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General Motors (NYSE: GM ) is revamping its entire lineup of vehicles over the next three years. It's doing so at a faster pace than it's ever done throughout company history. Leading the charge is GM's most profitable model, the Silverado, which hits showrooms next month. To make sure the Silverado's launch is perfect and successful, GM needs extra help. To the rescue are about 100 retired GM engineers who are going to monitor every angle of the launch and help the company take advantage of the full-year head start on rival Ford's (NYSE: F ) next-generation F-150. Here's why it matters and what you need to know.
Ford has had recent launch problems, with multiple recalls on its popular Fusion and Escape. It also had months of delays and headaches for consumers chomping at the bit to get their hands on the hyped Lincoln MKZ. The issue largely comes down to suppliers. Because of the drastic decline in demand resulting from our nation's great recession, suppliers cut production capacity to compensate. Fast-forward a few years later with how quickly our automotive sales rebounded in the U.S. and suppliers didn't increase production capacity fast enough and it created a bottleneck in producing a finished vehicle.
What will the engineers do?
For the most part, the rehired engineers will work with GM's Tier 1 suppliers to make sure quality on key systems is up to par. To a lesser extent, they will also be working with Tier 2 and 3 suppliers to make sure everything comes together smoothly, and quickly, for the complete Silverado and Sierra launch. I think this is an excellent move for GM and it will need all the help it can get for the busy years ahead. Consider that this year alone will have 13 new or redesigned models launched. That's a ridiculous pace, with a lot of problems that could pop up. That's just part of the plan to refresh, redesign, or replace 90% of its vehicle lineup by 2016.
Ford reviews its process
Luckily for Ford, consumers completely shrugged off its multiple recalls. The Fusion and Escape continue to sell at record-breaking pace and don't stay on the dealer lots for long. Part of Ford's issue was suppliers as I mentioned above, but another issue was its creation of global platforms to boost margins and create economies of scale. Here's what Joe Hinrichs, Ford president of the Americas, told Automotive News recently.
"You have to look at what the North American team has taken on in the last couple of years. We launched new global platforms -- not just new products but all-new global platforms on the Focus, Escape and Fusion -- all within a two-year time period. In a couple of those cases we redid the whole plant at the same time."
Since its early launch hiccups, Ford has completely reviewed its launch process. It now has monthly launch reviews, with more use of technology to spot quality issues faster. Ford also hired engineers and assigned them to suppliers to make sure capacity is where it needs to be.
As the U.S. automotive market continues to grow, and as China's expands more rapidly, the focus on smooth and timely launches is increasingly important. If all goes according to plan with GM and Ford's upcoming launches, there is much upside for investors of both companies. Both companies are making better products, and now it's time to roll them out on time and with the best quality possible.
How much upside does this portfolio refresh bring to GM?
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