Making and Selling Cars: Innovation and Change in the U.S. Automotive Industry

4. . . . To Buying Parts

✺ Douglas & Lomason Company was the forty-first-largest U.S. automotive parts producer in 1994, selling more than $500 million worth of parts for installation in new U.S. motor vehicles that year. The company was listed on the NASDAQ exchange, and its 5,800 employees made seats and decorative trim for Chrysler, Ford, and Mitsubishi. The fate of Douglas & Lomason illustrates the changing relationship between major suppliers of components and motor vehicle manufacturers in the late twentieth century. Like many suppliers, Douglas & Lomason was a long-established company that had made other products before entering the motor vehicle industry . Founded in 1902 in Detroit to make carriage rails for horse-drawn vehicles, Douglas & Lomason supplied its first component to the motor vehicle industry in 1905: a brass rail guard to keep passengers from falling out of their seats. Running boards and windshields were added in 1912. When running boards disappeared from cars in the late 1930s, Douglas & Lomason started making metal trim and ornaments. Until the 1980s Douglas & Lomason followed the standard mass production practice of each year submitting bids to the vertically integrated U.S. vehicle manufacturers to make individual parts for them. The company received contracts when it submitted the lowest price. To remain competitive, Douglas & Lomason reduced manufacturing costs by relocating its trim and ornament production from Detroit to the Southeast, where labor costs were lower. It opened two trim plants in Georgia in 1955, one in Mississippi in 1964, and one in Alabama in 1970. One of the two 88 Historically, mechanical engineers controlled the destiny of the vehicle. Now it is the electrical engineer. —Martin Anderson, director of Supply Chain Programs, Babson College 4 . . . To Buying Parts . . . To Buying Parts Georgia plants was closed in 1990, two years after a replacement was opened elsewhere in that state. While moving nearly all of its trim operations to the Southeast, in 1955 Douglas & Lomason began to use its old Detroit plant to make metal seat frames. In those days, motor vehicle producers purchased the various parts for making seats from different suppliers and put the seats together during the final-assembly operations. Douglas & Lomason expanded its seat frame business, adding a plant in Arkansas in 1960 and one in Nebraska in 1965. It offered a second seat component in 1973, polyurethane foam for seating pads, produced in St. Louis. Relationships between motor vehicle manufacturers and suppliers such as Douglas & Lomason changed dramatically during the 1980s in reaction to the economic downturn of the 1970s. Douglas & Lomason’s initial reaction to the economic downturn was to close the old Detroit plant in 1976 and move corporate offices to the Detroit suburb of Farmington Hills. The St. Louis plant was also closed in 1976, and foam production was relocated to a new plant in Tennessee. More substantial restructuring took several years to achieve. To retain its contracts with vertically disintegrated car makers, Douglas & Lomason had to start supplying complete seats instead of only steel frames and foam. The company would have to either manufacture seat covers, trim, springs, and controls, as well as frames and foam pads, or purchase them from other suppliers. And under lean production, the seats had to be delivered to the final-assembly plants on a just-in-time basis—that is, within minutes of installation in the assembly process. As it was taking on more responsibility for producing entire seat modules , Douglas & Lomason also had to start conducting research into consumer preferences for more complex seats, with such features as electronic repositioning controls, heaters, and child protection devices. Lean production required the company to respond quickly to changing consumer preferences. Douglas & Lomason expanded its production capacity in 1983 by converting an existing plant in Iowa to assembly of seats for Chrysler’s newly introduced minivan. Armed with the security of long-term contracts for seat modules, Douglas & Lomason built several new factories near finalassembly plants to meet the demand for just-in-time delivery. New factories were opened in 1988 in Richmond, Michigan, and in Havre de Grace, Maryland (near Chrysler’s Newark, Delaware, final-assembly plant). After 89 ✺ landing a long-term contract in 1993 to supply seat modules for Ford’s new Contour and Mystique models, Douglas & Lomason built another new plant in Excelsior Springs, Missouri, near Kansas City, where the Contour and Mystique would be assembled beginning in 1995. At the same time, however, Douglas & Lomason closed its...