Big Three Future Platform Strategies · programmable welding robots, standardized production practices, and one size fits all conveyors for assembly line are necessary to accommodate

AutomotiveAutomotive

Copyright © 2004 Global Insight, Inc.

Catherine Madden

Analyst, North American Production

Automotive Group

Big Three Future Platform Strategies

Detroit, 30 September 2004

Copyright © 2004 Global Insight, Inc. 29/29/2004

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Future Platforms for the North American Industry

Big Three focusing on opportunities to increase models and concepts developed from the same vehicle architecture

Fewer platforms reduce investment costs associated with new product development that impacts all parts of the process: design, engineering, manufacturing

Flexible manufacturing strategy that consists of programmable welding robots, standardized production practices, and one size fits all conveyors for assembly line are necessary to accommodate reduced platforms

Flexible architectures enable an OEM to offer an expanded model line-up at lower volumes, and shorten vehicle life cycles, which better position OEM response to consumer demand while increasing the bottom line



DaimlerChrysler Car

Future car architectures constructed with heavy reliance on affiliates; Mercedes components for base LX architecture, and a Mitsubishi platform for other cars

First to market with a modern, non-premium, RWD sedan architecture

LX platform derived from Mercedes; LX platform may have a PT Cruiser life cycle

GS/GSC platform – Mitsubishi developed project; that will accommodate the compact, standard, and entry standard segments

Single model focused platforms with minimal flexibility will reduce ability to compete



DaimlerChrysler Truck

DaimlerChrysler has spread future truck models over many truck platforms

Numerous platforms are tied to specific assembly plants; greatly reducing benefits of flexibility

DCX has not pursued the Full Size SUV/Utility segment; Future Full Size truck products are the same model offerings since late 90’s; compared with competitors

Jeep awaiting investment at Toledo to launch a Jeep platform that will build multiple models



DaimlerChrysler Strategy

DaimlerChrysler is at the back of the race to achieve a global vehicle architecture; competitive pressure will restrain future volume growth

Mitsubishi troubles endanger the car model offerings?

Cash constraints have already put significant pressure on development and will keep investment at assembly plants to a minimum

Lack of comprehensive strategy will become more costly if the LX platform follows reduced volumes of the PT Cruiser



Ford Car

Mazda developed the CD3

Ford developed the D3 platform from underpinnings of the Volvo PX2 platform

Implementation of global architecture remains weak; Focus C1 will remain in Europe

D2C platform derived from DEW supports the new Mustang; DEW was optimized around the Lincoln LS and is not very flexible

Introduced in 1979, Ford will retain the Panther platform; full-size body on frame, RWD, V8 distinguishes Ford with a completely unique product, but aged



Ford Truck

Full size truck platform has a structured vehicle architecture in future

P221 platform (F-Series) will become underpinnings of the T1 platform

T1 models will be modified to share the same front end architecture (F-Series, Super-Duty, Expedition, Navigator)

Ranger platform will remain unchanged; Ford will concentrate on refreshing model to remain cheapest, smallest compact pickup; poor performance of Canyon/Colorado



Ford Strategy

Ford not competitive with General Motors; Investment in assembly flexibility significantly less

Vehicle architecture remains a regional product development in favor of a global market

CD3 and D3 are scheduled to build seven truck models by 2009; Chicago and Rouge

CD3 platform will support CUV models; vehicle proportions are crucial

Pay later for saving money now; Cash constraints will make it difficult for Ford to compete



General Motors Car

Car side has a reasonably workable global architecture and no other Big Three OEM has at the same level

GM has a comprehensive set of platforms; not just two that will position it well

Longer, wider, and taller; you are able to change the hard points that could not be done in past; as Honda already does now

GM can create models without limitation; not the same for Ford and DaimlerChrysler



General Motors Truck

Current full size truck program has served well; GMT 800 platform generated almost 2 million units annually

Modest number of body on frame truck platforms support future products; will face increased competition in truck division

Global market for full size trucks remains limited; focus is more regional

Initial U250 minivans has design constrained by European needs; a global platform without a flexible structure



General Motors Strategy

General Motors leads among the Big Three on a comprehensive global vehicle architecture strategy

Delta, Kappa Epsilon, and Zeta are separate architectures; these platforms are modern and are the key to reviving the car industry

Over the next decade, investment by General Motors will yield almost completely new platforms for all models

General Motors has pursued flexible manufacturing most aggressively over the last decade



Foreign-Owned/Transplant Strategy

Honda has strong global architecture for model line-up, and ability to build almost any North American model at any of their assembly plants; however vehicle distinction is minimal

Toyota also focused on a global architecture that will meet regional product demands; Assembly flexibility at Georgetown, Cambridge allows each assembly line to produce up to eight models; Investment has increased capability from two models over last five years

Nissan has much strength in their FF-L and F- Alpha platform that offer many models in different segments



Conclusions

Significant challenge to deliver distinct products/concepts from a common architecture

Flexible assembly plants are essential to respond quickly to unexpected shifts in consumer demand

Honda and Toyota are industry benchmark

System allows for shorter vehicle life cycles to meet consumer demand; better utilization should improve profits

Investment constraints for platforms and flexible assembly plants put the most pressure on DaimlerChrysler and Ford to compete



