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Playing a High Margin Game in a Low Price Market

Playing a High Margin Game in a Low Price Market. Hau Thai-Tang Director of Advanced Product Creation Ford Motor Company. Current Headlines. “Business as usual is dead in Detroit” Detroit News; 9/16/2006 “Ford to Cut 14 Plants And Up to 30,000 Jobs” Washington Post; 1/24/2006

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Playing a High Margin Game in a Low Price Market

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  1. Playing a High Margin Game in a Low Price Market Hau Thai-Tang Director of Advanced Product Creation Ford Motor Company

  2. Current Headlines “Business as usual is dead in Detroit” Detroit News; 9/16/2006 “Ford to Cut 14 Plants And Up to 30,000 Jobs” Washington Post; 1/24/2006 “Dana follows auto parts peers into bancruptcy” Wall Street Journal; 3/6/2006 “Toyota boosts overseas output to 5M” Associated Press; 9/17/2006 “GM to Close 12 North American Sites, Cut 30,000 Jobs” Bloomberg; 11/21/2005 “Oil prices rise above $60 on OPEC plan” Associated Press; 10/16/2006 “Chinese plan to import cars to US” Associated Press; 9/1/2005

  3. Middle Market Squeeze Mercedes S-Class BMW 7 Series Lexus LS Hyundai Centenial Mercedes E-Class Lexus ES BMW 5 Series Hyundai Grandeur Mercedes C-Class Lexus IS BMW 3 Series Hyundai Sonata Mercedes B-Class Toyota Avalon BMW 1 Series Hyundai Elantra Mercedes A-Class Toyota Camry Hyundai Accent Toyota Corolla

  4. Market Fragmentation Total Number of Models Offered in US Market 350 Existing Model New Model 300 250 200 150 100 50 0 2000 2001 2002 2003 2004 2005 2006 2008E 2007E

  5. Mass Customization

  6. Quality Gap Diminishing 3500 Hyundai 3000 Range = 0.5 defects per vehicle DCX 2500 Ford GM 2000 Toyota Defects Per 1000 Vehicles Honda 1500 1000 Range = 2 x defects per vehicle 500 0 2001 2002 2003 2004 2005 2006

  7. ImplicationsConsumers & Manufacturers • Supply > Demand • Horizontal versus Vertical Integration • Global versus Local • Consumer is King • Unprecedented Product Choice • More Educated / Informed Consumers • Extreme Pricing Pressure

  8. Business Challenge How to play a high margin game in a low price market?

  9. Strategic Approach • Consumer Insight • Brand Clarity • Design Leadership • Improve Business Structure

  10. 1908 Touring Car 1920 Coupe 1924 Fordor Sedan 1912 Roadster Customer Focus Getting at the “Un-met and Un-articulated Needs” “If I had asked what my customers wanted, they would have said a faster horse…” –Henry Ford

  11. Strategic Approach Brand Value & Design Leadership Timex Seiko Patek Phillipe $30 $300 $30,000 Which one tells time better?

  12. Strategic Approach Revisit Consumer Mobility Paradigm Utilitarian Transportation Mythical Self-Expression

  13. Brand Clarity

  14. Brand Clarity AN AMERICAN REVOLUTION

  15. Brand Clarity

  16. Brand Clarity LET’S MOTOR.

  17. Brand Clarity – Mustang Example "The Beach Boys. Apple pie. The '67 Mustang. Three things worth fighting for". US Navy Recruiting Ad

  18. Brand Clarity – Mustang Example

  19. Evolution ofJapanese Automotive DesignJapanese “American”

  20. Evolution of Japanese Automotive DesignJapanese “European”

  21. Evolution of Japanese Design EthosWest versus Japan

  22. Evolution of Japanese Design EthosWest versus Japan

  23. Evolution of Japanese Design EthosWest versus Japan

  24. Evolution of Japanese Design EthosWest versus Japan

  25. Evolution of Japanese Design EthosWest versus Japan

  26. Evolution of Japanese Automotive DesignScion XB and Nissan Cube

  27. Evolution of Japanese Automotive DesignScion T2B and Nissan Chappo

  28. Evolution of American Automotive Design“Can Do Spirit” IMAGE HERE

  29. Evolution of American Automotive DesignSuper Chief Train

  30. Evolution of American Automotive DesignSuper Chief Truck Concept

  31. Bold American Design

  32. Bold American Design

  33. Bold American Design

  34. Bold American Design

  35. Bold American Design

  36. Bold American Design

  37. Bold American Design

  38. Improving Business Structure Drivers for Change GPDS • Principles: • Synchronization • Compatibility • Completeness • Key Enablers: • Platform Rationalization • Commonality & Reuse • Leverage Digital Tools Competitive Environment More Products, Faster, and More Efficiently Internal Complexity

  39. Global Product Development System <J1> <Start> <Funding> 6 Months Opportunity 6 Months Opportunity • Common Virtual Process • Data/Engineering/Manufacturing Synchronization • Reuse/Commonality • Faster Prototype Build/Verification • Faster Production/Prototype Tooling

  40. Platform RationalizationFewer Architectures with More Models Wave 12003 Mazda3 Volvo V50 Ford C-Max Ford Focus Wave 22004 3-Door 4-Door Mazda5 Wagon 5-Door Ford Cabriolet Wave 32005-2006 Volvo C70 Convertible

  41. Commonality and Re-Use

  42. CAD Digital Product BOM / BOP Structure Leveraging Digital Tools Theme Development Package Service Development Digital Product / Process Plant / Product Assembly Engineering Functional Product / Process Simulation Simulation Supplier Virtual Build Integration

  43. Digital Theme Development

  44. Virtual Crash Simulation CAE Prediction Physical Test

  45. Assembly Plant Virtual Simulation

  46. Virtual Build and Assembly Simulation

  47. Summary How to play a high margin game in a low price market? • Develop a Profound Understanding of Customers • Create Clear and Distinct Brand Positioning • Achieve Design Leadership • Fix Structural Business Issues

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