Automakers could save 99 per car by building cars within two weeks of customer orders, said Ford Chief Operating Officer Nick Scheele.
That goal is probably unreachable, Scheele said, but a more realistic reduction in build-to-order time to four weeks would save 66 per car. The current average build-to-order time across the industry is eight weeks.
By Scheele's calculations, if all vehicles were delivered within two weeks of being ordered, the European auto industry could save 1.68 billion a year on sales of 17 million new cars and light and heavy commercial vehicles.
The savings come purely from the lower costs of having cars in inventory for a shorter time, he said. Until they are sold, built cars tie up manufacturer or retailer capital, either as borrowed money or funds not invested elsewhere.
Build to order is a post-production extension of so-called lean manufacturing. In recent decades, just-in-time parts programs have produced huge capital-cost savings for automakers and suppliers by reducing inventories of manufactured parts.
Scheele said if the industry could manage to build a car in four days and deliver it in 10 days, the average build-to-order time would be reduced by six weeks.
Last year, automakers sold 17 million cars and trucks across western Europe for a total of 133 billion. Inventory costs for eight weeks at a typical finance rate of 11 percent were about 2.25 billion, he said. But inventory costs for only two weeks would have been just 563 million - representing a massive savings of 1.68 billion.
'This is why the entire industry is working like hell on build-to-order,' Scheele said.
Manufacturers also say that build-to-order vehicles command a higher price than cars sold from dealer stock.
Renault recently increased its build-to-order target from two weeks to three weeks.
'If [Renault] would manage to reach that target, it would be great for them,' Scheele said. 'Ford of Europe is still very far away from such an ambitious target.'
Ford's current build-to-order average is 10 weeks, he said. That means the potential savings for Ford by speeding delivery times are even greater than for the rest of the industry.
'We are working to be faster, but it will take time,' Scheele said. 'For the customer, it is more important to be precise in the exact delivery date.'
A dealer could promise delivery in three to five weeks, 'but all the customer really cares about is picking up his new car on the exact date he was told,' he said. 'Our systems today prevent us from being precise even on the delivery date.'
Scheele doesn't believe the industry could ever attain an average two-week build-to-order time because some cars will never be built to order.
'You have to consider the cars on display at every European dealership, the seasonality that requires building up some stock in certain markets in certain months, and so on,' Scheele said. 'But put it this way: halve build to order to four weeks, you still cut four weeks of fat, saving 66 per car.'