Three — General Motors, Ford and Chrysler — are falling behind Japan’s Big Three — Toyota, Nissan and Honda. Revenue and pricing, product design, and manufacturing and labor issues were identified as having the most impact on profit per vehicle.

By restructuring through layoffs and plant closures, GM and Ford are not focusing on the root cause of their problems, Felax said. One large U.S. automaker, which Felax declined to identify, makes 81 different types of wing mirrors, while its Asian counterpart Honda only makes two, she said. By using more common parts and processes, U.S. carmakers can close the gap with their rivals, she said.

“You can cut labor, but at the end of the day you can’t cost cut your way to competitiveness,” Felax said, adding that automakers need to share components between their vehicle brands to save money, especially commodity components that will not have a major impact on a car buyers' purchasing decision, like wing mirrors or batteries.

“All three of the big U.S. automakers are working on this,” Felax said. “The Japanese started doing it much sooner and are seeing the benefits. U.S. automakers are at a different level of maturity and execution and they are quite far behind the curve.”

Felax calculates that for every component that is shared between vehicle models, automakers stand to save between $1,000 and $1,500 dollars per vehicle.

“So if you multiply that saving by the volume of vehicles made by any one of these companies you can see there’s a potential for saving billions of dollars,” said Felax. “GM still produces the largest volume of product of any other carmaker, and this is an issue over which they have total control” — as opposed to the vagaries of consumer tastes and gasoline prices.

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