On Oct. 20, Toyota announced a recall of 1.5 million vehicles mostly because of the potential for leaking brake fluid from the master brake cylinder, a part supplied to the Japanese automaker by Advics. A few hours later, Honda readied a recall announcement for the same potentially leaky cylinder.
Welcome to the age of lean manufacturing, where a shrinking number of auto suppliers are selling nearly identical parts to multiple auto companies, and automakers looking to cut costs as much as possible are happy to take them if it means saving a few cents per part.
The thinking goes this way: Commonize as many parts as possible that don't contribute to the differentiation of one car to another. Commodity parts, such as seat structures, brake cylinders, gas pedal assemblies, wire harnesses, brake calipers ought not to be re-engineered from one car to another. Increasingly, companies that compete for buyers are even cooperating on such commodity purchasing to save money, preferring to spend their money on the stuff consumers care about -- exterior design, interior materials on the dashboard, software that impacts the way a vehicle feels to drive, and entertainment systems.
Parts companies, meantime, which are being pressured to lower prices and costs, are incentivized to try and sell one piece of technology or a part to multiple buyers making as few changes as possible to maximize the top line sales and minimize development costs.
"It's a perfectly logical strategy that makes a lot of sense on both sides," says David Cole, chairman emeritus of The Center for Auto Research in Ann Arbor, Michigan. "Hardware is simply becoming less of a differentiator among car companies. The real magic is happening in software, and that is where companies want to spend the money and resources."
Advics At Center Of Recall Problem
Advics is a joint venture of suppliers Aisin Seiki, Denso, and Sumitomo, along with Toyota. Besides supplying Toyota and Honda, it also supplies parts to GM, Ford, Chrysler and Mitsubishi, according to its website.
General Motors and Ford have a joint venture that produces a transmission shared between GM and Ford vehicles. Daimler and Renault have taken equity stakes in one another's companies to pursue shared costs on engines and other commodity parts, from hoses to electronic controllers for parts such as airbags. When Daimler owned Chrysler one of the rationales for the deal was for the two companies to share commodity parts and components, though the two companies' divergent cultures made that hard to do.
There is a trade-off, though, which Toyota found out the hard way this year. With more than 10 million vehicles recalled in the last 12 months, mostly from sticking gas pedals that have led to incidents and charges of sudden acceleration. The number is so high because Toyota used the pedal assembly across many models, which sell in high volumes. One problem can create a massive headline.
Recall Impacts Drivers Using Non-Standard Fluids
Toyota has blamed the latest brake problem on owners using non-Toyota approved brake fluid that does not contain certain polymers specified at the factory, which can cause seals to dry out and create leaks, the recall impacts six Toyota and Lexus models, plus the two Honda models.
It's not just Toyota. Ford has recalled more than 16 million vehicles since 1999 for one specific problem and part -- a fire hazard involving a faulty cruise-control deactivation switch used across various models. Earlier this year, in an interview with AOL Autos, Ford President of the Americas Mark Fields acknowledged that reducing complexity in vehicle manufacturing is going to result in recalls that involve big numbers when the occur. "It makes sense to use the same latches, connectors, wiring harnesses, caps and other parts across as many vehicles as you can, but it also means that you have to invest in quality control so that you make the problems as few as possible. You can't do one without the other."
Indeed, it can be argued that creating less complexity, quality should go up.
The Downside Of Efficiency
Auto companies are on a rampage to reduce the number of auto suppliers it uses, which is going to create even more instances where fewer suppliers are trying to sell their parts across the largest number of customers. Ford says it is on its way to reducing its suppliers to 850, down from 3,300 as recently as 2004. GM has about 1,500 suppliers and is trying to hammer that down to 1,000.
Because a problem with one problem part can lead to a recall of such a huge number of vehicles, companies are moving to issue voluntary recalls quicker and earlier in the process to avoid negative headlines. Auto companies are also operating with a heightened sense of urgency over quality problems since Toyota, a company long known for quality leadership, began its series of recalls a year ago.
"No question there is a heightened sensitivity," says Honda spokesperson Christina Ra, when asked if Toyota's recall woes has changed the atmosphere around recalls. "But Honda has never been a company that had to be forced into recalls. Our process has been and continues to be to move fast to fix problems we find before they become big issues or before NHTSA [National Highway Traffic Safety Administration] forces a recall."
In the 1990s, automakers tried to outsource more and more of a vehicle to parts suppliers. There was an idea that factories would be far more efficient if they manufactured whole sections of the car to be shipped to the auto factory to be snapped in with other sections from other suppliers. What they found was that quality dropped and costs climbed. GM and Ford also spun off their in-house parts makers, Delphi and Visteon. More recently, GM sold off its in-house Allison Transmission business.
Auto companies today for the most part still make their own engines, though more and more companies are sharing engine development and manufacturing. Other than that, the big auto companies are mostly developers and integrators, not to mention marketers. Their engineers design and develop engineering solutions in partnership with major supplier companies, and then farm out the making of the parts and components to be sent to their factories to be assembled.
In other words, that Toyota or Ford sitting in your driveway may have one logo on the front grille, but it probably has the work of over 1,000 separate companies behind it. And when one problem goes wrong and creates a recall on your car, you are bound to have a lot of company at the repair shops.