Auto platform sharing offers efficiency but also creates risks

Automobile companies often produce multiple models using the same platform–a common set of design, engineering and manufacturing functions. Using similar a structure and basic mechanical components for multiple vehicles allows companies to significantly reduce production costs by limiting the amount of equipment and number of workers that are needed to meet demand.

This practice also streamlines development and production of new models, because modified versions of existing vehicles can be produced with relatively modest changes to a platform. Toyota has developed several higher-end models using the platforms that produce its popular Corolla and Camry sedans.

Platform sharing also greatly facilitates overall supply chain and inventory management, as companies can more effectively limit the number of different machines and parts that are needed. This makes it easier to arrange CNC machining services and keep the production line moving.

Companies often produce vehicles for different brand names on the same platform. For example, the Ford Taurus and Mercury Sable are essentially identical sedans. In addition to customizing the appearance of different models, manufacturers can also adjust aspects of performance such as steering and suspension through changes to the platform's machinery. This allows them to use the same platform to produce models that target different markets. 

Each platform has certain elements that remain constant, while others are changed to enable the production of unique models. If too many adjustments need to be made between production runs, it cuts into the cost advantage of platform sharing.

Risks related to platform sharing

A 2004 research paper from Frost & Sullivan looked at some of the risks implicit in platform sharing. The firm noted that although the advantages of platform sharing are attractive, auto companies need to be "wary of the risks that come with overusing this strategy." For instance, producing too many "look-alike" models can cause consumers to lose interest in new releases. Furthermore, if vehicles positioned as high-end are too much like their more basic counterparts, it "makes it difficult for a vehicle manufacturer to position and price them as premium vehicles."

For this reason, platforms typically need to evolve over time to keep up with changing consumer preferences and technological advances. Without ongoing investment in platform development, the system may become outdated, necessitating a complete overhaul or replacement. Automakers may need to work with a CNC machine shop capable of producing custom parts to facilitate changes in production equipment and processes.

The most serious risk associated with platform sharing is that defects can spread across multiple models more easily, increasing the chance of a costly large-scale recall. GM's high-profile recall of more than 2.5 million vehicles in connection with faulty ignition switches is a relevant example. According to Seeking Alpha contributor Kevin Greenhalgh, many of the models being recalled were produced on the same platform. On May 20, the company announced an unrelated recall covering more than 1 million vehicles, in which platform sharing was also a factor.

In an article for JD Supra Business Advisor, attorney Jason Britt of Foley & Lardner LLP notes that the risk of widespread defects may be increasing as manufacturers implement more modular designs in their platforms. In cases where manufacturing equipment needs to be repaired or altered to address the cause of a defect, companies need a CNC machine shop that can quickly fabricate the necessary parts.

Lawmakers seek to make recall failures more costly

It will become more pressing than ever for auto companies to address defects quickly if new legislation taking shape in the Senate is passed into law. Senators Richard Blumenthal, Edward Markey and Bill Nelson recently filed a piece of legislation that could heighten the penalties in cases where auto companies fail to report known defects. At a press conference announcing the bill on May 22, the trio specifically referenced GM's ignition switch recall, saying the $35 million fine levied against GM is "pocket change for a major auto manufacturer." In fact, the company's first-quarter earnings report shows that the penalty amounted to less than a day's revenue.

Transportation Secretary Anthony Foxx has already addressed this issue, asking Congress to increase the maximum penalty to $300 million. The Automaker Accountability Act would go even further, eliminating the cap altogether.