Platform reductions vs. demands for specialization.

One of the biggest issues in the automotive industry in the past Few years is the OEM's attempt to reduce the number of platforms they are offering in order to improve their competitive position, The primary drivers for platform reduction are the need to reduce the overall cost of new vehicles, and to shorten their development cycle. By reducing the number of platforms, all stages of the product development and launch process can be maximized given the reduced complexity represented by fewer platforms going through the system. With fewer platforms, OEMs can also take a more modular approach to new vehicle design that should allow more component-sharing between platforms. This trend started years ago in areas that were relatively easy to pursue. In 1995, for example, one major OEM had 45 different trunk lock mechanisms used across its vehicle lines. By 1999, it had reduced that number to 12. This modular approach is starting to show up in all areas of the vehicle, including powertrain and vehicle exteriors.

Another trend driven by consumers that runs counter to the OEM's attempt at platform simplification is the increasing demand For more personalized, individualized vehicles. Gone are the days of selling 500,000 units per year of one vehicle [e.g. the Chrysler Minivan] that has only one or two variants. Consumers want more uniqueness in their vehicles, and many want the ability to customize their vehicle to their specific desires. The best example is the success of the BMW Mini Cooper. Much of the vehicle's appeal lies in the ability of the buyer to mix and match a wide variety of options to make it more reflective of their personality and style. Many OEMs are already taking option and marketing cues From the success of the Mini and incorporating them into their Future vehicle launches.

In a previous AD&P article [see: http: //www.autofieldguide.com/columns/jim/ 1102insight.html] we described the increased need for vehicle uniqueness as a result of the polarization of the market represented by the double bell curve.

As we discussed in that article, the Disappearance of the "average" middle class Buyers has significant implications for the Automotive industry:

* The upper end of the bell curve is primarily the new car market. Vehicles that appeal to the higher-end buyer will have shorter lifecycles, more options, and the primary buying criteria will be the uniqueness off he vehicle's image and offerings

* The lower end of the bell curve is primarily the used car market and the low-price commodity vehicles. For new cars sold to this demographic segment, they will have more traditional product lifecycles but the main consumer buying criteria will be price.

This phenomenon of the double bell curve is one of the main reasons consumers will pay top dollar for a Chevrolet Suburban but the same dealers have lots filled with Chevrolet Malibus. So if OEMs are attempting to reduce platforms and consumers want more choice, how are both apparently conflictive agendas integrated? The answer is in the trend or multiple vehicle variants off of a single platform. Peugeot has done this with great success in Europe with platforms like the 306.

Using vehicle variants vs. completely independent platforms allows the OEMs to better keep up with consumer tastes and should reduce the overall cost of each variant. A recent North American example is the CD1-3 platform at Ford. The only current vehicle off this platform is the Mazda6. Over the next three to four years, however, there are a multitude of vehicles planned including the Ford Futura, a Mercury midsize sedan, a crossover sport utility vehicle, and numerous van variants.

As the OEMs continue their drive for platform reduction, it is important for OEMs and suppliers to understand the implications of this change.

Implications to OEMs

* Using platform variants requires a very disciplined and seamless product development process to reap the rewards of leveraging a common platform and the use of common components.

* Too broad a usage of a single platform can dilute the brand strength of an individual platform as well as compromise the performance of an individual vehicle.

* The ability to successfully apply engine and powertrains to multiple variants of a platform will become a Future key success factor.

Implications to Suppliers

* Knowing the positioning of the vehicle on the front end of the sales process is critical to knowing what to offer [e.g., is it a price-driven vehicle or an upper bell curve vehicle?] and how to price the component or system.

* Certain types of parts will be broadly shared across multiple variants and platforms. Others will be specific to a vehicle variant and have smaller volume and probably a shorter product lifecycle. How to recoup product development and dedicated capital investment for these types of programs is critical.

* Small volume [less than 30,000 annual units] vehicle production will increasingly be done by the supply base vs. the OEMs. Companies like Magna, ASC, and others will increase their competence in low-volume niche vehicles.

The question in the long run for the OEMs is determining what is the optimum number of base platforms that can support their targeted product and demographic segments. The tension will reside in balancing what makes sense from a cost perspective without compromising what is needed From a consumer perspective.