By Russ Banham
In the teens of the 20th century, the middle-aged Henry Ford latched on to a revolutionary concept — vertical integration. Ford's idea was to bring together in one place all the factories needed to manufacture everything that went into the making of a car. On Ford property along the banks of the Rouge River in Michigan, steel foundries, glass and rubber factories, paint shops, and the world's largest assembly plant sprouted and teamed up to produce Model T Fords so quickly and cost-effectively that average-income Americans for the first time could purchase something heretofore reserved only for the rich — a car.
A new kind of teamwork is emerging to distinguish automobile manufacturing in the 21st century. Long ago, hundreds of automotive supply companies replaced the glass and rubber plants that Ford and other car manufacturers once owned, many spun off by the carmakers themselves. Over time, these suppliers evolved and consolidated to make ever-larger car components, from the doorknob to the whole door to the entire automobile interior. Now these suppliers are collaborating with the automakers or OEMs (original equipment manufacturers) in virtual "companies" to build cars increasingly to customer specifications. Consulting firms, network solution providers, and software application companies have erected the technology architecture supporting these virtual companies, which exist until next year's models require the start-up of a new virtual company.
While Henry Ford hated being held captive by suppliers that could hike his costs willy-nilly, today's OEMs willingly partner and rely upon top-tier suppliers to be their systems integrators, taking ever larger responsibility for the design, engineering, and production of automobiles. So pervasive is this reliance that some observers predict that companies like Ford, General Motors, DaimlerChrysler, and other automakers eventually will become brand management and marketing firms — leaving the actual manufacturing to others.
"We've said for several years that the automotive industry would deconstruct and become virtual," says George Stalk, senior vice president of The Boston Consulting Group. "There is plenty of evidence we're already there."
Indeed, it would be a stretch to continue to call some automakers manufacturers, when an outside company like Lear Corp. makes the complete car interior. Stalk cites the example of Mahindra & Mahindra, a car manufacturing concern in India, as riding the edge of change. The company's Scorpio vehicle not only was built and assembled by
suppliers like Lear, Visteon Corp., and Germany's Behr GmbH, it was designed by them. Says Stalk: "They've proven that you don't need a big car company to make a car."
Whose Car Is It?
