Playing a High Margin Game in a Low Price Market Hau Thai-Tang Director of Advanced Product Creation Ford Motor Company

Current Headlines “Business as usual is dead in Detroit” Detroit News; 9/16/2006 “Ford to Cut 14 Plants And Up to 30,000 Jobs” Washington Post; 1/24/2006 “Dana follows auto parts peers into bancruptcy” Wall Street Journal; 3/6/2006 “Toyota boosts overseas output to 5M” Associated Press; 9/17/2006 “GM to Close 12 North American Sites, Cut 30,000 Jobs” Bloomberg; 11/21/2005 “Oil prices rise above $60 on OPEC plan” Associated Press; 10/16/2006 “Chinese plan to import cars to US” Associated Press; 9/1/2005

Middle Market Squeeze BMW 7 Series BMW 5 Series BMW 3 Series BMW 1 Series Mercedes S-Class Mercedes E-Class Mercedes C-Class Mercedes B-Class Mercedes A-Class Lexus LS Lexus ES Lexus IS Toyota Avalon Toyota Camry Toyota Corolla Hyundai Centenial Hyundai Grandeur Hyundai Sonata Hyundai Elantra Hyundai Accent

Market Fragmentation Total Number of Models Offered in US Market E 2008E New Model Existing Model

Mass Customization

Quality Gap Diminishing Range = 2 x defects per vehicle Range = 0.5 defects per vehicle Defects Per 1000 Vehicles Hyundai GM DCX Toyota Honda Ford

Implications Consumers & Manufacturers Supply > Demand Horizontal versus Vertical Integration Global versus Local Consumer is King Unprecedented Product Choice More Educated / Informed Consumers Extreme Pricing Pressure

Business Challenge How to play a high margin game in a low price market?

Strategic Approach Consumer Insight Brand Clarity Design Leadership Improve Business Structure

1908 Touring Car 1912 Roadster 1920 Coupe 1924 Fordor Sedan “If I had asked what my customers wanted, they would have said a faster horse…” –Henry Ford Customer Focus Getting at the “Un-met and Un-articulated Needs”

Strategic Approach Brand Value & Design Leadership $30 Seiko $300$30,000 Which one tells time better? Patek PhillipeTimex

Strategic Approach Revisit Consumer Mobility Paradigm Utilitarian Transportation Mythical Self-Expression

Brand Clarity

AN AMERICAN REVOLUTION

Brand Clarity

LET’S MOTOR. Brand Clarity

"The Beach Boys. Apple pie. The '67 Mustang. Three things worth fighting for". US Navy Recruiting Ad Brand Clarity – Mustang Example

Evolution of Japanese Automotive Design Japanese “American”

Evolution of Japanese Automotive Design Japanese “European”

Evolution of Japanese Design Ethos West versus Japan

Evolution of Japanese Automotive Design Scion XB and Nissan Cube

Evolution of Japanese Automotive Design Scion T2B and Nissan Chappo

IMAGE HERE Evolution of American Automotive Design “Can Do Spirit”

Evolution of American Automotive Design Super Chief Train

Evolution of American Automotive Design Super Chief Truck Concept

Bold American Design

Competitive Environment Internal Complexity GPDS Principles: Synchronization Compatibility Completeness Key Enablers: Platform Rationalization Commonality & Reuse Leverage Digital Tools Drivers for Change More Products, Faster, and More Efficiently Improving Business Structure

Global Product Development System 6 Months Opportunity 1.Common Virtual Process 2.Data/Engineering/Manufacturing Synchronization 3.Reuse/Commonality 1.Faster Prototype Build/Verification 2.Faster Production/Prototype Tooling

Platform Rationalization Fewer Architectures with More Models Ford Cabriolet Volvo C70 Convertible Mazda3 Volvo V50 Ford C-Max Wave Wave Wave Wagon 5-Door Mazda5 3-Door 4-Door Ford Focus

Commonality and Re-Use

Leveraging Digital Tools Supplier Integration Product Engineering Theme Development Package Development Functional Simulation Plant / Assembly Product / Process Simulation Virtual Build Service Digital Product / Process CAD Product Structure Digital BOM / BOP

Digital Theme Development

Virtual Crash Simulation CAE Prediction Physical Test

Assembly Plant Virtual Simulation

Virtual Build and Assembly Simulation

Summary Develop a Profound Understanding of Customers Create Clear and Distinct Brand Positioning Achieve Design Leadership Fix Structural Business Issues How to play a high margin game in a low price market?