Tired of paying through the nose for gasoline, automotive consumers have shifted their purchasing preference to fuel-efficient vehicles, and that has cast a spotlight on an ongoing challenge for North American automotive manufacturers: How to inject agility and flexibility into product development cycles. While the three major Detroit-based auto makers — General Motors Corp., Ford Motor Co., and Chrysler Group — have made substantial strides over the last decade in improving their quality and manufacturing performance, they're still far off the pace of their Japanese rivals when it comes to consistent profitability. Ford reported its largest quarterly loss in 14 years in its fiscal 2006 third quarter ($5.8 billion), reflecting an 8.6% decline in U.S. auto sales this year. In comparison, companies like Toyota Motor Corp. and Honda Motor Co. are enjoying steady profits, thanks in part to their ability to push out cross-over vehicles, subcompact cars, and hybrids to a U.S. market increasingly disenchanted with gas-guzzling trucks and SUVs. Toyota recently reported a 34% rise in third-quarter sales on strong North American demand for its fuel-efficient vehicles. Thinking Like Toyota The differences between how the North American and Japanese car companies were positioned to respond to this latest consumer trend has as much to do with product development practices as it does with organization and culture, experts say. Led by companies like Toyota, the Japanese auto makers have spent years and poured millions of dollars into creating an environment and a set of R&D business processes centered around concepts like continuous improvement, component reuse, and standardization. U.S. auto makers, on the other hand, have traditionally pursued product innovation around clean-slate designs. Yet, faced with shrinking profits and the need for shorter product lifecycles, the domestic automotive OEMs are now rapidly trying to re-engineer R&D processes, enlisting technologies such as product lifecycle management (PLM), digital manufacturing, and supply chain management (SCM), among others, to promote collaboration and reuse and push new car models to market faster. "For a long period of time, the North American industry has lagged behind the Japanese car industry with respect to development cycles, but that's rapidly changing," notes Michael Grieves, director of industry research for the University of Arizona, as well as a visiting professor at Purdue University's College of Technology and a founder of the PLM Development Consortium at the University of Michigan. "There's more opportunity for innovation with the U.S. model, but you start from scratch every time. That's why it took the United States longer. But now, U.S. car makers are applying more reuse in design than they have in the past." Leveraging PLM, for example, North American car companies are creating central repositories of all information related to car platforms — CAD models, parts lists, sourcing specifications, and supplier information — and making that information accessible across functions and product teams in an effort to promote reuse and standardization whenever possible. PLM has facilitated the sharing of engineering information on a global basis, and is well positioned to become the common platform for managing and distributing a broader set of data to aid in reuse, including supplier information and electronic component data, maintains Eric Sterling, vice president of automotive marketing at UGS Corp. In practice, however, PLM at most companies is still narrowly defined around the sharing of engineering and CAD data. Even so, Japanese auto makers like Toyota have excelled at the practice of reuse. According to Kevin Reale, research director of the automotive practice at AMR Research, they enjoy 30% to 40% higher reuse rates on commodity components compared to domestic automotive OEMs, making the overseas manufacturers far more adept at getting products to market faster. On average, the lifecycle of a Ford model design is four to six years, while Toyota's is around three years, he says. "The shorter product lifecycle allows [Japanese car makers] to get closer to the market so that when a shift occurs they can adjust almost twice as fast as their counterparts," Reale explains. Reuse and standardization also facilitate a focus on things that are important to customers, instead of devoting resources to redesigning commodity components over and over again. "In addition, the flexibility carries into the ability to manufacture multiple vehicles in a single plant — an important element to the cost structure issues that domestic OEMs are dealing with," Reale adds. Technology Meets Culture Despite the progress U.S. automotive OEMs are making with reuse and standardization, some experts argue that organizational and cultural issues may inhibit them from fully exploiting the concepts. "Companies that think reuse is about reusing the geometries for a radiator system are not thinking the way a Toyota does," says Michael Kennedy, founder and CEO of Targeted Convergence Corp., a consulting company specializing in lean product development and the Toyota "learning first" development model. Rather, the Toyota approach fosters thinking about the physics around a particular subsystem like a radiator, developing intellectual property around it up front, and then using those basic building blocks to apply the technology elsewhere, Kennedy explains. U.S. car companies are working hard to close that gap and develop their own systems and cultures for promoting reuse. New Ford CEO Alan Mulally has dubbed component reuse a strategic initiative at Ford, and top execs at GM and Chrysler have also made a solid commitment. The latest swing in customer requirements toward fuel efficiency is only likely to accelerate the OEMs' transformations. "Crisis is a wonderful thing for focusing people's minds on the hard stuff around change," Grieves notes. "Both GM and Ford, even in the conditions that they're in, have substantial resources to realize these visions."