GM Recants On Feature Removal

Detroit January 5, 2003; James Mackintosh writing for the FT reported that General Motors has squeezed out all the savings it can make from a controversial project to cut the number of standard features on its vehicles in a move that will provide relief to hard -pressed suppliers.

Bob Lutz, vice-chairman, said GM had removed the expensive features fitted as standard on its vehicles that were only optional on rivals' cars and trucks. The world's biggest automaker is now likely to start improving the specifications - and cost - of new models.

The ending of the "decontenting" programme will be good news for suppliers, particularly Delphi. Delphi, which was spun off from GM four years ago, relies on its former parent for 63 per cent of its turnover and has seen the value of parts-per-vehicle it provides fall thanks to the project.

"Decontenting was a one-time exercise," Mr Lutz said. "I don't think we want to go beyond that. ... Incrementally with new models we will probably add new content."

Examples could include better leather, more powerful engines and more attractive instrument panels, he said.

The adding of extra costs could concern investors, who are already worried about the $1,000 per unit higher production cost of arch-rival Ford's redesigned F150 pickup truck, its biggest selling vehicle.

But Mr Lutz dismissed such worries, saying new features would only be added if they could be charged for.

"I am not opposed to putting meaningful cost into cars where the content is immediately seen and appreciated by customers," he said.

The idea of the decontenting project was to take out features that consumers did not notice and were not willing to pay for.

But it caused uproar among safety campaigners when Mr Lutz stopped GM fitting antilock brakes as standard, bringing the company into line with other carmakers.

GM did not have a target for cost reduction per vehicle, unlike Ford's aim of cutting $700 by mid-decade by working with suppliers to redesign and standardise parts. David Thursfield, who is overseeing Ford's project, is trying to achieve the cuts without removing features from vehicles.

The scale of GM's cost decreases can be seen by Delphi's estimate that it lost $75-$100 of parts per vehicle in the third quarter of last year compared with the previous year, equivalent to $360m-$480m if repeated across GM's annual US sales of 4.8m vehicles.