Here's a word you can toss on the automotive scrap heap: Outsourcing.
When was the last time you heard anyone use "outsourcing" in a sentence that made a sensible point? Probably not since the calendar flipped over to the current millennium, right?
Oh sure, there are those who talk about "offshoring" today in much the same way people talked about outsourcing 20 years ago. But offshoring at least relates to the new realities of a global auto industry.
Automakers and suppliers in a global industry transfer work to wherever it makes the most sense within their own supply base.
The whole concept of outsourcing goes back to the days when vertical integration was important to Wall Street. (Speaking of dead concepts, when was the last time you heard someone mention vertical integration?)
Three decades ago, analysts thought General Motors was strong because it had great vertical integration -- in other words, it produced in-house about 60 percent of the parts and components used on its vehicles.
GM was buying from itself. Brilliant!
Ford was something like 50 percent vertically integrated, and Chrysler was roughly at 40 percent.
All that changed.
As part of one of its deathbed recoveries, Chrysler had its suppliers take on more work, not less. They produced more parts and components -- not to mention systems -- and were involved earlier in the product development process. It worked.
Soon, GM and Ford got the new religion, too.
At first the automakers were just finding suppliers who could produce parts for less and sending them work. That concerned the UAW because it cost Big 3 jobs. Most of those suppliers paid less, some weren't even organized. "Outsourcing" became a dirty word.
Eventually GM divested most of its parts-making operations, peddling the real dogs and bundling the rest into Delphi Corp.
Ford mimicked GM, quickly creating Visteon Corp.
Voila! Outsourcing was no longer an issue because there was nothing left to outsource except a little engineering work.
When Ford took back some of the Visteon operations, was it insourcing work? Probably not, because Ford intends to play hot potato and sell the manufacturing remnants to someone else as quickly as possible.
It will be sort of like re-outsourcing.
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