Automakers Outsource Hot Models Automakers Get Help Building Cool Cars

DETROIT, July 30, 2004; Michael Ellis writing for Reuters reported that the head-turning, low-slung Chrysler Crossfire sports car or the curvy, retro-style Chevrolet SSR pickup are not built by Detroit automakers.

Mass market automakers, to compete in a crowded arena, increasingly are turning to small "coachbuilders" or engineering firms for help with distinctive low-volume vehicles that can strengthen a brand's image far beyond their sales numbers.

Major car companies are geared to build upwards of 100,000 of a particular model annually. Adding a vehicle such as a sports car, which sells in much smaller numbers, to an assembly line can be costly and severely disrupt the production process, executives said.

"We have to break some manufacturing rules to get some of these cool (design) proportions to appear," Larry Achram, vice president of virtual engineering on the Chrysler Crossfire, told Reuters. "If it's a niche vehicle, and you don't have to build it in your own house, it's much less expensive."

Coachbuilders -- a term left over from the horse-drawn carriage makers of a century ago -- are common all over Europe particularly for building a one-off show car.

But industry officials see an opportunity for small companies to take a greater role in building production cars in North America, despite the overcapacity in the auto industry created by underutilized plants.

Coachbuilders are able to design, engineer or build a vehicle in half the time of a mass-market company, saving hundreds of millions of dollars, and absorbing much of the risk associated with any new car or truck launch, executives said.

Car designs, like fashion, appeal to the emotions, and automakers must strike quickly with a hit show vehicle before trends change.

"These things age. The ability to be very agile and fast is the key to success," said Mark Reuss, executive director of General Motors Corp.'s performance division.

GROUND-BREAKING

Investment by the niche manufacturers in assembly plants and expensive tooling machinery frees up capital for automakers to invest in future development of cars and trucks.

"It gives (car companies) opportunities to take things off the balance sheet, because all the tools are taken on by suppliers," said Tim Olind, chief operating officer of Karmann USA, a unit of Germany's Wilhelm Karmann GmbH.

Karmann, which builds the Crossfire as well as the Audi A4 and Mercedes CLK convertibles in Germany, broke ground in July for a 144,000 square-foot facility in Plymouth, Michigan, to engineer and eventually build cars, Olind said.

One of the first cars the facility will work on will be GM's Pontiac G6 convertible. The first mass-market retractable hardtop car to be built in North America in years, it goes into production in 2005.

With the car market fragmenting and consumers demanding more choices, the number of nameplates, or individual vehicles, in the United States has grown well past 300, from about 250 four years ago. The average sales volume per nameplate, excluding pickup trucks, has dropped to around 40,000, from more than 100,000 15 years ago.

That creates opportunities for some specialists.

Canadian auto parts company Magna International Inc., which also builds the BMW AG (XETRA:BMWG.DE - News) X3 sport utility vehicle and DaimlerChrysler AG's Jeep Liberty SUV at its Magna Steyr plant in Austria, has said it could add an assembly plant in North America.

Magna would consider building a new facility or taking over an existing assembly plant from a down-sizing automaker, a spokesman said.

HOT CONCEPT

The Chevrolet SSR, a pickup/roadster crossover, would be just another show car without ASC Inc., which changed its name from American Sunroof Company to American Specialty Cars earlier this year as the engineering and design company expanded the scope of its work.

The SSR was a big hit when it was unveiled as a concept at the Detroit auto show in 2000, but GM had difficulty figuring out how to build the low-volume truck profitably.

"The SSR was named dead in the water in GM internally, from a financial standpoint," said Jeff Steiner, ASC executive vice president and chief marketing officer.

ASC's solution was to build a plant in Lansing, Michigan, to assemble 42 major SSR subcomponents, including the instrument panel and retractable roof. ASC cut costs by using some obsolete equipment, a less-sophisticated production line, and more manual labor than an average high-tech assembly plant.

Virtually the entire SSR passes through the ASC plant before it is shipped nearly five miles to a previously underutilized GM plant for final assembly.

Both the SSR and the Crossfire are making profits for the carmakers, executives said.

"We wouldn't have gotten the car if we had not done it that way," GM's Reuss said. "We really hadn't done anything like that before."