And components that cost less and less and less . . .
In the late 1990s, the winning automakers are those that can produce and distribute appealing cars cheaper than anyone else. So automakers are turning over every part, looking for a way to do it cheaper. They're cutting the prices they'll pay to suppliers, and they're trying to determine which parts and features really matter to the customer.
The auto industry faces a crunch. Technology has permitted cars to become ever more sophisticated. Upscale buyers want all the creature comforts. Government regulations require airbags, more structure and cleaner engines. And normal customers have lots of other places to put their hard-earned dollars - computers, home entertainment centers and vacations to parts of the world that had been off-limits. And while computers and other electronics get cheaper, cars get more expensive.
Those conditions affect different companies differently. Customers of the European luxury makers are buying that luxury briskly, but only because those makers have reduced their real prices.
The strong yen puts the Japanese automakers at about a $3,000 cost disadvantage per vehicle. They're struggling to eliminate unneeded features.
General Motors is selling many of its cars on price. Chrysler is the most profitable U.S. automaker because its costs are the lowest. And Ford is struggling to sell vehicles that are more sophisticated than their predecessors, but also just too expensive.
So far, suppliers have taken the brunt of the cost-cutting in the U.S. industry. But automakers are also looking at thousands of dollars per car spent in marketing, sales and distribution. That part of the business may offer more savings than does manufacturing.
GM gets the juice
Those high-voltage engineers at General Motors are shining up the company's image. We say bravo.
This fall, GM becomes the first automaker to actively market electric vehicles in volume. The EV1 will be sold as a GM model through Saturn dealerships in Southern California and Arizona.
California's fantasyland mandate for thousands of EVs in 1998 had the unfortunate effect of obscuring the promise of electric vehicles. Now that California is backing off, GM is stepping up to a serious test of the technology. Batteries or flywheels will get better. Electronics will get better. And GM is bolder.