Failure in the Automotive Industry – The Primary Reason

Failure in the Automotive Industry – The Primary Reason

The United States automotive industry endured a fatal blow. Yet anybody who claims the industry’s demise could be linked one root-reason for failure is sadly mistaken. I spent the higher part of ten years within that industry a few of which within an executive or managing role.

Regrettably, there is no silver bullet that caused the autumn. I only say regrettably just because a single reason for failure might be avoided later on. Within this situation, the culprit may be put only around the system in general which makes it hard to safeguard against a repeat occurrence.

Exactly what the automotive industry endured would be a catastrophic failure brought on by multiple points of failure. We are speaking systemic failure in the truest form. Being an insider in the market, I’m able to personally verify a few of the actions (or lack thereof) that pressed the to some collapse.

Among the greatest gremlins that undermined the would be a myopic concentrate on piece cost (cost). Through the years the car manufacturers grew to become totally engulfed in driving (no pun intended) suppliers to reduce sell prices so that they can lessen the production price of a vehicle or truck and for that reason increase the conclusion.

This shortsighted concentrate on lower piece cost am strong that supplier relationships were sacrificed. Actually, among the Big 3 automotive companies thought that if a person supplier went under that another would always step-up. How’s that for arrogant?

Pressure for lower piece cost am extreme that suppliers were made to seek low-cost countries for that procurement of parts as well as for their very own manufacturing processes. At first glance this method may appear logical. However, that which was missing would be a holistic look at the problem to determine that lower piece cost demands were resulting in other systemic issues:

Reduced quality and elevated existence-cycle costs because of overseas outsourcing

Suboptimal designs due to shortcuts to lessen costs

Jobs being pressed from the US

Collapse of solid, trustworthy suppliers

Tarnished relationships using the legacy supply base

The problem went so far as the automotive manufacturers demanding payments low cost to keep current business in order to be awarded new business. These payments were generally known in industry as “givebacks”. These givebacks began as checks which were written for absurd levels of money after which altered into piece cost concessions over the size of confirmed contract (the SEC wouldn’t necessary such as the check approach, i.e. buying business).

Business is all about not only the conclusion. The means by that you simply start producing profit is important. Our buddies within the automotive industry learned hard method in which relying upon myopic, dictatorial and selfishly driven profits at the fee for your suppliers and customers isn’t sustainable.

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