Project Management in The Automotive Industry: November 2007

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Project Management in the Automotive Industry
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CHAPTER FIFTY-FIVE
PROJECT MANAGEMENT IN THE

AUTOMOTIVE INDUSTRY
Christophe Midler, and Christian Navarre
T he automotive industry has always been a testing ground and a powerful specifier for
managerial innovation—one need only think back to ‘‘Fordism,’’ ‘‘Sloanism,’’ and the
‘‘Japanese Model of Manufacturing’’, which was in fact quite simply the Toyota Model.
The success of the book The Machine That Changed the World is typical of this point of view
(Womack, Jones, and Ross, 1990). The assimilation of managerial techniques by the auto
industry—Total Quality Management (TQM) and just-in-time (JIT), for example—certainly
has transformed the way in which production is managed in car plants. However, much
more than this, it completely goes beyond the dominant theories on the management of
inventory and quality, and has radically changed perception of the relative importance of
these disciplines throughout the various schools of thought on management.
This chapter explains how and why the concept of the project gradually became for-
malized and deployed in car firms, and how this development generated, directly or indi-
rectly, profound changes in (1) corporate structures and the professional practice in their
technical disciplines and (2) the relationships between carmakers and their subcontractors.
In short, it details how the development of project management transformed the automotive
industry.
Generally speaking, the strategic importance of project management methods is largely
dependent on the importance both of product strategies and the competitive environment.
The mass production of a small number of standardized, relatively undifferentiated products
with a long life cycle does not require mastery of very sophisticated project management
skills. Conversely, mass production of a large number of differentiated products has as a
S direct consequence the fact that the design and marketing of a large number of distinct
N products is hardly conceivable in the absence of the concomitant development of very so-
L
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Professional Associations and Global Initatives 1369
phisticated project management skills. The history of project management since World War
II follows closely that of the markets (Morris, 1997).
We will trace the evolution of project management in the auto industry through four
stages:
1. From the postwar period up to the 1970s, there was no differentiation between the
‘‘product strategies’’ of carmakers in North America and Europe. Disciplined manage-
ment of projects was not a core component in competitive strategy.
2. During the 1970s and 1980s, the gradual saturation of markets changed the competitive
environment radically. Japanese carmakers succeeded in breaking into the North Amer-
ican market using (novel) product proliferation strategies, and the direct consequence of
this business model was an explosive increase in the number of projects to be managed.
The management of projects for new vehicles now assumed strategic importance.
3. In the late 1980s and early 1990s, manufacturers radically reorganized their approach
to the management of projects for new products in order to develop more quickly and
at lower cost a greater number of products of increasingly high quality. The manage-
ment of projects for new vehicles was now at the heart of corporate strategy.
4. By the late 1990s, the limits of the reorganization of the beginning of the decade were
becoming blatantly obvious. In addition, new challenges emerged. Manufacturers initi-
ated a second wave of reorganization. New vehicle project management became more
complex in order to cope with the new challenges, namely: alliances, market globali-
zation, and innovation.
In characterizing the specific position of the project function in firms at each stage, we will
make use of the organizational diagrams of Clark and Wheelwright (1988). However, going
beyond this framework, we shall show that the development of project-oriented logic was
to bring about profound change in the permanent processes of companies, both internally
and in their dealings with outside firms.
First Phase: From the Postwar Period to the 1960s

The ‘‘product strategies’’ of carmakers in North America and Europe were undifferentiated. Disciplined
control of projects was not a core component in competitive strategy. The management of projects for new
vehicles operated via functional structures, coordination was informal, and learning occurred within devel-
opment projects.
From a strategic point of view, the 1950s and 1960s were typified, in Europe and even
more so in North America, by a conventional approach to mass production. The devel-
opment of car manufacturing firms exhibited a gradual formation of product ranges, namely:
a small number of models, long life cycles for models (as long as 12 to 14 years), little
S product diversification, competitiveness focused on cost reduction through standardization,
N and longer series (over 250,000 a year for a model).
L
1370 The Wiley Guide to Managing Projects
The design of these products was conducted using an organizational form of ‘‘project
craft’’ in an essentially function-oriented corporate structure (see Figure 55.1). Firms were
divided into powerful, compartmentalized, trade-focused entities: the product engineering
office, the process engineering department, manufacturing, and so on. There was no direct
linkage between functions. Projects passed in sequence from one function to the next, fol-
lowing a metaphorical relay race. Each project was handled on a case-by-case basis. The
only player joining up functions and acting as arbiter between them was the senior man-
agement team and often the CEO himself or herself.
Technical learning took place within the projects themselves, each project being a gen-
uine locus for the development of new skill sets relating not only to products but also to
production processes. The buildings of new bodies of expertise occurred in and through
successive project development programs. Given this process, the consequences of the risks
associated with major technical learning often became more visible in projects.
The resulting level of performance in terms of duration, cost, and quality in the new
products was mediocre: long development times (five to seven years), often with delays of
one or two years. Product launches were frequently beset with unforeseen problems of
industrial feasibility. It often took several years before nominal production rates could be
achieved in plants. And, finally, even in a context in which competition was weak because
of lack of market availability of products, it is manifest that a large number of unsuitable
products reached the market, a sign that upstream project targeting and evaluation processes
had been relatively ineffective.
Second Phase: From 1970 to 1985

