GM outlines plans to cut product-development costs

By Mike Colias, Crain staff (AN)

Detroit. Michigan -- General Motors says it will cut the number of vehicle platforms it uses globally by more than half over the next decade, in a bid to reduce complexity and save on product-development costs.

“More of our components will be common, and more of our vehicles will be on global architectures,” GM CEO Dan Akerson said today during a series of presentations to analysts and media, billed as GM's 2011 Global Business Conference. The sessions were webcast.

Mary Barra, GM's senior vice president of global product development, said GM will reduce the number of vehicle architectures, or the platform of parts and subcomponents that underpin cars and trucks, from 30 in 2010 to 14 in 2018.

More use of 'core' platforms

GM also said it will vastly increase the number of cars and trucks that will be assembled on its “core” architectures, which GM defines as global platforms as well as high-volume regional platforms such as the T900 architecture used for its full-sized pickups in North America. Core platforms will account for 90 percent of GM's volume by 2018, up from 31 percent in 2010.

“This allows us to have a much more efficient engineering investment in each of our vehicles,” Barra said, “and it also delivers higher quality, faster to market.”

The company also aims to cut its engine platforms, from nearly 20 in 2009 to fewer than a dozen in 2018 and around 10 eventually. For example, Barra said a new, small gasoline engine platform, ranging from 1.0 to 1.5 liters, will be used globally and replace engines that now are on three separate engine platforms.

The consolidation is aimed at eliminating inefficiencies in GM's product-development system.

'Churn' wastes $1 billion

With a more efficient product-development process, GM hopes to reduce costly development snags, which GM calls “churn.” The term covers canceled programs, late changes to vehicles nearing production, and reassigning a vehicle program from one of GM's lead engineering centers around the world to another.

Such churn costs GM up to $1 billion annually, according to slides GM prepared for its presentations.

GM has a “huge opportunity” to “bring discipline within the vehicle programs, control churn, control change,” GM CFO Dan Amman said. “That will enable us to work better with the supply base.”

Barra said, “Whether we start or stop, cancel or make late changes to a program, it really hurts the momentum of the team that's executing the program” and ultimately delays vehicle introductions and adds costs.

Fewer vehicle architectures should allow GM to get new products to market more quickly and improve quality by standardising “best practices” across its development facilities, she said.

It also will drive down engineering and materials costs, she said, while allowing GM to share the cost of tooling across platforms, which would also cut capital costs.

Manufacturing grows abroad

GM also said it plans to increase its production capacity in the developing markets of China, Russia, India and Brazil 45 percent by 2015.

Up to 80 percent of the capacity that GM adds between now and 2015 will be in low-cost countries, said Diana Tremblay, GM's global chief manufacturing officer.

In North America, Tremblay said GM will be using about 99 percent of its production capacity by year end, on two shifts, up from about 90 percent in 2010. If demand grows, she said GM would add third shifts, which could bring the capacity-utilisation rate up to 133 percent.

From Automotive News (A Crain publication)