During the heights of the global recession, Supply Chain Matters issued a number of commentaries that addressed the need for governmental policies to not just focus on strategic industry or company survival, but rather the broader aspects of protecting strategic industry supply chain capabilities. The motivation was the crisis that occurred within the U.S. automotive industry, with at least two of the big three automotive OEM’s at risk of going bankrupt.
At that time there was much political discourse around the merits of the U.S. government’s investing of billions of dollars to “bailout” Chrysler and General Motors. That discourse remains a point of debate among Republican candidates within the current U.S. Presidential election cycle.
In late 2009 and later in a January 2010 Supply Chain Matters commentary, this author ranted on the then current state of industry attention and urged Presidential advisors to not view the task as one of saving individual companies but rather for sustaining and building competitive supply and value-chain networks. By August of 2010, 13 months after the U.S. government stepped in to financially assist Chrysler and GM, auto industry employment had increased by 76,300 jobs, of which 44,000 were estimated to come from the supplier base. The White House blog noted in June 2011 that job growth was now at 115,000 jobs. Today, in addition to continued job growth, billions of new dollars are being invested in new or expanded manufacturing capabilities. All of this activity was what many of us were able to see and read about. Today however, we have an inside view of what was also occurring, one that again reinforces the strategic importance of any industry’s supply chain capabilities.
The Wall Street Journal printed an excerpt from a soon to be released book: American Icon: Alan Mulally and the Fight to Save Ford Motor Co. by Bryce G. Hoffman. (paid subscription or free metered view) This excerpt stated: “By the fall of 2008, the Detroit three OEM’s weren’t the only ones struggling to stay in business. Most of their suppliers were also on the brink of bankruptcy.” The book goes on to describe Ford’s intense efforts to prevent its supplier base from destroying the long-term viability of Ford as a producer of vehicles. It describes efforts in 2008 by Tony Brown, Ford Vice President of Global Purchasing to establish “Project Quark”, a rather secret global cross-functional team tasked with simultaneously addressing three goals: to intensely monitor parts suppliers, prevent supply chain disruptions, and accelerate Ford’s needs to shrink its supply base into a network of strategic suppliers.
While our readers can review this WSJ excerpt or actually read this new book when it becomes available, we did want to highlight a very important aspect of what was noted as ultimately occurring. “From the beginning Mr. Brown knew that Ford could not prop up the global automotive supply base on its own. He reached out to other manufacturers for help.” In the end, it was a collaboration of Ford, Toyota, Honda and later Nissan who collectively agreed to coordinate their efforts to support suppliers that were critical for each OEM. Also noted was that Ford, Toyota and Honda together sent a letter to the U.S. Treasury Department explaining the important interconnections among the automotive supply base while urging the federal government to take concrete steps to protect it.
This inter-industry player collaboration was an unthinkable event in the pre-recessionary industry competitive environment.
For our part, we can’t wait to get our hands on this book and read more details.
As with the conclusion of any major crisis, organizations move on with important insight and learning. For government and industry players, the U.S. automotive industry crisis brought home that important learning. As the industry continues with its current renewal, past and current investments and joint collaboration will collectively improve industry capabilities for years to come.
Once again, we again circle back to why this blog was so named, for the reality that supply chains do indeed matter in any company’s business strategy.
©2012 The Ferrari Consulting and Research Group LLC and the Supply Chain Matters blog. All rights reserved.