During the 1970s and 1980s, the gradual saturation of markets brought about radical change in the
competitive environment. The management of new vehicle projects assumed strategic importance. Firms learned
how to steer their projects strategically and centralize their coordination.
The late 1960s saw, both in Europe and in the United States, the deployment of a new
strategy that was to lead to the arrival of the modern, multiproduct vehicle model range,
to the diversification of models (power trains, bodywork, and fittings), and to the interna-
tional deployment of the companies.
In such circumstances, the ‘‘project craft’’ of the preceding period was incapable of
coping with the new complexity of product strategies. It is at this point that we see the
beginnings of a professionalization of project management:
• The first project functions were created in the early 1970s, along with periodic review
systems involving corporate management.
• The careful guidance of projects to completion was gradually put in place, along with
formalization of development timetables and the deployment of economic reporting tools
S integrating all the variables in the projects concerned.
N
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FIGURE 55.1. THE FUNCTIONAL STRUCTURE.
Departmental management
Departmental
project players
Contributors from
outside the company
(industrial market
partners)
Source: Adapted from Clark, Hayes, and Wheelwright, 1988.
Other than this centralization of control, however, there was no change in the relationship
between strategies for the building of technical skills occurring in engineering design offices
and central process planning departments, on the one hand, and development policies, on
the other (see Figure 55.2). Project teams had neither the political weight nor the expertise
to defend their own logic against the strategies of technical departments. This period can
be characterized as that of the ‘‘lightweight project manager,’’ a notion given formal ex-
pression by Clark, Hayes, and Wheelwright (1988).
These new forms of project organization and instrumentation certainly brought with
them improvements in new vehicle projects, but the limits of this form of coordination
became clear as early as the beginning of the 1980s. The failures that could be seen in
projects became increasingly prejudicial:
• Control of project profitability and lead times was often lost, signposting the limitations
of the use of sequential input of trade-focused logic and an excessively hierarchical ap-
proach to the negotiation of compromises (Cabridain, 1988);
• Product quality at start-up was disappointing on occasion, reflecting an organizational
balance in which there was no powerful internal actor capable of measuring and man-
aging the risks generated by technical innovation strategies.
Last, despite a few hesitant attempts, there was no innovation in the area of project man-
agement on the part of American or European carmakers. The innovation, in fact, came
from a small number of companies, Toyota and Honda in particular. Stalk and Hout (1990)
S have shown that by the end of the 1980s, certain Japanese firms were implementing highly
N
L
FIGURE 55.2. THE PROJECT COORDINATION STRUCTURE.
Project committees
Departmental
project players
Contributors from
Project Project Manager's Departmental outside the company
Manager scope (industrial market
project
partners)
supervisors
aggressive product proliferation strategies, the principle of which was to drown competitors
in a flood of very rapidly replaced products. In such an environment, the products of slower
competitors quickly go out of fashion. Stalk and Hout show how the use of such strategies
by Honda and Yamaha won them dominance in the motorcycle market. A similar approach
can be seen in the conquest of the North American market by Japanese carmakers. Table
55.1 (Womack, Jones, and Ross, 1990) shows that from 1955 to 1989
• the number of vehicles offered to consumers was increased by a factor of five;

• Japanese producers, absent from the market in 1955, were, by the late 1980s, offering a
vehicle range equivalent in variety to, or even slightly more diverse than, their North
American competitors. It is worth noting that European manufacturers did not penetrate
the North American market with additional automobile models during this period. More-
over, the same study shows that in 1989 the models brought to market by Japanese car
firms were more recent and superseded more quickly by new models than those of their
North American competitors.
• Average sales per vehicle declined substantially. As a consequence, it became increasingly
difficult to provide input for assembly plants designed for volumes greater than 250,000
vehicles per year.
Such proliferation strategies were based on highly effective project management methods.
Comparative studies (Clark and Fujimoto, 1987), updated in 1990 and published in 1995,
highlight a significant differential in relation to the development performance achieved by
S Japanese firms according to the three metrics chosen by the researchers: lead time, project
N
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TABLE 55.1. FRAGMENTATION OF AMERICAN AUTO MARKET.

1955 1973 1986 1989
American Products:
Number on sale 25 38 47 50
Sales/product (000s) 309 322 238 219
European Products:
Sales/product (000s) 11 35 26 18
Japanese Products:
Sales/product (000s) 0 55 94 73
Total:
Products on sale 30 84 117 142
Sales/product (000s) 259 169 136 112
Market share captured by six largest-selling products 73 43 25 24
Source: Adapted from James P. Womack, Daniel T. Jones, Daniel Roos, 1990, Figure 5.6, p. 125.
team productivity as measured by the number of engineering hours required to develop the
projects, and the quality of the vehicles placed on the market.
This work was widely disseminated and analyzed by industry professionals. These stud-
ies stimulated intense reflection among academics, researchers, and industry professionals.
The conditions were in place for a radical change in the way projects were managed in
North American and European auto firms in the late 1980s.
Third Phase: 1985–1995—The Rise of Project Functions and the

Deployment of Concurrent Engineering
At the end of the 1980s, a new template emerged: concurrent engineering, characterized
by the spectacular rise of project functions and the deployment of new development meth-
odologies. (See the chapter by Thamhain.)
The most visible sign of this break with the past was the creation of project directors
who were destined to become genuine entrepreneurs in automotive development. The time
had come for the ‘‘heavyweight project manager’’ template described by Clark, Hayes, and
Wheelwright (1988).
The heavyweight project manager structure, under the label ‘‘Susha,’’ had existed for
many years in the Japanese firm Toyota (The first Susha was appointed at Toyota in 1953!).
A Susha is an independent project director with wide-ranging powers, enjoying authority
S from the preliminary project stage right up to design and manufacture. As early as 1984, a
N
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TABLE 55.2. ADJUSTED LEAD TIME AND ENGINEERING HOURS.

