A decade after General Motors outsourced its parts-making operations in a widely publicized move, the company has just quietly acquired its old steering division. Is this part of an ongoing trend among large manufacturers?
A decade ago, outsourcing swept through the assembly world. General Motors Corp. (GM, Detroit) nonchalantly jettisoned its huge parts-making arm and created Delphi Corp. (Troy, MI) in a widely publicized move. At the same time, Ford Motor Co. (Dearborn, MI) spun off its in-house supply operation and set up Visteon Corp. (Van Buren Township, MI). A few years later, Boeing announced that it would outsource the subassembly of its new 787 Dreamliner to a strategic group of suppliers.
Yesterday, GM announced that it’s acquiring Delphi’s steering division (ironically, the operation was GM's first parts manufacturing division back in 1917). The Saginaw, MI-based unit operates 17 plants around the world and has more than 7,000 employees.
Delphi, which has been operating under bankruptcy protection since 2005, put the steering division up for sale after identifying it as a “non core” business (GM obviously believes that you can’t build cars without a way to steer them). According to GM, the steering unit will be “operated as a stand-alone business much as it is today and, at least in the near term, will be held in a wholly owned subsidiary of GM.”
I understand that Chrysler LLC (Auburn Hills, MI) is interested in taking some suspension assembly work back in-house from ArvinMeritor Inc. (Troy, MI). Will Ford be the next automaker to buck outsourcing?
In the aerospace industry, Boeing has struggled mightily with the affects of outsourcing too much assembly of its Dreamliner. After numerous delays, the company is shifting some work back in-house and more may soon follow.
When you outsource core competencies, such as steering wheels (GM) or wings (Boeing), you lose a degree of control over quality. It also adds another degree of variability to the production process.
What’s driving this “back to the future” trend among large manufacturers? Perhaps hard-core outsourcing is something that makes more sense in a boardroom (or on a golf course) than on the plant floor.