DETROIT - General Motors is winning in the marketplace because it has relentlessly cut costs. The savings at one quiet corner of the company show how.
GM tested 338 prototype dies in 1996. It spent tens of millions of dollars to do so, with large prototypes costing $150,000 apiece.
Now GM tests dies, which are used to stamp metal, with computer simulations. That means no more prototypes.
As Mark Stevens, general director of engineering for the metal fabricating division, puts it, "All that cost went to zero."
Multiply that process many times over, and you have the cost-cutting marathon that began when GM's board installed Jack Smith as president in 1992. Now, according to a study by securities firm UBS Warburg LLC, GM is the lowest cost producer among domestic automakers.
The change is staggering. Just a year ago, GM was still fixed in the industry's mind as a bloated giant.
GM's sustained effort to squeeze cost out of its suppliers, dealers and its own operations gives it new marketplace muscle, which it has used to hammer Ford Motor Co. and the Chrysler group.
But analysts caution that GM's advantage over domestic competitors won't last forever - and that it must further improve to compete with the import brands that keep grabbing U.S. market share.
The downsized GM now:
GM has exploited its advantage since last fall, offering heavy incentives and leading the market in pricing. Ford and the Chrysler group have had to play catch-up, losing money while doing so.
GM also has won some respite from import brands' relentless market-share gains. GM's current advantage allows it to ensure that imports' market share gains come at the expense of Ford and Chrysler, rather than itself, in the view of analysts.
But analysts say GM must build on its current domestic advantage to compete effectively with Asian and European brands. Otherwise, it will still suffer long-term share losses.
"Sooner or later, GM will have to find a way to defend its share against the Japanese," says analyst John Casesa of Merrill Lynch. "But I think right now, GM is being appropriately opportunistic."