The auto industry must come to grips with its prodigious excess in capital spending.
As explored in this week's installment of the Automotive News series "Industry on Trial" (see Page 24), automotive companies keep reinventing their own versions of common hardware.
Take two prime examples of wasteful spending:
1. Automakers, for the most part, are spending billions to create their own, unique engines and transmissions. In many cases, this is an ego exercise that brings dubious competitive advantage.
2. Automakers must reinvent dozens, even hundreds, of their own parts to satisfy different regulations in each market, even though the parts accomplish essentially the same function.
The spending to comply with differing regulations is clearly wasted. But automakers have little control over that. They do it because they must.
But they can control unnecessary hardware duplication. Surely, not all of the different three-cylinder engine programs introduced or announced by 12 automakers since 2012 are needed.
Duplicating hardware drives up vehicle prices, threatening industry sales volumes. Yet the capital spending continues. Fiat Chrysler Automobiles CEO Sergio Marchionne argues such waste is unsustainable. He projects that every four years, automakers' product development spending equals their net worth. That compares with every 18 or 19 years for pharmaceutical, defense and aerospace companies -- industries also noted for heavy capital spending and government oversight.
An obvious answer is for everybody to stop. Global regulators should harmonize rules in the interest of aiding their own domestic automakers. Automakers should standardize under-the-skin parts.
Teaming up is the way to go, as Daimler and Infiniti and others noted in our story have done.
True, the auto industry has a spotty record with joint ventures and alliances. Still, automakers would be well-served by exploring more partnerships -- and while they're at it, investing more in making those tie-ups work. Survival may depend on it.