(w/o Korea)
Japan U.S. Europe Korea Total Total
Adjusted engineering hours (EHAD):

1980s 1703 3366 2915 2507 2507
(843) (642) (950) (1084) (1084)
1990s 2093 2297 2777 2127 2438 2477
(500) (947) (723) (926) (739) (755)
Total 1847 2880 2843 2127 2474 2493
(745) (936) (822) (926) (926) (941)
Adjusted lead time (LTAD):
1980s 44.6 60.9 59.2 53.5 53.5
(7.4) (5.6) (6.1) (9.9) (9.9)
1990s 54.5 51.6 56.1 54.5 54.7 54.7
(12.6) (3.8) (12.2) (3.6) (10.3) (10.9)
Total 48.6 56.7 57.6 54.5 54.1 54.1
(10.7) (6.7) (9.7) (3.6) (10.1) (10.3)
Total Product Quality (TPQ):
1980s 53 35 60 52 52
(29) (29) (21) (27) (27)
1990s 61 42 59 21 52 56
(16) (18) (17) (1) (20) (18)
Total 56 38 60 21 52 54
(25) (24) (19) (1) (24) (23)
Definitions:
Adjusted engineering hours-The number of hours required to develop a project of average project complexity. See
Appendix II for further details on the adjustment method, which is based on a multiple regression model.
Adjusted lead time-The number of months required to develop a project of average project complexity. See Appendix
II for further details on the adjustment method, which is based on a multiple regression model.
Total product quality (TPQ)-The TPQ index presented in Table 2 makes quality comparisons relative to other vehicles
in the same class. As a consequence, the TPQ index has already been adjusted for project quality and is presented
here to allow comparisons across the three measures of development performance.
Adapted from Ellison, David J., Kim B. Clark, Takahiro Fujimoto, and Young-suk Hyun. ‘‘Product Development Performance
in the Auto Industry: 1990s Update.’’. #w-0060a, IMVP 1995, p.11.
few perspicacious managers visiting Japan had discovered the Susha system and pointed,
using the example of Toyota, to its strategic dimension for the management of new vehicle
projects.
In the United States, the company that took the heavyweight project manager template
furthest was Chrysler. Early in the 1980s, Chrysler was close to bankruptcy and its project
performance was poor: Development was taking 60 months with little or no cost control,
and vehicles devoid of strong identity were being launched, which was undermining the
company’s commercial credibility. The team around Lee Iacocca pointed to the inability of
vertical functional groups (trades) to cooperate and to soft compromises on policy. Vertical
S functional groups were clearly incompatible with innovation and audacious ‘‘product poli-
N cies.’’
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FIGURE 55.3. THE PROJECT DIRECTOR STRUCTURE.
Departmental
project players
Contributors from
Project Project manager's Departmental outside the company
manager scope (industrial market
project
partners)
supervisors
The new management redefined how the development of new vehicles was to be or-
ganized on the basis of range segments functioning as autonomous enterprises in their own
right. All engineering and project management resources, which previously had been con-
ventionally organized by trade, were divided into five platforms: Top of the Range (Large
Car), Entry Range (Small Car), Jeep, Truck, and Minivan. The entire 10,000-strong work-
force employed in the development of products and engineering design was split into
medium-sized units comprising between 2,000 and 3,000 people and provided with clear
leadership.
In Europe, Renault was the first manufacturer to put in place powerful project directors
with a genuine entrepreneurial dimension in the late 1980s (Midler, 1993).
These structural changes went on to drive profound modifications in project commu-
nication and decision processes. We summarize these modifications in five broad categories
in the text that follows.
Overhaul of Project Control Processes

The previous stage was characterized by the development of sophisticated control of plan-
ning and project costs. The limitations of this bureaucratic template have been thoroughly
analyzed in the literature, namely: inertia and cost of control, lack of accountability, and
lack of solidarity on shared general goals. In contrast, the new template emphasized the
importance of adherence to an overall vision and the meaning of the project—of the per-
sonal involvement of individuals in seeking collectively to achieve objectives of a more gen-
S eral nature. There was a shift from burdensome controls that removed any sense of personal
N accountability to an encouragement for individual responsibility and self-regulation by proj-
L
ect participants, within a framework defined by ‘‘meta-rules’’ guaranteeing minimum co-

herence (Jolivet and Navarre, 1993).
At Chrysler, the new compact organization based on clear leadership created a new
feeling of solidarity, favoring early resolution of problems, encouraging calculated risk taking,
and reducing the inertia in decision making inherent in structures of the matrix type.
In Europe, at Renault, followed by PSA Peugeot Citroën, this logic of personal ac-
countability for overall objectives, quality-cost-duration, was rolled out for all vehicle sub-
assemblies: seats, engine, dashboard, and so on.
The Development of Concurrent Engineering

