A Spend Management Update from Detroit

In the past few months, I've taken a backseat to covering the automotive saga from Detroit. And that's because Tim Minahan has been doing such a good job of it. Last week, Tim opined that Ford's latest round of troubles were not due to the result of failing to execute on their aggressive Spend Management initiatives. Tim notes that as Ford was announcing billions in losses, they also reported "progress on its goal to cut the number of suppliers by 60% and shave $1.8 billion from its supply bill. In fact, earlier this month Ford reported that all its cost-cutting initiatives -- including its procurement goals — were ahead of schedule." And GM is not far behind. According to Tim, GM is also on track "to reduce its global spending by $2 billion in 2006. This progress was reaffirmed ... in an interview with Fortune Magazine, GM CEO Rick Wagoner cited reducing structural and supply costs as his company's top achievement in 2006."

Without question, Detroit is more than on its way to becoming the dominant cost-cutting center of the universe. But unfortunately, Spend Management and other approaches alone will not be enough to save an industry which is building cars that fewer and fewer people want (at least domestically). Toyota, in fact, is so confident of its position in the market that it is significantly raising pricing on its popular pick-up line. Tim, I await your continued analysis of the situation. You clearly have this one in hand (which will allow me to sit back and comment from the peanut gallery).

Jason Busch

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