Moving parts suppliers closer to factories, building more cars off same platforms key plan components
DETROIT—General Motors’ product development chief says the company is making progress on cutting costs to improve profit margins.
Senior vice-president Mary Barra told a group of financial analysts that GM is saving money by using the same parts on many vehicles.
It also has moved parts suppliers closer to factories to cut shipping costs, and it’s building more models on the same underpinnings.
GM was briefing analysts on its business plans at its proving grounds in Milford, Mich., near Detroit.
GM’s pretax profit margin in North America—the amount of each dollar in revenue it actually keeps—was 6.2 per cent in the first quarter.
But crosstown rival Ford Motor Co.’s margin was 11 per cent for the same period.
GM CEO Dan Akerson has pledged to take advantage of the company’s size and ability to cut costs in order to boost margins in the future.
Barra highlighted a few examples that showed GM’s progress—and how inefficient some old methods had become.
GM used to have 11 different air bag systems to protect drivers’ knees.
But it’s moving to a single design that should cut costs 21 per cent by 2017, Barra said.
As an example of manufacturing cost cuts, Barra said GM parts suppliers had been shipping Chevrolet Malibu interior trim pieces more than 700 miles to GM’s main assembly plant for the car in Kansas City, Kansas.
For the new generation Malibu, which came out last year, the company worked with three suppliers to move their operations close to the plant.
As a result, Barra says GM will save $31 per car, or $66-million over the life of the new Malibu.
“We’re often finding as we work with suppliers we can pull these savings into products in a nearer term,” instead of waiting for the next generation of the car or truck, Barra said.
Also, just three years ago, GM had 30 different sets of vehicle frames, which are called platforms in the auto business.
That number will drop to 17 by 2018.
Automakers can save billions by building more cars off the same platforms across the globe.
GM also can save money by trimming the number of parts supply companies it deals with across the globe, Barra said.
“We have an opportunity that we haven’t completely tapped,” she told the analysts. “It’s one of the quickest ways that we can improve our margins and add more value for the customer.”