Quarterly Comparison Year-over-Year

North American Quarterly Production

• Ford and General Motors derail fourth quarter output

• Q4 assembly cuts are result of high inventory levels, and slower

ramp up of new model launches

• Assembly of ‘05 models has been curtailed in 2004 calendar year

1Q04 2Q04 3Q04 4Q04CAR -5.5% -6.7% -3.8% -4.9%TRUCK 3.6% 6.0% 1.3% 0.3%TOTAL -0.3% 0.6% -0.9% -1.8%



2005 Outlook

2005 annual production at 16.114 million units, or 2.1% increase year over year

If GM and Ford meet their inventory targets, overhang should be minimal in January; less chance of overbuilds in Q1 and Q2

2005 output strengthened by a recovery from Ford and Volkswagen; Nissan continue to make gains

Through the forecast window, the production forecast has been trimmed by about 200,000 units annually

Car/Truck split continues to reflect consumer demand for truck-like models



DaimlerChrysler

Launch of LX platform kicks off avalanche of new models; RWD first large-volume platform from Big Three since the domination of FWD platforms; Will new products generate enough volume to keep Toyota in the rearview mirror?

DaimlerChrysler retains strong capacity utilization, but minimal mfg. flexibility leaves it poorly positioned to respond to trends if design misses; Financial woes ended capacity expansion in Georgia

Flexible platform development with Mitsubishi (next-generation Sebring and Neon); intended to improve productivity and save cost

Mercedes awaiting new products in 2005; expanding in North America and increasing its position as an export base



Ford

Product cycle drought is over as second half of 2004 launches seven models, but volume is still very weak

Success of CD3 platform spawning up to ten models and 800,000 vehicles is critical to success

Future of Mercury; just a sister product?

New F-Series leads the market. Is this enough to give leadership over GM in truck market, and at what cost?

Flexible manufacturing strategy at Norfolk, Kansas City, and Rouge assembly plants is on track

Capacity reduction remains priority despite cuts in 2002



General Motors

Truck products reflect design for manufacturability –boosting assembly plant efficiency; but General Motors is losing ground in the truck market

General Motors unable to push truck output higher; inventory position is most burdensome among Big Three

Is the revival strategy for Cadillac applicable to the Saab and Saturn brand; rebadging is not a solution

Struggling car program needs more than Cobalt and Malibu Maxx; car output contracts 2.2% by 2009

Integrated car – truck platforms; strong position in cross-over utility market; SRX, Equinox, Vue



• Still best-in-class manufacturing, which will shield it from some market lows

• Only constrained by capacity; most plants are fully utilized

• Success built upon cars - 58% of output in 2009; Civic softening

• Will competitive position be minimized without body-on-frame truck?; Honda SUT launch in 2005; Toyota and Nissan have a more complete truck line-up

• Customer base aging, design stodgy; Toyota Scion in line to take over youth market?

Honda



• Nissan had a strong performance with four launches in eight months; however new model launches face quality problems

• Titan, Armada and Quest are off slow start

• By 2009, total production increases 9.6%; capacity expansion

• Manufacturing efficiency remains strong; key roles with suppliers

• Multiple products from one platform include the Altima, Maxima, and Murano

• Mexico remains underutilized; delay of next-generation Sentra program and ambiguity over Nissan CUV will hurt competitiveness

Nissan



Toyota is ready for another assembly plant; expansion in Mexico

Toyota is still a leader in manufacturing strategy and quality

Toyota continues to address past mistakes; Solara and Sienna

Scion brand – a leading edge?

Almost achieved car/truck parity in 2009; will market support increased Tundra volume?; move into Central region

Toyota



Other Transplants

2004 is tough year on smaller transplants (200,000 units capacity); Mitsubishi, SIA, and Volkswagen taking major steps backward; CAMI is only bright spot

CAMI revived with Theta platform; Equinox, Torrent, Suzuki XL-7

Mitsubishi in N.A. still on unstable ground

SIA awaiting Lambda platform derivative; must survive with Legacy/Outback until 2005

Volkswagen needs model distinction; survive without a truck?

Hyundai strategy must accommodate for a US cost base structure; to be more than niche for inexpensive/100,000 mile warranty; must fully commit to N.A. mfg. to be competitive



North American Light Vehicle Production

5

6

7

8

9

10

11

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 200915

16

17

18

Car - L Truck - L Total - R

2003 Actual 15.866 2004 Forecast 15.8(Millions)



Big Three North American Production

1.5

2.5

3.5

4.5

5.5

6.5

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009Ford DCX GM

(Millions)



Conclusions

Inventory remains a problem, Ford and GM cut Q4 production

Big Three passenger car business in trouble

Pressure on the Big Three production will continue due to imports and transplant models

Production is at the bottom; growth will be stable not spectacular

Big Three must close more plants

Other OEMs focused on expanding capacity in North America

AutomotiveAutomotive

Copyright © 2004 Global Insight, Inc.

Catherine MaddenAnalyst, Automotive Group

[email protected]: 781 301 9128

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Big Three Future Platform Strategies · programmable welding robots, standardized production practices, and one size fits all conveyors for assembly line are necessary to accommodate