Knowledge Management in the Automotive Term Paper

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Use of single version of the truth and single information

Balanced set of strategic metrics (Financial and non-financial).

New methods of cost accounting (ABC, Target Costing).

Internal vs. External Focus (Benchmarking and Self-Assessment).

Process Management and Measures (value delivery).

Stakeholder value measures

Uniform set of measures

Causal relationships between measures across all levels.

Source: Lieberman; (1994; et.al.).

Automotive Industry Analysis

Entering 2007 it is clear that Japanese firms, lead by Toyota, will be at parity with and potentially surpass the Big Three automakers' market share in the U.S. And globally. The Big Three automakers, all in various phases and strategies of restructurings today, will continue to look towards significant cost reduction strategies over time. General Motors and Ford specifically are offering early retirements and incentives to further decrease payroll, pension and healthcare costs. It is anticipated Ford will consider selling Land Rover, as the sales of Austin Martin is pending. General Motors' efforts to integrate their production systems and processes with Toyota's Production System have had limited success, as GM continues to push for an 18% reduction in the number of suppliers per year.

Chrysler's approach to a turn-around is to sell the remaining part of the company to Daimler-Benz and exit the U.S. market completely as a result. Daimler-Benz has shown interest in acquiring the remainder of the Chrysler assets, and re-vamping the product strategy to focus more on global car unmet demands in the Pacific Rim nations. GM has expressed an interest in Chrysler's plants that can produce minivans and light trucks, the two areas of the GM product strategy that are performing at production quota today. With all these cost reduction strategies in progress, it appears Toyota will potentially emerge with the leading market share in the U.S. At the close of 2007.

The exacerbating factor in the cost reduction strategies of the auto manufacturers however is the role of the United Auto Workers (UAW), and their negotiation points in the event of a potential 10% GM layoff and 5% reduction in force at DaimlerChrysler. The UAWs' wage and pension negotiation points have become more focused on limiting the number of layoffs and less on trying to increase wages by the high single-digit and double-digit growth gains in the 1980s and 90s.

To many industry experts and analysts, the restructuring of the Big three automakers was overdue, and is now all the more costly due to the lack of focus on cost efficiencies earlier in the decade.

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American auto manufacturers have been on average spending between 2% to 10% of a Sport Utility Vehicle (SUV) price on dealer and customer incentives alone, which in effect takes their gross contribution margin per vehicle down by 50% or more. General Motors specifically has been taking this strategy on their top-selling SUVs in the U.S. And elsewhere. Demand for SUVs, the flagships of the GM line, has proven to be highly inelastic however and as a result the auto manufacturer is facing challenges to growth.

Countering the many financial challenges the Big Three auto makers have are their new model line-ups including the broader availability of hybrid vehicles, an area Toyota has been able to dominate to this point through the use of their Toyota Production System (TPS) integration strategy with suppliers. The acceptance or rejection of the new model year will be a direct indicator whether Toyota will become the market share leader in the U.S. And globally. Figure 1, from Value Line Investment Surveys (2007, 47) shows the composite statistics for the Automotive Industry based on the firm's financial analysis.

Figure 1: Automotive Market Financial Analysis

Figure 2 provides an overview of the global car market as of 2007, according to Standard and Poor's Research organization. From this graphic it is clear the majority of growth is in the Asian countries, a clear indication that Chinas' emerging growth is significantly changing global demand. Table 1, Passenger Car Sales by Asian Region, shows the historical growth in sales specifically in China, to the exclusion of the other nations in that region.

Figure 2: World Car Sales Analysis and Forecast (Standard & Poor's)

Table 1: Passenger Car Sales in Asian Region

Units -- "

Country 2003 2004 2005 Growth in 2004 (%) Growth in 2005 (%) Japan 4,714,003 4,768,625 4,745,267 1.2 (0.5) China 2,171,312 2,478,911 3,293,382 14.2-32.9 South Korea 1,020,130 879,816 944,073 (13.8) 7.3 India 704,902 868,323 920,551 23.2-6.0 Australia 592,921 593,463 611,235 0.1-3.0 Taiwan 331,896 388,745 418,944 17.1-7.8 Malaysia 337,536 387,795 414,079 14.9-6.8 Thailand 178,086 207,247 182,207 16.4 (12.1) Others 335,218 374,110 433,710 11.6-15.9.....

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