The new project actors laid down new game rules for the coordination of project contrib-
utors. These changes were at three levels. First, they related to the timing of the contributions
by the various specialists: Traditional sequential processes gave way to a planning logic
aimed at maximum anticipation of problems through the early involvement of the trades
involved in production: Plants were involved in the manufacture of prototypes in order to
validate process feasibility, future products were tested with the sales networks, and so on.
Next, they concerned communications between functions: Previously, intertrade dialogue
had occurred largely at the top of the management tree. Project management departments
now began to promote such dialogue at the bottom in decentralized work groups responsible
for all aspects of the development of a given part of the vehicle (seats, dashboard, etc.). And
last, the changes related to the spatial organization of work, with systematic use of co-
location of participants in project office suites, and development of tools to accelerate in-
tertrade communications.
To point to the example of Chrysler once again, the construction of a single develop-
ment center had the effect of locating transverse project communications within the work-
place. ‘‘Chrysler’s management realized that the company’s conventional functional
organization, which consisted of the usual design, engineering, manufacturing, marketing,
and sales departments, was a prime culprit. Each functional group tended to operate as an
independent fiefdom with its own goals . . . When there was a major decision to be made,
it had to go up to the president, because each functional group had its own objectives, and
it was difficult to get agreement among them. Chrysler’s president often ended up having
to arbitrate among groups that should have been cooperating instead of competing.’’ The
implementation of integrated multifunctional ‘‘platform design teams’’ allowed Chrysler to
replace the conventional sequential engineering with simultaneous engineering. To enhance
communications among engineers and to make concurrent product development possible,
it was seen as extremely important to have all platform teams members collocated. Despite
limited financial resources at the time of the turnaround, the costly decision to relocate all
the people developing new cars under one roof was made. Lee Iacocca, then the company
chairman, announced the new technical center in 1984. Construction began two years later.
When an economic recession hit in 1989, Wall Street and a lot of others called for Chrysler
to abandon the project to save money, but Iacocca refused, believing it was too important
S to Chrysler’s long-term health . . . The Chrysler Technical Center opened in 1991 and
N quickly became an important part of the enterprise.
L
The architecture of the design center placed each platform/project physically on the
building’s floors (horizontally), disposing trades vertically (along a vertical axis connected by
escalators). The company implemented simultaneous engineering tools and, more generally,
transverse communication systems (the center thus pioneered intranet and extranet devel-
opment). Support programs were initiated to encourage cross-category culture and contin-
uous learning processes: ongoing vocational training for staff and an aggressive policy of
recruitment of young engineers, along with the overhaul of the system of personnel man-
agement and evaluation (notably by introducing coworker evaluation, etc.).
The Dynamic of the Technical Trades Involved in Projects

While project process efficiency is a necessary condition of the new product innovation
strategies, the excellence of the technical disciplines is just as essential. However, the new
types of organization implemented profoundly destabilized the processes of capitalization
and development of expertise in the various trades involved in vehicle engineering. One of
the crucial problems facing carmakers in the 1990s was therefore the issue of how to create
a project management capability without this being detrimental to the key disciplines’ ex-
pertise base.
The example of Chrysler illustrates an extreme case in which trade-focused logic has
manifestly been subordinated to project platform logic. However, the company set up
‘‘expert clubs’’ to maintain cross-platform solidarity learning on key technical skills. Initially
informal, this system was consolidated and officially instituted in 1994, under the sponsorship
of a general manager.
In Europe, Renault preserved the trade-based structure of its vehicle engineering but
thoroughly overhauled the boundaries between specialities to ensure their assimilation of
product-process engineering logic by dividing up departments on the basis of vehicle sub-
assemblies and functions.
In Japan, the issue of how to organize corporate technical departments was at the heart
of Toyota’s engineering reorganization in 1992.
A Change in Relations with the Outside World:

From Subcontracting to Codevelopement
The development of the project concept did not undermine internal corporate mechanisms
alone. Automotive projects usually unfold in a space much wider than that of single com-
pany: Today, the proportion of production cost relating to parts bought in from suppliers
is generally more than 70 percent. The new project actors have come to play a major role
in the development of new types of—codevelopment between carmakers and suppliers Calls
for bids from and subsequent selection of suppliers operate from the outset of a project, on
the basis of agreement on core project objectives. The chosen supplier is then associated
closely with the engineering study process: ‘‘co-location’’ in the project ‘‘office suite,’’ par-
ticipation in project progress meetings, and so on. Compared with the conventional template
S for competition between suppliers based around detailed project specifications, this new
N template for the relationship involves, for those taking part in it, the need to modify their
L
organizational and contractual frameworks (Banville and Chanaron, 1991; Lamming, 1993;
Garel, Kesseler, and Midler, 1997; Kesseler, 1998). The purchasing process in particular is
completely revolutionized.
Once again, Chrysler can be seen to be, in North America, a precursor in its imple-
mentation of the ‘‘extended enterprise’’ concept, closely involving suppliers in projects. In
Europe, Renault also consciously committed to codevelopment policies (Midler, 1993; Kes-
seler, 1998).
Developing Project Management Professionalism within Automobile Firms

