Last August, newspaper columnist Jennifer Saranow described one of the latest developments in car technology—cup holders with the ability to heat or cool drinks.   Apparently, the 2007 Chrysler Sebring has a holder capable of heating beverages to 140 degrees Fahrenheit and cooling them to a near freezing 35 degrees.  Why?  Because according to market research, “58% of car buyers now say cup holders are somewhat or extremely important, up from about 14% in 1990”  (Wall Street Journal, August 10, 2006, p. D2). 

Seeing that article reminded me of a “pop quiz” that appeared earlier in the year in the Philadelphia Inquirer.  Using Ford’s announcement that it was cutting jobs and closing manufacturing plants as a springboard to recovery, it asked ten questions about defunct cars and carmakers.  Typical of this genre of popular quizzes, one question asked the reader to match an extinct make of car to a standard feature it pioneered.  The features were the rearview mirror, air-conditioning, the steering wheel, safety glass, the speedometer, and cruise control.  The cars were the 1900 Packard Model C, the 1901 curved dash Oldsmobile, the 1909 Marmon Wasp, the 1926 Rickenbacker, the 1940 Packard, and the 1958 Chrysler Imperial. 

Unfortunately, I failed to clip the page that contained the answers to the quiz, but I suspect that is just as well since I am sure that our knowledgeable readers would disagree over the veracity of the “answers” given or, indeed, the question itself.  In any case, the point of citing these two newspaper articles is to note the historic and ongoing fascination with car options and their apparent importance to car sales.   

One of the reasons that I think such options are a significant factor in consumer purchasing preferences is that the general public does not fully understand the nature of more fundamental technical/mechanical differences.  For example, they seem to assume that because company A offers all-wheel drive (AWD) on its SUVs that it will work as well and will require as few repairs as the all-wheel drive option offered by company B.  In other words, they erroneously believe that AWD is AWD regardless of how it is engineered and installed.  (Advertising firms are well aware of this belief and play off of it in many of their car ads.) 

Which brings me to a consideration of one of the more interesting (and controversial) recent books on the auto industry, Graeme P. Maxton and John Wormald’s Time for a Model Change: Re-Engineering the Global Automotive Industry (Cambridge University Press, 2004).  Maxton and Wormald’s premise is a relatively simple one, that a turnaround in the financial fortunes of the American auto industry (vis-à-vis foreign competition) is possible if the industry moves away from the integrated auto companies of the recent past which, they argue, have become uneconomical and have lost their innovative edge.  Instead, there needs to be an “unbundling” of the package and decentralization.     

Such a development would be a curious, and possibly necessary, return to an age when “assembled” cars were common, as in the early 20^th century when many auto companies essentially constructed cars from engines, chassis, bodies, etc. made by independent suppliers.  While unbundled manufacturing may possibly be another instance of the cyclicality that sometimes appears in the auto industry, there is a decided difference here.  Today, it is not a question of the ability of an automotive company to master all the technologies necessary to build a complete automobile, but rather the contemporary economics of doing so.  Maxton and Wormald believe that it makes much more sense to allow specialized suppliers to develop expertise in the production and/or assembly of a particular part, to pass on to them the costs of research and development, to allow them to compete among themselves in such a manner that the product gets better and the cost lower, and then have the marque manufacturer buy what it needs, when it needs it, from whomever it wants.  Those of you who follow developments in the electronics industry will recognize that this is the approach used by several contemporary computer makers, most notably Dell. 

If Maxton and Wormald are correct, what may emerge is a new definition of car options.  Options, indeed entire sub-assemblies, may, as the unsuspecting American public now believes, actually become interchangeable.  Of greater significance, the more fundamental technical/engineering differences among American car companies will diminish, as manufacturers exercise their “options” to incorporate into their cars those parts that are universally seen as being best in terms of quality and cost, irrespective of which independent supplier makes them.  In such a world, it would be highly likely that several companies would purchase the same “best buy” part from a particular supplier to an extent previously unknown.  Should this come to pass, American marques may survive, but what will remain unique in those cars beside the badge on the hood?                                      

- Mike Berger, SAH President