Outsourcing helps US auto sector in tough times

Information technology professionals haven't been immune to the recent spate of layoffs across the US, but IT executives from top...

Information technology professionals haven't been immune to the recent spate of layoffs across the US, but IT executives from top car manufacturers claim their heavily outsourced operations have been insulated from the axe.

"The outsourced model allows us to constantly evaluate our contracts," said Ted Wozniak, senior vice-president of IT for materials management at Magna International, an $11bn (£7.8bn) vehicle component manufacturer.

If IT staff cuts do become necessary, "it will come from people outside rather than inside," Wozniak said.

Ford and General Motors also rely on heavily outsourced IT operations. Both companies estimated spending around $3.2bn last year on IT but said they plan to slightly reduce that sum this year.

"It will be a long time before we spend that much again," said Tony Scott, GM's chief technology officer. "GM has been reducing spending on IT over the last couple years," although primarily through cost control rather than staff cuts.

However, the spend reduction hasn't stopped the world's largest car manufacturer from piloting a wireless laptop LAN project and a wireless construction village at its Lansing Grand River manufacturing plant. Scott said these types of ambitious projects are needed to help GM become more efficient at its sprawling facilities.

Peter Janak, CIO at Delphi Automotive Systems, said using outsourced resources allows the $29bn maker of auto parts to keep internal staff numbers level and forge ahead with critical IT projects. "The growth opportunities [in IT] are zero at this point," said Janak.

Despite this, the company is developing a supplier exchange to lower the cost of communicating production changes throughout the supply chain. Linked to Delphi's SAP enterprise resource planning and electronic data interchange systems, the portal hopes to provide real-time manufacturing updates to suppliers in all parts of the supply chain.

Only four of Delphi's 5,000 suppliers are participating in the six-month-old pilot, which has so far cost between $200,000 and $300,000. Janak said he plans to either bring in additional outsourced staff to take the project into production or hand it over to a vendor such as Covisint, an automotive exchange.

The portal project, which will cost between $5m and $10m to get into full production, could potentially reduce costs by $100m per year by eliminating the time delays, overtime and premium freight shipment costs associated with missed production schedules, according to Janak.

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