The empowerment and generalization of project function called for institutionalization of
project management professionalization processes. Beyond the variety of the programs and
professional patterns that developed in the late 1980s and 1990s, we will pinpoint the fol-
lowing characteristic points (Boudes, Charue-Duboc, Midler, 1998):
• Project management was not generally developed into a specific professional pattern, as,
for example, in construction. On the contrary, human relations rules organized trans-
versal carrier trajectory, mixing skilled-based and project-based roles. Two ideas are be-
hind that choice: (1) that a key difficult point is to maintain solidarity between project
and functional populations and (2) that alternating the role will enhance the capitalization
of inside project learning. Emphasizing the individual project management expertise ap-
peared in that perspective not as important as developing a more collective project man-
agement competency.
• The maturity the project management approach of the firm can be correlated to the
hard/soft orientation of project management learning programs: the deeper in organi-
zational and strategic themes, the heavier the project management function.
• The more technical side of project management (planning tools, budgeting . . .) diffused
through highly specialized staff people in the firm.
• Emphasizing on the entrepreneurial aspect of project function led to develop cross-
practitioner learning and capitalizing programs. Such project managers exchanges not
only occurred within each firm but also extensively in cross-sector clubs and associations.
The Results: The Spectacular Success of Western Carmakers

The implementation of these new project management modes led to significant progress in
the performance levels achieved by Western manufacturers in terms of new vehicle launches.
Duplicating the study they had conducted in the 1980s, Ellison, Clark, Fujimoto, and Hun
demonstrated that Western carmakers had very much caught up with the Japanese according
to the various metrics they had defined as being most indicative of project management
performance levels (see Table 52.2).
At Chrysler, the results were initially impressive. ‘‘The . . . Neon compact car model
took 31 months to bring to market, while the current Dakota pickup truck made it in only
S 29 months.’’ Over the first five years from the initial setting up of these new structures,
N Chrysler developed more new models than in the 20 previous years.
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Unquestionably, from the mid-1980s to the mid-1990s, Chrysler has been a exemplar
company, especially for the development of new products. During the 1990s and up to the
time of the merger with Daimler, Chrysler was generating by far the highest average profit
per vehicle of any North American auto manufacturer (Harbour and Associates, from 1995
to 1999). In addition, its assembly plants also ranked, according to the same studies, among
the non-Japanese plants with the highest productivity.
In Europe during the first half of the 1990s, Renault reaped the benefits of its break-
through in project management, bringing to market an innovative product range while also
restoring its image in terms of product quality and improving its cost base. The success of
vehicles such as the Twingo and the Megane Scenic—which were to create new market
niches as the Espace minivan had done in years past—was the most spectacular result of
the new project systems.
New Difficulties in the Late 1990s

The 1990s ended less happily than they had begun. Surprisingly, the effectiveness of the
new systems put in place a few years before seemed to run out of steam. Chrysler got into
trouble and was taken over by Daimler-Benz. Unfortunately, excellence in new product
development is not sufficient by itself to sustain profitability and growth on a long-term
basis. The inescapable turmoil induced by a merger, the disruptive effect of the 9-11 terrorist
attack combined with a cutthroat competition made again Chrysler vulnerable. Since the
end of 2001, Chrysler is again in crisis.
In Europe, the most advanced carmakers evidenced slower product cycles, losses of
control over lead times, and mismatches between vehicles and customer expectations. Dur-
ing this period, in Japan the landscape was very mixed. Toyota could do no wrong in any
market around the world, while Nissan was mired in a profound crisis. This crisis ended
only with its takeover by Renault, when the deep renewal was implemented triumphantly
by the new managers of the company under the leadership of Carlos Ghosn.
Fourth Phase: 1995–2003

Project management faces new challenges in the automotive industry.
Several factors serve to explain what might seem at first sight to be a ‘‘relapse,’’ but that
was in fact another stage in the intensification of innovation-based competition in the au-
tomotive industry; a stage described as one of ‘‘intensive innovation’’—innovation that is
both more radical in content and repeated at a faster rate (Hatchuel and Weil, 1999; Ben-
ghozi et al., 2000) and that has been increasingly deployed against the background of global
alliances.
The comparative benefit of efficient project systems for the pioneers in the early 1990s
tended to run out of steam as ‘‘best practices’’ spread rapidly to their competitors. To find
S new values for differentiation, firms went down the road of innovation policies that were
N far more radical in terms of both engineering and styling. On the one hand, in doing so
L
they were adding a source of higher risk; on the other, they were facing problems for which
‘‘heavyweight’’ types of automotive project organization were unsuited, since the most rel-
evant context for the deployment of technical innovation is not vehicle development but
transverse learning covering both the preliminary project stages and whole product ranges.
No cross-functional and cross-product project existed to address, coordinate, and control
these learning tracks on radical innovative features and technologies (a good example is car
telematics; Lenfle and Midler, 2003).
The increasing number of projects in firms clearly highlights problems associated with
the heavyweight project management template, problems that were not burdensome when
such forms of organization were the exception. As early as the beginning of the 1990s,
Toyota had taken a critical look at its Susha system (Cusumano and Neoboka, 1998). By
1992 the number of platforms rose from 8 to 18, along with a decline in average production
volume per platform.
Communication and coordination problems became critical. In 1991, a Susha was
communicating and working with 48 departments in 12 engineering divisions, plus the R&D
division. Trade divisions were conducting concurrent dialogues with 15 projects. The rela-
tionship between Sushas and senior management in the plan-product division was all the
more strained because detailed supervision of 15 Sushas was impossible without setting up
an enormous project-focused bureaucracy. Staff in the plan-product division were finding it
difficult to monitor all 15 projects and became disconnected from reality. R&D was per-
ceived as being distant—and its interfacing with projects became very problematic. The
influence and power enjoyed by Sushas were considerable and difficult to control because
of the failings of the system.
As crisis after crisis occurred, the powers of Sushas were strengthened, along with their
responsibilities, which had the effect of ‘‘locking them in’’ to projects and encouraging the
appearance of a blinkered silo mentality—albeit ‘‘transverse’’ silos. The rapidly expanding
number of projects led to the appointment of young, inexperienced Sushas. Coordination
became increasingly difficult, or even impossible. The increased number of departments and
divisions led to narrow specialization in the engineers, making it more and more difficult
for them to understand cross-category logic and interfacing, and this in turn led to less well-
thought-out, less integrated products. Capitalization and transfer of expertise from one proj-
ect to another became extremely problematic. The same solutions were continually being
reinvented. The total workforce assigned to development was not far from 15,000.
The end of the 1990s was also a period of unprecedented strategic shifts in the auto
industry. There were more and more alliances of all kinds. Projects needed to assimilate
this new factor, which was a source of further difficulty and new constraints compared with
the previous stage.
These strategic changes led eventually to new developments in automotive project man-
agement, which can be summarized in terms of five interdependent trends:
• Deployment of the project function downstream of initial product development

