The Offshoring of Engineering Facts, Unknowns, and Potential Implications (2008) / Chapter Skim
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The Changing Nature of Engineering in the Automotive Industry--John Moavenzadeh
The Changing Nature of Engineering in the Automotive Industry--John Moavenzadeh
Pages 69-102
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From page 69... ...
$100 million to $500 million, and a new-transmission development program costs roughly $50 million to $250 million. MANUFACTURING ENGINEERS Thus corporate engineering capability is a key competitive differentiator for vehicle manufacturers.
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From page 70... ...
across the planet. In theory, the industry supply base is PRODUCT ARCHITECTURE Some vehicle manufacturers and suppliers have significant equity relationships.
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From page 71... ...
development for many years, found significant differences The integral architecture of the vehicle often forces close, in efficiency among vehicle manufacturers. Their data show coordinated interaction among teams of engineers from that differences in engineering efficiency -- as measured vehicle manufacturers and suppliers.
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From page 72... ...
To evaluate R&D output, one must been shifting from components to full-vehicle systems, or also consider the efficiency of the engineering operation. "modules." Their customers, the vehicle manufacturers, have One vice president of engineering reported that his single granted them greater engineering responsibility and have angreatest challenge is the pressure "to do more with less." nounced plans to work more closely with fewer suppliers.
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From page 73... ...
This arrange- focus research on specific technical areas. An electronics and ment is in sharp contrast to traditional assembly plants, controls CRL, with Carnegie Mellon University, is one of where vehicle manufacturers are responsible for all of these the largest; others include an engine technology CRL at the functions.
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From page 74... ...
To reduce transport costs, most document information. Many engineers also mentioned that early offshore assembly plants were based on the assembly of they feel pressured to work more efficiently today than they completely knocked down (CKD)
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From page 75... ...
Japanese manufacturers followed a similar pattern Assembly Plants as of 1928 of investment in transplant production facilities in Europe fig few years later. Beginning in the late 1980s, but greatly a 5 Number Company of Plants Location of Plants (Year Opened)
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From page 76... ...
. Because these 10 vehicle manufacturers on all fronts.
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From page 77... ...
fig 6 Foreign-Owned, 2005 Total Sales = 16,997,192 units Domestic-Owned, Foreign-Brands: Domestic-Brands: BMW, Mini, Rolls Royce, Mercedes Ford, Lincoln, Mercury, Buick, Benz, Maybach, Ferrari, Acura, Cadillac, Chevrolet, GMC, Hummer, Honda, Hyundai, Kia, Isuzu, Oldsmobile, Pontiac, Saturn Lamborghini, Lotus, Maserati, Mitsubishi, Infinity, Nissan, Porsche, Subaru, Suzuki, Lexus, Scion, Toyota, Audi, Bentley, Volkswagen 40.4% 43.3% 13.6% Domestic-Owned, Foreign-Owned, Foreign-Brands: Domestic-Brands: 2.7% Aston Martin, Jaguar, Land Rover, Chrysler, Dodge, Jeep Volvo, Saab, Mazda Data Source: Automotive News FIGURE 7 U.S. vehicle sales by category, 2005.
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From page 78... ...
Source: Adapted from Center for Automotive Research study prepared for Association of International Automobile Manufacturers Inc.; Automotive News data; U.S. Department of Commerce; IMVP.
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Nowadays, vehicle manufacturers 2006, when the new Hyundai plant in Alabama and the new "shop at the global mall" -- that is, they purchase components 14 Foreign Brands 12 Big 3 0.5 2.2 2.6 2.7 0.7 0.3 2.3 0.8 0.9 1.3 2.4 2.4 2.5 2.8 3.0 10 1.8 2.6 3.3 3.6 0.2 Production (millions)
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From page 80... ...
U.S. vehicles contain thousands of components from European and Japanese suppliers, each of which is TABLE 5 1997 Proximity of Suppliers to Transplants: Number of Suppliers, Median Distance to Assembly Plant, and Percentage Domestic Company Location Start-Up Year Number of Suppliers Median Distance (miles)
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From page 81... ...
. Figure 14 shows total emmanufacturing/production purposes, and $17.6 billion was ployment for vehicle manufacturers and vehicle and parts for non-production purposes (e.g., engineering and design, manufacturers.
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From page 82... ...
Sources: Automotive News, 2005; BankruptcyData.com; company reports.
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Table 9 shows that an estimated 34,000 $66,284 for industrial engineers, and $65,861 for mechanical engineers and technicians work for vehicle manufacturers engineers. In a National Science Foundation report, Scien(not parts makers)
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Many factors are involved in deciding where to locate Jointly Engineer Joint Venture product engineers and manufacturing engineers for a given with Partner firm. Industry managers identified four critical factors con Engineer within Engineer in Offshore in sidered by both vehicle manufacturers and suppliers in deter the Firm House House mining their footprint strategies: customer, cost, capability, and government policy.
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of production facilities will also determine the location of 17 facturers to "build where they sell"? Is it also valuable to fig manufacturing engineers.
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Production ment from state and local governments. In some cases, local facilities for bumpers, side mirrors, door cladding, and other governments compete against each other, offering increas- components that require precise color matching are also ingly lucrative fiscal incentives to bring a plant to their located close to assembly plants (Table 11)
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From page 87... ...
to the vehicle engineering center, where supplier engineers can benefit from being close to their OEM engineer counEngineering and Proximity terparts, especially the OEM vehicle engineering team for a vehicle under development. When key supplier engineers are Market Factors co-located at the vehicle manufacturer, as part of a vehicle development program, proximity facilitates interaction, Although proximity to customers is significantly less iteration, and, therefore, faster resolution of problems and important for product engineering than for manufacturing concerns as they arise.
