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Automakers turn to outsourcing
By George Kubicke, President, Modern Engineering, Warren, MI -- Design News, October 6, 1997
Outsourcing is a trend that's here to stay, says Modern Engineering's Kubicke, who's president of one of the nation's largest automotive engineering services firms.
Design News: Why are the Big Three automotive companies increasingly turning to engineering services firms such as Modern Engineering to do design work?
Kubicke: There are two reasons. One is they may not have the internal resources available in the timeframe that they want to be able to deliver the engineering project. The second reason is because of our ability to execute competitively. We can deliver a design and engineering job frequently at rates that can compete with their own internal costs. It allows them to reduce their fixed cost of engineering. What they do is staff for core capability, and for anything beyond that they utilize companies like us.
Q: What services does the company offer?
A: We offer three areas of services. One is in-client contract engineering services, where we provide people at our customer's site. The other two components are in-house engineering. The first is doing product engineering work--actually designing car bodies, chassis, or trim; the other part is manufacturing engineering, which includes tool design, checking fixture design, and laying out production lines.
Q: What are some ongoing projects Modern engineers are working on?
A: I can't divulge the customer or the car line, but one project is doing all of the interior design work for a car based on a European platform that will be sold in the U.S. Another is taking an existing vehicle manufactured in China and making it larger by extending the wheelbase. We're also doing two tool-design projects: one is for a new vehicle to be built in Mexico; the other is for a vehicle to be built in China.
Q: You've got two China projects in the works--is China an automotive hot spot right now?
A: China's hot right now for new vehicle development. The government there is investing significantly in infrastructure growth and is developing its own internal capability to design and build vehicles in China. It's very exciting to be part of that, but it brings its own set of challenges because of the distance, language, and culture differences.
Q: What skills and attributes does an engineer need to be successful working for an engineering services firm?
A: Most of the engineers we use are either mechanical or electrical engineers, and for us they need to have a broad range of skills or a highly specific set of skills. We may look for a person that is a specialist in radio antennas, for instance, or we may look for a vehicle engineer who can design almost anything. Engineers also need to have an ability to work for a number of different customers and maintain a level of security--you can't be telling one customer what the other one's doing. We have confidentiality agreements with all of our people, and we do background checks.
Q: Is it difficult to find engineers with these characteristics?
A: Yes. We have a recruiting staff of about 25 people that spends a lot of time finding qualified candidates in a timely manner.
Q: Tier-one suppliers are also doing a larger share of automotive design work. Why is that?
A: The automotive companies have each taken a look at their core capabilities and defined what they think they can do best. The other side of that coin is determining what other companies can do best. In some cases they've decided that instead of doing the design themselves and having a supplier manufacture the part, the way to go is to tell a supplier what they want and have them design and engineer a part that satisfies this need. This allows them to use their engineers to integrate their own design with their own manufacturing capabilities, so they will design something they can produce at the lowest possible cost and the highest quality. For firms like Modern Engineering, that broadens our customer base to the tiers. Ten years ago we had three customers: Ford, GM, and Chrysler. Today we have more than 300.
Q: How do you see your business changing in the next five years?
A: I think the auto companies will continue to determine what's core and non-core and will outsource the non-core. In addition, there's going to be a real shift to utilizing more technology--such as computer simulation and knowledge-based engineering--in the design of vehicles. That will allow more rapid and efficient design and create a whole new era of competition. We'll probably end up hiring more specialists to deal with the increased technology.
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