• Implementation of systems better suited to steering radical innovations, both upstream
S and between product development programs
N
L
• Increasing numbers of projects conducted by intermanufacturer partnerships

• Development of ‘‘platform’’ projects as a way of managing the plethora of multibrand
product development programs
• Enlargement of supplier-manufacturer cooperation fields: modularization and colearning.
Deployment of the Project Function in the Commercial Phases

The intensification of innovation-based competition in the automotive industry had conse-
quences. Downstream of development projects, it undermined the stability of the products’
commercial life cycles. This was because, since the mid-1970s, the initial development of
new products was a key stage that allowed the introduction of innovations, whether in
products or processes. Between product launches, there was room for minor modifications.
In the mid-1990s, the price war in the European and North American markets led to a
new strategy involving more systematic deployment of development forces for products al-
ready in the market, in order to obtain immediately all the benefits of the innovations
introduced between new product cycles. Transverse integration, formerly restricted to the
development phase, now spread to the entire product life cycle. This led in European car
firms to a rise in importance of new actors, the ‘‘series life project manager’’ and the
‘‘program director,’’ with the task of coordinating the various trade components within a
segment of the manufacturer’s range throughout the life cycle.
The Management of Radical Innovation Projects: The Growing Importance of

Predevelopment as a Base for Differentiation Strategies
At the same time as this increase in the rate of appearance of innovations, the differentiation
strategy increasingly included research activities in order to find new competitive advantages.
The ‘‘quality-cost-lead time’’ triangle no longer sufficed. It was necessary to introduce more
strikingly radical innovations in the services offered to customers: hence, recent changes in
upstream development disciplines, which had until this point remained relatively aloof from
ongoing changes.
At Renault, by the end of the 1990s, the research division was totally overhauled,
strengthened, and tightly interfaced with the preliminary project design departments. The
logic of this reorganization was clearly expressed in the change of director: Previously led
by a scientist with a past career in a French pure research body, the French National
Research Council, the division was now led by a former vehicle project manager. The
division’s activities, previously based around scientific disciplines, were now guided by pro-
grams focused on areas for innovation allying services and technology and that have clear
importance for the evolution of automotive transport. Within vehicle development programs,
the post of ‘‘innovation project manager’’ was created to manage the convergence of com-
plex technical innovations (the ‘‘keyless car,’’ for example). At Peugeot-Citroën Group, an
Innovation Division provides a focus for all upstream specialists.
By the early 2000s a new form of project organization was gradually being put in place
S to guide exploration upstream of vehicle projects (Lenfle and Midler, 2002). Although one
N
L
can find in this type of project some of the features of vehicle projects (specifically the need
to conduct such exploration by coordinating a plurality of forms of expertise—technical,
marketing, design, etc.), these projects also have novel characteristics. First, the level of risk
is much higher because of the extent of the innovation in terms of both technology and
product features. This leads projects to be conducted within exploration portfolios in which
efforts are made to maximize synergy and offset risks, rather than mobilizing teams on ‘‘one-
shot’’ operations, which is the principle underlying conventional projects. (See the chapter
by Jamieson and Morris.) Second, the direct ‘‘result’’ of such a project is not a product
placed on the market but a concept that is validated and knowledge that is acquired, which
it will be necessary to exploit later in actual products. (See the chapters by Artto, Thiry and
others.) This virtual, intangible character of the result is undoubtedly one of the difficulties
of this type of project: The tangible, practical nature of a new product launch is no longer
present as a focus for the contributors to the project.
The Development of Projects by Intermanufacturer Partnerships and the Interfacing

