Topics: Automotive industry, New product development, Product life cycle management Pages: 25 (4212 words) Published: March 1, 2014
Judge Institute of Management, University of Cambridge, UK,,
Warwick Business School, University of Warwick, UK, 3
School of Management, University of Bath, Bath BA2 7AY, UK,

This paper explores the relationship between trends in product development processes in the automotive industry and the post-launch problems that require car makers to recall vehicles for remedial work. The paper is based on a dataset of 23.1 million vehicles registered in the UK between 1992 and 2002. The data show that the incidence of vehicle recalls is increasing – between 1998 and 2002 there was an average of over 120 recall incidents per annum in the UK, compared to less than 50 per annum between 1992 and 1994. Total numbers of vehicles recalled show no clear trend over time, but the absolute level of recalls year on year is very high: in the UK, 10.8 million vehicles were recalled during 19922002, representing 47% of all vehicle UK registrations in the period. There are substantial differences in recall rates between different car manufacturers, with European and American producers showing recall rates that are nearly three times greater than their East Asian counterparts. The paper explores possible relationship between these patterns and changes in product development practice, and suggests an agenda for further research in this area.

The automotive industry is a ferociously competitive industry. Structurally, it suffers from long-term over-capacity, at least as far as vehicle assembly is concerned. In 2000, the installed global assembly capacity for motor vehicle production was 79.2 million units (measured on the basis of two-shifts per day in the assembly plants) compared to global sales of 58.8 million units – an overcapacity of 35% (Pemberton, 2005). This situation has a number of consequences. An immediate and obvious consequence is that many car makers operate with very low margins, creating a particular headache for smaller producers who struggle to recover the huge costs of activities such as product development and distribution from relatively modest sales volumes (Chappell, 2005, Connelly, 2004) The outcomes of this in recent years are not difficult to see. Many smaller players have been assimilated into the larger ones - examples include Ford’s acquisitions of Landrover, Jaguar and Volvo and GM’s acquisition of Saab and Daewoo. There have been a number of mergers (Renault-Nissan, Daimler-Chrysler) and even when there has not been a full merger, partial ownership or cross-shareholding may be found (Ford and Mazda, GM and Fuji and Fiat). Further rationalization amongst incumbents in the developed world seems inevitable, especially as new entrants in the developing world continue to create new capacity. Indeed, at the time of writing the collapse the UK’s MG Rover Group has just been announced. With insufficient resources to develop new models itself and no success in finding a partner, Rover’s model range had become increasingly aged and uncompetitive, and sales in the UK,

its major market, had fallen from around 200,000 units per annum (about 10% of the market) to just 80,000 units or 3% of the market by 2004 (BBC, 2005a) New Product Development Trends
Car makers are responding to this situation in a variety of ways. Consolidation is one response; alliances and technical collaborations to develop new models and components are another; vigorous programmes of manufacturing reform are yet another, particularly in the face of the threat that the Japanese producers were seen to pose in the 1980s and 1990s (Womack, Jones and Roos, 1990, Holweg and Pil, 2004). Product development processes, being of enormous strategic significance, as well as major drivers of cost,...

References: BBC (2005) ‘Thousands of MG Rover jobs to go’.
BBC (2005b) ‘Scandal doubles Mitsubishi’s losses’,, 8 February,
BBC (2005c) ‘Mercedes recalls 1.3 million cars’.,,
Centre for Auto Safety (2004).
Chappell, L. (2005) “Analysis: Excess Capacity will haunt N.A.”, Automotive News, January 24.
Connelly, M. (2004) “Overcapacity is a Concern”, Automotive News, June 14.
Cusumano, M. and Nobeoku, T. (1998) Thinking Beyond Lean. Simon Schulster: New York.
Fujimoto, T. (2000) Shortening lead time through early problem solving – A new round of capability
building in the auto industry
Holweg, M. and Pil, F. (2004), ‘The Second Century: Reconnecting Customer and Value Chain
through Build-to-Order’, Cambridge, MA: MIT Press.
Pemberton, M. (2005) “Overcapacity – Myth or Reality?”, Newsletter, Autelligence, London, March.
PTC (2005) Product Development Best Practices: Automotive’ Needham, US,
Womack, J.P., Jones, D.T., and Roos, D. (1990) “The Machine that Changed the World”, Rawson
Associates, New York.
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