Why GM may be able to do what Apple cannot – sell a car produced in China!

October 31, 2016

Apple got into the car business with a big splash in 2014, hired hundreds of employees and took on the automotive industry with an arrogance of an electronics giant for brick and mortar dinosaurs.  Now those Apply employees are laid off and some of the disdain the phone giant had for the Big Three is gone.  Apple found out that it isn’t a trivial pursuit controlling the supply chain for complex durable goods (ones that aren’t thrown away every 3-5 years).    Automotive companies and their suppliers have employed a robust release and validation process, necessary to assure consumer safety and meet global regulatory demands.  The processes were perfected in the 1980s when Kaizen and cost pressures were high, manufacturing and engineering was still in the US and innovation was king.  Phone companies have been able to push their performance requirements to the bottom of the supply chain – mostly because they made millions of the same product and the components are quite similar from year to year.  Add a relatively benign environment like your pocket or purse, and getting components from overseas was a manageable challenge.  But a car, or a bulldozer, or even an airplane is more than the sum of its parts, the design, materials, and long-term reliability of components far down the tiered supply chain must be understood.  In fact, making sure replacement parts are available is one of the biggest environmental challenges for the global car market.

 

GM is going to market with a new SUV manufactured in China, but will consumers buy it?  GM is not known for innovative design and while the Envision is an affordable crossover, it may be perceived as cheap.   In a bid to further reduce costs, US companies have been quietly outsourcing management and expensive core support over the past few years.  While this bodes well for the management consultants, can companies be assured that the replacement employees are as diligent about supplier audits, sourcing due diligence policies and the on-going vigilance needed to meet new environmental product regulations like EU REACH.     The bottom lines look good for many US companies, but in their efforts to shed high cost, older workers they may have introduced unacceptable risk.  A great piece of advice I received when starting out in the auto industry was “Don’t buy the first model year car; they have to work the bugs out!”  I wonder if that’s the case with the shiny, new supply chain.

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