GM consolidation could cut development costs
By Michael Ellis
DETROIT, Oct 6 (Reuters) - General Motors Corp.'s move to
create a global organization could cut months and millions of
dollars in costly vehicle product development time, analysts
said Tuesday.
But the inefficient giant, which has the slowest vehicle
development time among the Big Three and the major Japanese
automakers, could face quality problems as it tries to compress
the product cycle to as little as 18 months.
"Time is money. And development time costs a lot of money,"
said Mark Johnson, an analyst with A.G. Edwards & Sons.
"Chrysler benefited from that four or five years ago when they
streamlined."
GM executives said that a shorter product development time
would allow the automaker to respond quicker to changing
consumer tastes around the world.
G. Richard Wagoner Jr., named as GM president Tuesday, told
reporters that the product development time has been cut to
about 24 months from about 36 months just a few years ago. GM
will begin this year trying to cut it down to 18 months, he
said.
Computer-based engineering systems, common worldwide
processes and systems, fewer automotive platforms will all help
to cut the time from the drawing board to the car showroom,
Wagoner said.
GM has improved engineering productivity in North America
by 10 or 11 percent over the past two years, Wagoner said, and
he expected double-digit productivity improvements to continue
over the next few years.
"In terms of costs per vehicle, GM is still the most
inefficient," Johnson said. "There's a lot of different factors
that go into that equation, and one of them is cycle time."
David Littman, an economist with Comerica Inc., said GM's
history of labor problems may make it tough to cut back on
product development time without inflaming worker tensions and
hurting quality.
"The question is, will quality suffer," Littman asked.
"That's going to be a tougher nut to crack. Flexibility is a
key ingredient that will influence the quality."
"Consolidation is the only way to squeeze (enough) profits
out of the system sufficient to reinvest in these more
grandiose plans of new, quicker and better product offerings,"
Littman added.
GM Chief Executive Jack Smith laid out his vision in August
for fewer vehicle models, more efficient assembly plants, fewer
workers and fatter profit margins.
However, Wagoner told reporters that quality will be a top
priority in cutting development time.
"You can't go faster if you hurt quality," he said. "The
market wouldn't allow us."
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