Apple’s Outsourcing is Not the Model for Detroit Automakers

I do not believe that outsourcing is the future of U.S. auto manufacturing, with design and manufacturing the only in-house functions of a car company.

I say this because Forbes suggests that it is. In its latest cover story, under the headline “The Next Detroit,” the magazine profiles Fisker Automotive, a relatively new company headed by renowned car designer Henrik Fisker.

The company already sells the $88,000 Fisker Karma, a plug-in hybrid sports sedan that gets up to 100 mpg. And it is developing a $50,000 model, due in three to five years, claiming that it will eventually sell 100,000 cars annually worldwide.

But Fisker is not a manufacturer.

Almost everything is outsourced--engineering, components, the electric power train, manufacturing. No messy work rules to worry about, no postretirement health care. Only design and marketing remain in-house…

History is littered with the failed visions of automobile impresarios like Preston Tucker, John DeLorean and Malcolm Bricklin. Henrik Fisker figures his fate will be different because he has more than just a new design or variety of propulsion in play. He wants to change the very definition of an American car company, taking his inspiration from firms such as Apple and Nike, which focus on branding and design, not running factories. Indeed, if the Big Three could start over, without the baggage of high labor costs and excess brands, they might create a car company that looks a lot like Fisker Automotive.

Fisker acknowledges that to be viable, he needs a subsidy from the U.S. government. He is seeking some of the money available from Washington to encourage new automotive technologies. And tax breaks for buyers of electric cars don’t hurt either.

Regardless of whether Fisker succeeds, I’m not impressed either by his business model or Forbes’ take on it.

I believe a true manufacturer that embraces a lean strategy will ultimately perform better than a company based on outsourcing. Apple may be a rare exception, but companies with lean manufacturing in-house avoid the logistics and quality issues that can bedevil an outsourcer. Not to mention the fact that your outsourcing suppliers may ultimately become so skilled at what they do that they choose to become your competitors.

Fisker is not The Next Detroit. The Next Detroit is the Toyota plant in Georgetown, Kentucky, and the Nissan plant in Smyrna, Tennessee, and the plants of other foreign carmakers within the U.S. who understood a long time ago how to do a better job than GM, Ford and Chrysler.

1 comment:

KeepingYouHonest said...

I think you are taking some comments out of context. I believe the article does not say Fisker needs a govt subsidy but it would be helpful. You imply that the transplants do not get subsidies but they do in the form of tax breaks and incentives. The truth is everyone would enjoy some help and if they can get it then so much the better. Anyone driving a Porsche Boxter or Cayman or BMW X3 is driving an outsourced vehicle as is anyone driving a Mercedes G Tank and lets not talk about the computers that are built this way. Do all these products suffer worse quality issues vs items built in house? Of course not. I think there are pros and cons to everything but outsourcing is not the evil you make it out to be. It may not impress you but why not wait and see what happens?