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COE-FORUM-USER
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| 07 Feb 2003 03:58 AM |
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IBM deal will help Ford cut design cost
Automaker will spend close to $100 million on software to lower development outlays
By Ira Breskin / Special to The Detroit News
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DEARBORN -- IBM Corp. and a French partner have landed a deal with Ford Motor Co. to help the automaker improve the computer-aided design of future models.
In a strategic initiative, Ford will spend close to $100 million on Dassault Systems SA's software and IBM services over the next decade to lower the cost of developing its next-generation vehicles and production lines.
IBM/Dassault could win more business if Ford suppliers adopt the same computer-aided design software.
"It's a major feather in the cap of IBM/Dassault," said Marc Halpern, an analyst with Gartner Inc., a consulting company based in Stamford, Conn.
The contract gives IBM/Dassault momentum after capturing a prized account that could determine long-term leadership in the market for industrial design software.
Electronic Data Systems Inc., the incumbent Ford supplier, was awarded a new contract to supply computer-aided design software to Ford, including applications that will enhance the automaker's digital manufacturing efforts.
But EDS now faces the challenge of selling its software to large industrial customers after losing portions of a rare, open contest for a pivotal account.
Among Detroit automakers, Daimler Chrysler AG is a long-term IBM/Dassault customer and General Motors Corp. is a strong EDS client.
Ford's selection of another software provider comes as the automaker strives to lower product development and procurement costs, which are proportionately higher than its rivals.
Ford plans to introduce 60 new or redesigned vehicles over the next several years.
"Clearly Ford has been lagging (in terms of product design) for years, instead focusing on acquiring other brands like Jaguar and Land Rover," said Scott Hill, auto analyst at Sanford Bernstein & Co. in New York.
Ford Chairman and CEO William Clay Ford Jr. aims to cut an additional $1 billion in expenses above the $7 billion target set in January.
Ford has already announced that it wants to chop $700 from the cost of each vehicle by 2005.
The automaker is counting on cost reductions to generate about half of the $9 billion in annual profit improvement it expects by mid-decade.
Ford, in many respects, is following GM's lead.
EDS software is an integral "part of our foundation to fix product development," said Kirk Gutmann, GM's global product development information technology officer.
Software applications helped GM reduce annual product development costs by $1 billion and cut what was a 40-month average engineering-design cycle to 18 months, he said.
Analysts say EDS apparently failed to convince Ford that it could maintain software development in the face of recent cutbacks.
Revenue at EDS's relatively small industrial software division will decline this year by 10 percent to $900 million, according to Daratech Inc., a market research firm based in Cambridge, Mass.
"We will continue to own key pieces of information technology at Ford," EDS spokesman Mark Gilman said.
"Twenty seven of the top 30 automakers use our software, and we provide the standard software platform for 15 of the top 30 automakers."
Ford could have taken a middle of the road approach and split its software purchase if top management wasn't convinced that one vendor could provide the full range of software and service required to generate and manage data needed by designers, suppliers and strategic planners.
Such a move, expected by most consultants, would have allowed Ford to purchase each vendor's top product. Or it could have given each Ford operating division, such as Volvo car and Land Rover (both IBM/Dassault customers), the option to independently select software.
However, "this is not a slam dunk" for IBM/Dassault because its design software still must meet performance benchmarks in the next several years to persuade Ford to eventually replace EDS' existing software base, Gartner's Halpern said.
In the meantime, IBM/Dassault software will work hand-in-hand with EDS software, said Edward Petrozelli, general manager of IBM's industrial software unit.
Ford didn't want to pass on the opportunity to substantially cut costs by standardizing a single corporate-wide tool to design major vehicle components for future vehicles.
"Ford is looking to coordinate auto design on a global basis in order to cut design and production time," Petrozelli said.
Ford hopes to eventually reuse the designs for 40 percent to 50 percent of its vehicle components and bodies.
Ira Breskin is a free-lance writer in Great Neck, N.Y.
Muharrem Cakmak
Author: Muharrem Cakmak |
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