Why GM and Ford design cars in Australia
We all know that GM outsourced the Zeta platform - the basis for the new Pontiac G8, the upcoming Chevrolet Impala and, if rumors are true, both a new rear drive Buick and the next generation Cadillac DTS - to Holden, the General’s subsidiary in Australia.
And now Ford’s doing it, too.
Ford Australia is preparing a rear drive platform for a range of American cars which could be on the market as soon as 2011. These might include replacements for the current Mustang as well as the Crown Victoria and Lincoln Town Car. The head of Ford Australia, Tom Gorman, has confirmed that there are active discussions between Dearborn and Ford Australia, though no final decisions have been made to date.
Why are Detroit automakers outsourcing the development of new platforms to Australia?
It is one of the least acknowledged stories about Detroit’s automakers, but also one of the most devastating problems within American auto industry.
American automakers have systematically eliminated their senior engineers. They have, by doing so, lost the legacy of accumulated knowledge and wisdom which they now need, more than ever, to speed development of new products.
So, they have to resort to a subsidiary which has a history of producing cars for a market very much likethat of the United States, but in which the policies of the company have not eliminated the engineers with the most accumulated experience.
Here’s how we came to this:
Beginning a bit more than a decade ago, domestic automakers began eliminating white collar employees by offering them early retirement. It was a cost-cutting move. Among the most prominent engineers to accept that deal was Dave McLellan, at the time the chief engineer for the Corvette and just beginning the development of what would become the C5 Vette.
Generally, these early retirement offers gave an employee whow was at least 55 the benefits he or she would have received by retiring at 65. The company traded the higher salary for the lower retirement pay, and got a better cash flow in return.
Management did this for two reasons:
First, they couldn’t dump blue collar workers because the union contract wouldn’t permit it.
Second, they figured one engineer was as good as another, one manager as good as another, and saw the difference between senior and junior employees as a matter of price.
This is not a new story.
In Arthur Miller’s uniquely American play, “Death of a Salesman,” the lead character - salesman Willie Loman - is systematically minimized by his employer because, as a senior salesman, he’s become too expensive. That’s because he’s put in the time and the effort, and now he’s too good at his job. He’s become expensive. His employer would rather replace him with a younger person, someone cheaper. Having done the hard work, Loman’s reward was superfluity. In the end (if you’ve not read the play) he drives his Studebaker into a bridge abutment.
The automakers were not quite as cruel as the employer of Arthur Miller’s fictional character, and their employees didn’t react the same way. To the contrary, many of the insiders read the handwriting on the wall and were only too glad to get out.
But the effect has been the same: the automakers lost the reflexes, intuition, and plain common sense judgment of people who worked for a lifetime in the industry. In its place, they substituted kids with fresh college degrees, who were inexpensive and also inexperienced.
That is now coming back to haunt the American automakers.
And that is why they are relying on their Australian outposts to develop their new cars. Australia is a lot like middle America. It’s big. It involves large distances. They build cars in Australia that are a lot like the cars that middle America has traditionally wanted to buy.
But they didn’t give the engineering staff in Australia early retirement.
So, now General Motors and, apparently, Ford are depending on their smallest and least important subsidiary to save their bacon.
It is said that a company is only as good as its employees.
American automakers are learning the verity of that adage the hard way.