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Automotive: Auto Industry's Drive To Standards

Automakers and their suppliers see standardization as a way to improve efficiency
Collaboration, standardization,and localization in the name of greater efficiencies underpin auto and truck manufacturers' IT efforts. Standardization, in particular, is rising to new heights at General Motors Corp., whose information systems and services are completely outsourced. To facilitate this setup, IT staff running business management, systems development, and systems operations have in the last 12 months been developing definitions of standardized work to govern interactions with all their IT vendors.

GM is incorporating tools such as Capability Maturity Model Integration and Information Technology Infrastructure Library to drive business processes and standards for change management, production control, and enterprise monitoring. With these tools and increased collaboration with suppliers, it's achieving greater efficiencies. "We've reduced our design-cycle time from 48 months in 1996 to less than 24 months today," says Kathi Mehall, director of planning of information systems and services at GM. "We cut a billion dollars from the annual $4 billion IT budget, consolidated more than 7,000 legacy systems to fewer than 3,000, and improved productivity by 25% over the past six years," she says.

Globalization requires closer collaboration between suppliers and manufacturers. About 60% of GM's estimated growth will come from emerging economic countries such as Brazil, China, India, Mexico, Poland, Russia, South Korea, and Thailand. So GM is developing business processes adapted to local conditions for design, manufacturing, quality, and distribution. The information systems and services group supports this effort, providing the tools for collaboration and systems reuse that let the company leverage global resources in delivering products for local markets. GM recently engineered one product in one country, manufactured it in six, and sells it in 124 countries.

Delphi Corp. is focused on standardization, too, with a project begun last year to transform a model based on relatively self-sufficient IT teams aligned into divisions and regions into a strong shared-services model. The company also is collaborating more closely with suppliers through its Web portal. Suppliers can suggest cost-savings ideas, such as a change in a design specification that would make a part easier to secure and increase product quality. To date, the program has achieved $8 million in savings, with an additional $74 million expected.

Delphi expects that its suppliers will match its global presence, setting up local offices and deploying the necessary technology to support them. Says Bette Walker, Delphi's VP and CIO: "Our IT suppliers have become an integral part of our product and services offerings and an extension of us."

INDUSTRY LEADERS
Company Revenue in millions Income (loss)
in millions
General Motors Corp.
$185,524
$3,822
DaimlerChrysler AG
$171,529
$564
Nissan North America Inc.
$56,905
$4,126
Delphi Corp.
$28,096
($56)
Johnson Controls Inc.
$22,646
$683
Mitsubishi Motors North America Inc.
$22,000
--
AutoNation Inc.
$19,381
$479
Goodyear Tire & Rubber Co.
$15,119
($802)
TRW Automotive Holdings Corp.
$11,351
($70)
Paccar Inc.
$8,195
$527
JM Family Enterprises Inc.
$7,800
-
International Truck & Engine Corp.
$7,340
($18)
Michelin North America
$6,666
--
Cummins Inc.
$6,296
$50
Federal-Mogul Corp.
$5,546
($190)
Advance Auto Parts
$3,494
$125
Tower Automotive Inc.
$2,816
($125)
American Suzuki Motor Corp.
$2,100
--
CSK Auto Inc.
$1,578
$11
Reynolds & Reynolds
$1,008
$119
Rush Enterprises Inc.
$815
$9
Financial data is from public sources and company supplied.
Revenue is for latest fiscal year.
Dashes indicate companies requesting financial information not be disclosed.

SNAPSHOT
INSIDE COMPANIES
Average portion of revenue spent on IT 2%
Companies using radio-frequency identification 37%
Companies globally sourcing products and supplies 81%
HOW COMPANIES DIVIDE THEIR I.T. BUDGETS
Hardware purchases 16%
IT Services or outsourcing 19%
Research and development 3%
Salaries and benefits 32%
Applications 18%
Everything else 12%
INDUSTRY FINANCIALS
Average year-over-year revenue change 4%
Average year-over-year net income change 9%
DATA: INFORMATIONWEEK RESEARCH
See year-over-year shifts in business-technology practices for this industry.
Compare and contrast this year's data with last year's.

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