World cars: One model fits buyers everywhere
Ford unveils the biggest reorganization in its 91-year history, merging European and US operations. The goal: lower production costs and designs that sell, with minor changes, worldwide.
CALL it the global gospel.
Nearly 1,800 ranking Ford Motor Company managers gathered in Orlando, Fla., early this month to learn the details of a sweeping corporate reorganization. Dubbed Ford 2000, it's the biggest shake-up in Ford's 91-year history. When formally implemented Jan. 1, it will consolidate the company's vast United States and European automotive units into a single entity, the new Ford Automotive Operations, or FAO.
If Chairman Alex Trotman's grand vision is valid, FAO will be able to respond more quickly to changes in customer demand. And in the increasingly competitive auto industry, whoever gets there first with the lowest price is in a good position to dominate the market. Mr. Trotman believes that the reorganization will also help Ford slash costs by $3 billion or more a year by developing products that can be sold, with little modification, all over the world.
Ford isn't the only automaker converting to the global gospel. General Motors Corporation also is breaking down long-standing barriers between its nearly autonomous US and European operations. And Honda is reconfiguring its international carmaking strategy. The common goal is to slim down and become more efficient in producing a car - with many standard elements - that consumers worldwide will buy.
Consider Ford's new ``Duratech'' V-6 engine produced at a plant in Cleveland for both the new Contour, a compact sedan sold in the US, and the Mondeo, a version of the Contour built and marketed in Europe.
``In the past, Ford developed separate engines in Europe and in the US that were unique in virtually every detail but performing essentially the same functions,'' Trotman explains. ``There was an enormous waste in doing that. In the future, we'll have one team design the engine for use worldwide.''
Under FAO, product development is divided into five Vehicle Program Centers, or VPCs, each focused on a specific market niche. One ``platform team,'' based at the Ford Design Center in Dearborn, Mich., works on large, front-wheel-drive vehicles, such as the Taurus. Another VPC, based in Europe, handles smaller products, such as the Contour and Mondeo.
Collectively known within the company by their code name CDW27, these are Ford's first ``world cars.'' The Mondeo debuted in Europe in the spring of 1993, and was quickly voted ``European Car of the Year'' by a panel of international journalists. The automaker launched two American variations in the US this fall: the Ford Contour and Mercury Mystique.
But CDW27 has had its problems: Notably, it took a year longer than expected to develop and cost $6 billion, making it the most expensive new-car line in automotive history. ``It wasn't easy getting American and German engineers to agree on things,'' recalls one Ford engineer, who says compromise came slowly and with great difficulty.
To break down national barriers, Ford is busily transplanting workers. Plenty of European engineers are transferring to the US and a lot of American designers are learning German. But, while Ford may tame national egos, it can't ignore local preferences and needs.
German drivers want cars that can race along at Autobahn speeds, but won't waste $4-a-gallon petrol. US motorists want cars that are fast off the line that ride comfortably at 55 miles per hour.
``The only thing you combine are the parts and components the consumer really doesn't see,'' says marketing consultant Chris Cedergren, of the AutoPacific Group. Mr. Cedergren notes that with the CDW27, each version is uniquely styled. There are different features. Even the engines may be different. Europeans, for example, can opt for a fuel-stingy diesel that isn't available in the US.
Saddled with a bloated, inefficient product-development system, General Motors Corporation also needs to speed up and slim down.
Cedergren says there's a lot for GM to learn from its Swiss-based subsidiary, which has fared surprisingly well, despite Europe's ongoing recession. GM of Europe is considered one of the Continent's leanest and most efficient carmakers. Its newest plant, in Eisenach, Germany, rivals the best of the Japanese in terms of quality and productivity. And its products consistently win rave reviews. Compare that to the US, where GM is barely breaking even, and its plants are among the least efficient. Its products have been faulted as stodgy.
Since a boardroom shake-up in 1992, GM's new CEO, John ``Jack'' Smith, has been looking for ways to pare back costs and speed up the product development process. The Cadillac LSE may be a hint of things to come. This ``entry level'' luxury sedan, scheduled for a 1997 debut, will be based on the same platform as the European Opel Omega. Several other GM divisions, including Chevrolet, Buick, and Saturn, also will likely use Opel designs.
GM's powertrain operations have already been consolidated, and the man who pulled off that effort, Richard Donnelly, is now running GM Europe. Meanwhile, GM has consolidated its American auto operations into two new units, a Small Car Group and the Midsize and Luxury Car.
``We're a big company and frequently that's been a disadvantage,'' Mr. Donnelly says. ``If we can figure out how to work together, it can turn into a big marketing advantage.''
Ironically, while Ford and GM are looking to go global, the people who invented the world car concept may be moving in the opposite direction.
Take Honda Motor Company, which, for years, built virtually nothing but world cars. Now, as it expands its production base in the US and other foreign markets, Honda is designing vehicles tailored to local needs. Early in 1994, the carmaker announced its own global reorganization creating three semi-autonomous units. One, covering the Americas, will soon double its research and product development capabilities. Suzuki Motor Company says it now has the capacity to design and engineer two locally oriented vehicles at a time.
``Japanese and American companies are now going in opposite directions on the world car,'' suggests Hisao Suzuki, head of Honda's research and development unit.
But are they really? True, there'll be slightly different versions of the next Accord sedan, but the vehicles still will be based on the same underlying platform. And while the Accord wagon is now being built only in the US, it is being exported to markets around the world. In fact, Honda is selling more of the wagons in Japan than in America.
So this apparent Japanese move away from the world car concept may be more a matter of corporate semantics than a real shift in product development.
The reality is that car buyers' tastes are becoming more and more common from market to market. And competition is forcing carmakers to increase their economies of scale. As a result, the most efficient carmakers will be those who can invest in a single product that they can produce and sell - with relatively little variation - all over the world.