Playing a High Margin Game
in a Low Price Market
Hau Thai-Tang
Director of Advanced Product Creation
Ford Motor Company
Current Headlines
“Business as usual is dead in Detroit”
Detroit News; 9/16/2006
“Ford to Cut 14 Plants And Up to 30,000 Jobs”
Washington Post; 1/24/2006
“Dana follows auto parts peers into bancruptcy”
Wall Street Journal; 3/6/2006
“Toyota boosts overseas output to 5M”
Associated Press; 9/17/2006
“GM to Close 12 North American Sites, Cut 30,000 Jobs”
Bloomberg; 11/21/2005
“Oil prices rise above $60 on OPEC plan”
Associated Press; 10/16/2006
“Chinese plan to import cars to US”
Associated Press; 9/1/2005
Middle Market Squeeze
Mercedes S-Class
Mercedes E-Class
BMW 7 Series
Lexus LS
BMW 5 Series
Lexus ES
Hyundai Centenial
Hyundai Grandeur
Mercedes C-Class
BMW 3 Series
Lexus IS
Hyundai Sonata
Mercedes B-Class
BMW 1 Series
Toyota Avalon
Hyundai Elantra
Mercedes A-Class
Toyota Camry
Hyundai Accent
Toyota Corolla
Market Fragmentation
Total Number of Models Offered in US Market
350
Existing Model
New Model
300
250
200
150
100
50
0
2000
2001
2002
2003
2004
2005
2006
2007E
2008E
Mass Customization
Quality Gap Diminishing
3500
Defects Per 1000 Vehicles
3000
2500
Hyundai
Range = 0.5 defects
per vehicle
DCX
Ford
GM
2000
Toyota
1500
Honda
1000
Range = 2 x defects
per vehicle
500
0
2001
2002
2003
2004
2005
2006
Implications
Consumers & Manufacturers

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



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Supply > Demand
Horizontal versus Vertical Integration
Global versus Local
Consumer is King
Unprecedented Product Choice
More Educated / Informed Consumers
Extreme Pricing Pressure
Business Challenge
How to play a high margin
game in a low price market?
Strategic Approach

Consumer Insight

Brand Clarity

Design Leadership

Improve Business Structure
Customer Focus
1908 Touring Car
1912 Roadster
1920 Coupe
1924 Fordor Sedan
“If I had asked what my
customers wanted, they would
said
faster horse…”
Getting at thehave
“Un-met
and a
Un-articulated
Needs”
–Henry Ford
Strategic Approach
Brand Value & Design Leadership
Timex
Seiko
Patek Phillipe
$30
$300
$30,000
Which one tells time better?
Strategic Approach
Revisit Consumer Mobility Paradigm
Utilitarian
Transportation
Mythical
Self-Expression
Brand Clarity
Brand Clarity
AN AMERICAN REVOLUTION
Brand Clarity
Brand Clarity
LET’S MOTOR.
Brand Clarity – Mustang Example
"The Beach Boys.
Apple pie.
The '67 Mustang.
Three things worth
fighting for".
US Navy Recruiting Ad
Brand Clarity – Mustang Example
Evolution of
Japanese Automotive Design
Japanese “American”
Evolution of
Japanese Automotive Design
Japanese “European”
Evolution of Japanese Design Ethos
West versus Japan
Evolution of Japanese Design Ethos
West versus Japan
Evolution of Japanese Design Ethos
West versus Japan
Evolution of Japanese Design Ethos
West versus Japan
Evolution of Japanese Design Ethos
West versus Japan
Evolution of Japanese Automotive Design
Scion XB and Nissan Cube
Evolution of Japanese Automotive Design
Scion T2B and Nissan Chappo
Evolution of American Automotive Design
“Can Do Spirit”
IMAGE HERE
Evolution of American Automotive Design
Super Chief Train
Evolution of American Automotive Design
Super Chief Truck Concept
Bold American Design
Bold American Design
Bold American Design
Bold American Design
Bold American Design
Bold American Design
Bold American Design
Improving Business Structure
Drivers
for
Change
Competitive
Environment
GPDS
Principles:
• Synchronization
• Compatibility
• Completeness
Key Enablers:
Internal
Complexity
• Platform
Rationalization
• Commonality &
Reuse
• Leverage Digital
Tools
More Products,
Faster, and More
Efficiently
Global Product Development System
<Start>
6 Months Opportunity
<Funding>
6 Months Opportunity
1. Common Virtual Process
1. Faster Prototype Build/Verification
2. Data/Engineering/Manufacturing
Synchronization
2. Faster Production/Prototype Tooling
3. Reuse/Commonality
<J1>
Platform Rationalization
Fewer Architectures with More Models
Wave 1
Mazda3
Volvo V50
2003
Ford C-Max
Ford
Focus
Wave 2
3-Door
2004
4-Door
Mazda5
5-Door
Wave 3
2005-2006
Ford Cabriolet
Wagon
Volvo C70 Convertible
Commonality and Re-Use
Leveraging Digital Tools
Theme
Development
Package
Development
Service
Digital
Product / Process
Plant /
Assembly
CAD
Product
Structure
Product
Engineering
Digital
BOM / BOP
Functional
Simulation
Product / Process
Simulation
Virtual Build
Supplier
Integration
Digital Theme Development
Virtual Crash Simulation
CAE Prediction
Physical Test
Assembly Plant Virtual Simulation
Virtual Build and Assembly Simulation
Summary
How to play a high margin game
in a low price market?




Develop a Profound Understanding of
Customers
Create Clear and Distinct Brand
Positioning
Achieve Design Leadership
Fix Structural Business Issues