The Road Ahead

The Road Ahead

What's next? More cost-cutting. A 13-hour parts auction in mid-January, using Covisint, the industry's online parts exchange, helped DC save up to 40 percent of the opening price on some items, and DC will continue to experiment with the auction model for some purchases.

DC also plans to turn to software programmers in India and other parts of the developing world to reduce costs even further on next-generation projects. Unger will also push ahead to consolidate IT into an even more streamlined and "commonized" operation. Morrotti, for one, foresees "huge opportunities" to cut costs by reducing the number of regional computing centers. It's unlikely DC will settle on a single, global data center. More likely, he says, DC will set up four regional facilities, one serving North America, another for Latin America, a third for Europe, the Middle East and Africa, and the fourth serving the Asia/Pacific region, which would more closely tie DC to partners Mitsubishi Motors Corp. of Japan and Hyundai Motor Co. of South Korea.

Even farther down the road? Schrempp foresees new ways to wring cost-savings from DC's expanding global ties. In January, he reported that DC is working with Mitsubishi and Hyundai to develop a "world engine" for as many as 1 million vehicles that could, potentially, cut development costs by one-third and carve out bigger profits from the small cars most of these engines would power. In addition, Mahler says, DC may save $100 million in engineering costs by cloning a Mercedes transmission for Chrysler sedans coming out in 2004.

Information technology will be critical to both efforts: such collaboration, say analysts, would not be possible without some common—and virtual—design and engineering systems and combined purchasing of some key parts. Still, analysts like Keller question how far DC can go in this direction before "customers start wondering why they're paying $100,000 for a Mercedes when they can spend $20,000 on a Mercedes-built Chrysler compact."

Mahler is optimistic, saying that Unger, his boss, has built a unified IT team which will enable continued progress. "Today, the process of integration [in the IT department] is complete, and whether you're in Stuttgart, São Paulo, Singapore or Auburn Hills, we act like a team," Mahler says. But Unger also knows that long-term success will take a lot more than getting disparate IT cultures to make nice. Sure, technology has already helped Unger to start taming culture and costs. The really hard part—figuring out a way to help IT plump up the profits—has only just begun.

Can she do it? Keller is dubious. "The auto industry is not magic." she says. "Success is not a by-product of efficient software. It's what the software produces, ultimately. It's what the distribution system ultimately delivers. Success and failure, in this business, is still determined one customer at a time in a showroom."

PAUL A. EISENSTEIN is publisher of TheCarConnection.com, an automotive news Web site. His work has appeared in some 60 media outlets, including The Economist and National Public Radio. Comments on this story can be sent to editors@cioinsight.com.

This article was originally published on 03-18-2002
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