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Realigning Technology Infrastructure April 2, 2009

Posted by tmarion in ERC.
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Realigning Technology Infrastructure 

To survive in the global manufacturing tsunami, the domestic US auto industry must be restructured. Today each of the Big-3 has its own powertrain divisions, which develop and produce engines and transmissions. But the consumers don’t care about who produced the transmission in the car that s/he drives; just make it functional and quiet. Separate design, development and production is a waste. The powertrain divisions of Chrysler, Ford and General Motors should be combined to reduce costs and be ready to develop the sustainable engines and transmissions required for a “Green” world.

Here are some facts:

Fact: The engine and the transmission are the most expensive components of the automobile, and constitute a substantial fraction of its cost

Fact: The factories that produce engines and transmissions are the most expensive (and not the assembly factories, as most people think)

Fact: A substantial increase in the fuel efficiency can be achieved through innovations in the engine and the transmission (for example, by a transmission gear with 10 speeds)

Fact: Each of the Big-3 has its own powertrain division (powertrain = engine, transmission and their base components); each division develops very similar engines and transmissions. None of the Big-3 has the resources to develop fuel-efficient transmissions and engines. Because of the small demand, their powertrain factories are operating well below capacity.

Separating the engine development and production from the final product is not a new business model. It exists for years in the aerospace and the computer industries. Here are some facts about these Industries.

Fact: There are only three large jet engine manufacturers in the world: General Electric, Pratt & Whitney, and Rolls Royce.  Boeing, Airbus as well as other smaller airplane manufacturers utilize jet engines from one of these three manufacturers.

Fact: The computer companies (Dell, Hewlett Packard, Sony, Apple, etc.) are using the microprocessors that were designed and produced by Intel, AMD and Samsung.

 

Aerospace Industry

Computer Industry

Auto Industry

Boeing, Airbus

Dell, Hewlett Packard, Apple

Chrysler, Ford and General Motors

General Electric, Pratt & Whitney, and Rolls Royce.

Intel, AMD ,Samsung

Proposed:

Big-3 Powertrain

 

Our plan for Restructuring the US Auto Industry: Implement the Business Model of the Aerospace and the Computer Industries in the domestic auto industry:

  •   Combine the powertrain divisions of the Big-3 into one company that will develop and sell engines and transmissions to General Motors, Ford and Chrysler. 
  • Achieve this goal as a migration from the current business structure; align best practices in design and operations among the Big-3 powertrain divisions, select the top performers and consolidate these factories into the new company.  Government loans will be utilized to support this migration process.  
  • The Big-3 will sell their top performing powertrain factories to this new company. The funding will come from a loan that the US congress will approve.
  • This new company will receive generous government grants to develop fuel-efficient engines and 10-speed transmissions. Developing these components will allow the new company to produce leap-frog fuel-efficient cars, which will guarantee the future competitiveness of the industry.

IMPACT: Combining the powertrain divisions will reduce the cost of building cars by 15% to 20%, making the products of General Motors, Ford and Chrysler more competitive, which, in turn, will increase their sales. More sales will create more jobs.  Brand differentiation will be achieved through automobile design and assembly as well as reconfigurability capabilities of powertrain factories that will provide powertrain differentiation.