of Project Management and Strategic Alliances
The auto industry is one of the sectors that saw a spectacular wave of globalization and
corporate restructuring in the 1990s (mergers, acquisitions, strategic alliances, industrial co-
operation, as well as spin-offs and exit). Internationalization strategies and the importance
of size are, of course, not new features of this sector, but the changes seen in the 1990s
were unprecedented in their scale and generalized character, giving the impression of a
fashion phenomenon that has swept all company strategies along in its wake. Such strategies
for growth through alliances were reflected in two ways in projects. First, manufacturers
increased the number of one-off cooperative programs in joint projects, in order to round
out their model ranges in niche markets and gain access to new markets by pooling with
others the costs and risks involved in such developments. Second, where alliances were more
global in character, projects for new products provided useful leverage for the exploitation
of synergy between merged companies through the sharing of platforms, systematic exchange
of mechanical subassemblies, and so on.
Piron (2001) and Midler, Monnet, and Neffa (2002) have emphasized the importance
of three problem sets that exist in cooperative projects, compared to the traditional auto-
motive project culture:
Mutual understanding within joint project teams. In single-manufacturer project teams, coordination
is based on numerous unarticulated bodies of expertise forged throughout the company’s
past history. Once projects begin to be conducted as cooperative endeavors by more than
one manufacturer, the risks of misunderstanding will be high if the participants do not make
substantial efforts to make themselves clear. Such effort is costly and difficult to gauge
correctly, since it runs counter to the participants’ need to protect their knowledge and
expertise.
S The management of fair and equal treatment of the partners. This becomes a prerequisite for cohesion
N and focus in joint project teams. Studying a joint project by General Motors and Renault,
L
Midler, Neffa, and Monnet (2002), adapting Piron (2001), have demonstrated that the prac-
tical implementation of fair treatment in projects could take three forms: Distributive justice
involves the search for a balanced proportionality between the partners, a ‘‘fair return,’’ in
Piron’s words. The point is, for the firms, to find a fair distribution of goods and powers
based on the goals sought and the resources committed by each. Procedural justice refers to
the feeling that procedures have been fair. The point is for the participants to judge a
decision-making process relative to a reference that is well known and considered legitimate.
The factors that influence this include a feeling of participation in decision making, an
explanation of decisions, and clarity concerning expectations and the rules of the game, all
of which influence whether the participants feel they have been treated fairly and equitably.
Finally, interactive justice refers to individual interactions based on fairness in behavior, which
makes it possible for a decision to be considered doable. Hence, respect and courtesy be-
tween allies prove to have an important contribution to make in the fostering of a positive
atmosphere for interpersonal relations during the cooperation process.
Regulation of tensions between the project and the strategies of the parent companies. Cooperation projects
are by their very nature unstable and vulnerable to exogenous events. In the case of the
Renault-GM project, joint decisions have been upset by shocks coming from outside the
project, such as the Renault-Nissan alliance in 1999 and the GM-Fiat alliance in 2000.
However, the nomination of a project general manager representing the interests of both
firms and the governance structures has strengthened the joint program and attenuated the
impact of external events such as the Renault-Nissan and GME-Fiat Alliances or the high
currency rate between the euro and sterling.
The Growing Importance of the Platform Concept in Vehicle Design Strategies

One of the core tensions in the automotive industry has always been the product-
standardization/product-differentiation dilemma. In the 1980s, the myth of the ‘‘global car’’
was a subject much talked up by manufacturers, and a burden on the accounts of those
American manufacturers who actually developed the concept. The development of highly
entrepreneurial project managers allowed, in the early 1990s, the rapid launch of innovative
products in market niches that conventional strategies were incapable of reaching. The
successes achieved at that time by a firm like Renault can certainly be put down to this
logic.
However, with the advent of strategies for growth by merger and acquisition in the
1990s, the advantages of design strategies based on platforms common to different products
took on new relevance. Firms such as the VAG group, PSA, and, less successfully, Fiat used
such strategies to drive their development in Europe.
Although the concept of the platform is an attractive one, putting it into practice in-
volves, in project terms, a dual difficulty in interfacing the ‘‘platform-driven projects’’ with
‘‘product-driven projects.’’ Specifically, the issues are as follows:
S • The core issue is how to benefit from covert standardization while nevertheless preserving
N differentiation in the finished products. The boundary is, however, far from obvious here.
L
In multibrand groups, it usually leads to the de facto domination of one brand identity
over the others, which must fit in with the constraints imposed by the initial designer of
the platform.
• The second issue is how to link up the replacement cycles for platform and products. If
a requirement to use a platform is imposed on a product, it will often mean that recent
innovations cannot be introduced, with the consequence that a risk is taken in a market
characterized by swift obsolescence. But if the platform evolves at the same speed as the
products derived from it, there is no longer much of a distinction between the concept
and the conventional notion of ‘‘carry-over.’’
The New Boundaries of Manufacturer/Supplier Relationships and Vehicle Programs:

