Automotive Manufacturers Invest with a Focus on Digitization, Autonomous, and Electric Vehicles
Political pressure or actual need, major investments in manufacturing were announced recently by Ford and GM. Ford announced a $900 million investment in a new factory for autonomous vehicles and technologies, creating 900 jobs through 2023. The company also announced an $850 million investment in its electric vehicle production. GM announced $1.8 billion in investments that will be spread across six states and add an additional 700 new jobs. Among GM’s investments includes $300 million towards a Michigan assembly plant where the company will build a new electric vehicle alongside its Bolt EV.
In 2018, President Donald Trump told leaders of the world's top automakers that he wants to see more cars built in the United States. In a recent tweet, Trump commented “Close a plant in China or Mexico, where you invested so heavily pre-Trump, but not in the U.S.A. Bring jobs home!”
Heeding the presidential call, Ford and GM are investing in the U.S. but perhaps differently from what Trump anticipated. The automotive industry is relying more on tighter supply chains and technology in its facilities.
Ford’s digitalization efforts are aimed at improving efficiency and quality. Its showcase facility in Livonia, Michigan is evidence to this. By investing in the Internet of Things (IoT), data is generated and monitored at different work stations within the facility. Among the benefits are individual parts can be tracked, inspections can occur during production and an increase in digital design and virtual reality computer simulations. According to Ford’s Mike Bastian, digital systems integration manager-powertrain, “Most of your rich data comes from your control systems. The origination of that data – 95 percent of the time, 90 percent of the time – is within the controls. You’ve got to get this part of it right. And we have nailed it as a company deploying these network standards.”
Ford’s intense focus on technology has also made its way to the CFO role. Tim Stone, a former CFO of Amazon Web Services, was named Ford’s CFO effective April 15th. Automotive analyst Stephanie Brinley of IHS Markit is quoted as saying, the "non-auto experience has an opportunity for accelerating innovation by looking at the environment through a different lens. Stone's experience with e-commerce may help Ford as it navigates from operating in its traditional business to an environment where it looks to be both automaker and mobility service provider."
For GM, much of its latest investments will be focused on electronic vehicle production. Indeed, PwC estimates that by 2030 around 35% of US vehicles will be powered by electricity. In 2017, Mark Reuss, GM executive vice president of product development, purchasing, and supply chain said, "General Motors believes in an all-electric future." With a goal of at least 20 new all-electric vehicles that are expected to launch by 2023, GM is investing fast and furious.
Digitization, autonomous vehicles, and electric vehicles are all impacting supply chains in powerful ways – warehouse reconfiguration and locations, the types and number of OEMs needed, raw material requirements, transportation needs and much more. As this shift in the type of vehicle occurs, investments in technology are providing automotive manufacturers better visibility across their supply chains as well as data that allows them to forecast more accurately and to respond faster to changes.
At the same time, like many other industries, the major automotive manufacturers are facing competitive threats that would have been unheard of only a few years ago.
Jay Arcement of Lab 1886, the Daimler lab for innovative business models said at a recent Automotive Logistics conference, "At Mercedes, we are not worried about BMW or the other German brands. We are worried about Google and Apple, and the thousands of startups that are coming after our space. It used to be the big eating the small, now it is the fast eating the slow.
In an upcoming article, we’ll take a look at these competitive threats that are impacting the traditional automotive manufacturing and supply chain space.