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From page 88... ...
United States 16,959 17,402 17,178 16,848 16,676 16,913 –0.3 2.78 Western Europe 17,296 17,053 16,944 16,608 16,352 16,856 –2.4 1.97 Japan 5,861 5,964 5,907 5,813 5,849 5,853 –0.1 1.66 China 1,832 2,089 This a figure has4,461 translated from the PDF in a different way 2,353 2,917 been 5,230 185.5 8.52 India 857 859 and 818 now retained the original line weights, except for Japan has 867 1,098 1,298 51.5 5.74 Russia 1,102 1,154 1,256 1,295 1,334 1,654 50.1 6.87 which now has a black dashed line (the original yellow does not Sources: Automotive News data; IMVP, 2004; World up in grayscale)
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From page 89... ...
1.5 1.4 1.3 1.2 1.1 North fig 21 America 1 Japan Europe 0.9 Brazil Production 0.8 Europe Production Brazil China Production 0.7 India Production China 0.6 India Japan Production NA Production 0.5 2002 2003 2004 2005 2006 2007 2008 Actual Data Forecast Data FIGURE 22 Vehicle production by country/region, normalized to 2005. Source: Automotive News, 2005; forecast data from JD Power, 2006.
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From page 90... ...
Imports to Japan of Japanese-brand cost countries in the backyards of their production centers, vehicles actually declined, from 90,682 in 1995 to 19,119 as shown in Table 13. For Western Europe and the United in 2005 (both numbers represent a negligible portion of the States, production has increased in these low-cost countries, overall Japanese market of roughly 5.9 million units in 2005)
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From page 91... ...
All of the industry managers interviewed were complex. It makes sense for suppliers of certain components, asked to estimate the cost to the company of employing such as bulky or sequenced components, to be close to OEM a product engineer with 5 to 10 years of experience in six assembly plants.
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The following factors must also be equate supply of qualified engineers. considered: Vehicle manufacturers can offshore product engineer ing in two ways: (1)
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will remain flat." GLOBALIZATION OF RESEARCH AND DEVELOPMENT The value of electronics content in automobiles has increased steadily for the last two decades. Thus electri Coordinating Global R&D cal and software engineers have become as important as the traditional mechanical engineers who have historically Engineering managers at Ford, GM, and DaimlerChrysler been associated with the automotive industry.
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ple, Ford acquired Volvo's engineering center in Gothenberg, GM is trying to reduce the number of vehicle architectures Sweden, when the company purchased Volvo in 1999, and while making sure that the right engineers among GM's 13 GM acquired the engineering center in Trollhättan, Sweden, global engineering centers are working to support the approwhen it purchased Saab. priate vehicle architecture.
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From page 95... ...
Home Engineering Center Luxury RWD Car Warren, Michigan International Mid-Size Truck São Paolo, Brazil Compact Crossover Warren, Michigan Compact Car Rüsselsheim, Germany Performance Car Warren, Michigan Mid-size Car Rüsselsheim, Germany Full-Size Truck Warren, Michigan Small Car Seoul, South Korea Mid-Size Truck (regional) Warren, Michigan Mini Car Seoul, South Korea FWD Truck Warren, Michigan RWD Car Melbourne, Australia Vans / Commercial Truck Warren, Michigan Source: General Motors, 2006.
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From page 96... ...
There's a shortage of software, electronics, and control The number of engineers and designers employed by engineers in the U.S. -- that's part of why I opened our [over- foreign-brand vehicle manufacturers in the United States seas] R&D center.
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From page 97... ...
Sources: Automotive News, 2005; company reports and interviews; JAMA, 2004. 150 to 550 employees.
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From page 98... ...
vehicle manufacturers have benefited from the ment limited foreign automakers to a maximum of 50 percent exploding Chinese market. In 1983, Chrysler, through ownership in the joint ventures, and Chinese import duties its acquisition of American Motors, was the first foreign on passenger cars in 1985 were 260 percent.
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From page 99... ...
The most notable of these was conduct applied automotive research -- essentially product Phil Murtaugh, a talented, well respected manager who used engineering -- for Chinese vehicle manufacturers. The cen- to run GM China, who was hired by SAIC on June 18, 2006.
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From page 100... ...
Chinese government's rationale for promoting international Although the joint-venture model for technology transfer joint ventures was to develop R&D capability based on the to Chinese engineers has largely failed, other ways of depremise that engineers from the Chinese domestic company veloping China's automotive R&D capability are emerging, would spend a few years working in the joint venture R&D such as strategic outsourcing to foreign knowledge centers. center where they would acquire knowledge.
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From page 101... ...
TRENDS AND PROJECTIONS As vehicle manufacturers learn to engineer more with less, Offshoring of automotive engineering -- defined as the a company's footprint strategy will become increasingly replacement of engineers in a high-cost country by those in a important. low-cost country -- is just one aspect of the complex dynamics of the global automotive industry.
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From page 102... ...
Available online at Saloon. Speech at the Automotive News Europe Congress, June http://www.jama-english.jp/europe/auto/2007/jauto-mkrs_in_europe_ 20–22.
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