A new global era is dawning on U.S. industry. Nowhere is it more apparent than in the North American automotive industry, where it's being signaled by the steady stream of mergers, reorganizations, acquisitions and joint ventures. We are witnessing a dramatic and fundamental restructuring of American industry. It started with Ford and has spread to consumer product giant Coca-Cola. The message is clear: It's time to rethink strategy and structure.
Today the process of globalization goes far beyond its traditional reference to international trade. It is a reshaping of corporate vision and structure along global, single-market lines. In the new global era there is no distinction between international or domestic markets. Departments are organized into single units based on functions - rather than political or geographic lines.
The trend began in early 1995 when Ford Motor Co. announced what many consider America's first globalization program - ``Ford 2000.'' Today, GM and Chrysler are in various phases of similar globalization programs as are their European and Japanese competitors.
Companies that committed to the concept have been re-warded with growth in their existing business, supply of additional components or systems, and with volumes that could satisfy worldwide requirements. Some companies quadrupled sales. Those that have not participated in the process have fallen further on the automotive food chain.
It also set off a scramble to increase market share and global efficiency. Suppliers with 35 years' experience in the industry now are viewed the same as the new kid on the block. American companies are seen on an equal basis with European, Asian or Latin suppliers. Decisions for North American production are being made in Cologne, Russelsheim, Stuttgart or Munich - as much as Dearborn, Detroit or Sterling Heights.
In the past, suppliers may have priced 100,000 widgets and established their production accordingly. In the new global era, the same supplier is required to supply 1 million widgets in an assembly with other parts supplied just-in-time to North America, Europe and Latin America.
Efficiencies gained by the supplier are significant. The real benefit is to the manufacturer by eliminating the purchase of individual parts in the assembly and dealing with the hassles of logistics. The result is millions of dollars saved in streamlined management, purchasing and production.
The real burden is on the supplier. More than ever before, suppliers in the automotive and other globally organized industries must serve customers with intensive support, technical assistance and greater integration of production.
It may be a burden to some, but to the globally minded company, it's also an opportunity to greater integrate their product into the customer's supply line.
In addition, the major automotive manufacturers are drastically reducing their number of suppliers. Suppliers are reducing their number of sub-suppliers, and so it goes down the food chain.
How does a company survive in this brave new world? The options are simple. Reorganize, retool or retire.
Companies must quickly adjust to the new requirements of the customer. This means greater engineering and sales assistance, establishment of global logistics and distribution support, joint ventures and other methods to quickly increase geographic and product supply ranges. It means creation of flexible production that can shift with major currency fluctuations or economic conditions. It means managing a company where there is rarely a single factor, such as finance, law, engineering or production that is the source of the problem, or the source of the solution, and organizing the company accordingly.
Retooling has a unique meaning in globalization. It means procurement of production capacity to efficiently supply on a global basis. It may mean new tooling, larger equipment, more machines in traditional terminology. It also means buying a competitor's plant or buying components from a major competitor to get the price advantage of large production volumes.
Some management styles are not comfortable with the changes that globalization brings. They are trying to retire to a "safe" area such a housewares - anything other than automotive. The fallacy of this approach is they will soon face the same challenge in these industries.
If globalization has hit the automotive and cola ware - it undoubtedly will affect everything in between.
Companies not up to the task should seriously develop a strategy to cope with this new trend or look for a good way to retire, close down, or find a friendly white knight.
Shepperd is managing partner of the Quadral Group Ltd., an international consulting firm with offices in Akron, Ohio; Stuttgart, Germany; and Sao Paulo, Brazil.