Toward Colearning and Modular Codesign?
In the 1990s, the successes achieved in efforts at codevelopment led first-rank suppliers to
gradually broaden their field of competence and learn trades that had in the past been the
reserved domain of carmakers. Major value shifts were observed as subcontracting was
generalized. How far should one go in this new allocation of the roles of the manufacturer
of the vehicle as a whole and the suppliers of its components? The issue of extension of
supplier responsibilities and involvement is apparent today in two main areas.
The first area relates to timing. In the 1980s, suppliers provided input in the later stages of
projects, in the context of relationships that were precisely governed by detailed technical
specifications laid down by the car manufacturer. In the 1990s, it became gradually possible
to define effective arrangements for codevelopment (Garel and Midler, 2000; Kesseler,
1998)—that is to say, cooperation between the carmaker and its suppliers on the basis of
overall functional objectives. However, with the increasing importance of innovation policies,
carmaker/supplier cooperation sought to extend itself upstream within development proj-
ects, in ‘‘colearning’’ arrangements (Lenfle and Midler, 2001) for the design of innovative
concepts for product features in which more effective coordination of the partners’ respective
‘‘roadmaps’’ was sought. The expanding importance of concept competition phases com-
pared with the more traditional competitive bid processes was the visible sign of this strong
trend, which raises several questions: For example, how should one allocate the costs and
risks involved in such upstream explorative programs, whose outcome is highly uncertain?
What type of regulation of intellectual property issues might encourage the partners to
provide the transparency imperative to the success of the partnership?
The second relates to the spatial and functional boundaries of supply. The last two decades have been
ones in which the functional and spatial scope of the supplier’s role has expanded: There
has been a shift from the individual part to the component, followed, in the 1990s, by entire
systems (complete functional assemblies) and modules (an assembly whose boundaries can
be geographically isolated). The principle is to define interface standards to enable the
producers of components (whether modules or systems) to develop items that are simulta-
S neously less expensive (volume effects), more ‘‘versatile’’ (offering greater variety), and com-
N patible with open-architecture interiors. Suppliers delivering similar or homogeneous items
L
to more than one manufacturer are in a position to gradually define ‘‘commonalities’’ in

the components they offer. They are also in a position to define the best ways to differentiate
them at low cost and to contain, or even to eliminate, the extra cost because of variety.
Volume also allows R&D costs to be spread over a number of client manufacturers.
This approach, summed up in the ‘‘black box sourcing’’ concept, suggested by Clark,
forms part of a particularly active flow of work on modular design (Henderson and Clark,
1990; Ulrich, 1995; Baldwin and Clark, 2000). The area that has been revolutionized by
the modular architecture concept is that of telecommunications and information technology.
Is the auto industry ready to be rethought in terms of combinations of interchangeable
components whose interaction can be predetermined through the adoption of common
standards and integrated into platforms with a strong and sharply defined architecture? A
highly futuristic concept car, Autonomy, presented by GM in 2002, is a step in this direction.
However, many authors rightly emphasize the ‘‘integrity’’ that is characteristic of the car as
object: It is very difficult to uncouple components without penalizing overall performance,
given that its functions are split between a number of component parts (vehicle behavior,
weight, compactness, noise—all these are examples of highly distributed functions). On the
other hand, industrial vehicles do allow much more advantageous use of modularity.
Finally, one of the original features of the car as product is that while this dual evolution
toward platforms and modular black box design provides a rich mine of inspiration, it cannot
be applied literally as it has been in information technology. (There is, in fact, a need to
specify this area more precisely: Portable computers, like mobile telephones, have integrity
characteristics associated with their compact dimensions, which place tight constraints on
the deployment of modularity.) This observation is of major importance where project man-
agement is concerned because it forces partners to interact during the design phase in order
to arrive at compromises on distributed functions. Given that fact, a template for contrac-
tualized coordination capable of handling black box logic in terms of functional performance
is inadequate. It must be overlaid with procedures for interaction enabling the detection of
problems and the negotiation of compromises aimed at resolving them.
Limits of Performance in New Product Development Are Constantly Surpassed

Today, in a nutshell, the performance envelope for new vehicle project management can
probably be located in the following ranges in North America:
1. Cost of development of a new vehicle: between USD1bn and USD1.5bn (compared

with USD3bn to USD5bn ten or so years ago).
2. Accelerating fragmentation of market supply and creation of innovative new product
lines (Mini Rover, Beetle, Crossover, Hybrids, Nissan Cube, SUVs, etc.). In addition,
some manufacturers, with Renault in the forefront, are taking the risk of introducing
radical styling that breaks with the past, staking the visual identity of their products.
3. Development duration is of the order of 24 months or less (with a mean of around 36
months), compared to 60 months (and a year’s delay) at the beginning of the decade.
S Lead times are shortening between concept cars and serial production.
N 4. Carmakers in North America are now generally close together in terms of measured
L
quality, which, however, does not preclude wide variations in quality as perceived by
the consumer. In addition, quality is no longer a competitive advantage but a prereq-
uisite. However, a worrying rise in the cost of vehicle recalls can be seen.
5. A continuous decline is apparent in the costs of assembly and processes (productivity
gains estimated in the region of 7 percent per year—cf. Harbour Report) as well as
components (on the order of 20 percent to 30 percent for each new vehicle). In addition,
manufacturers have included systematic annual volume-linked price reductions in their
contracts with suppliers.
6. These savings are passed on to the consumer through constant enrichment of the fea-
tures offered by vehicles at a constant price level. Moreover, for the last three years the
beginnings of further reductions in prices targeted on certain model ranges have been
observed. In short, there are now more features for a given price in constant, declining
money terms.
7. Architecture is controlled in terms of platforms and modules in order to take advantage
of scale effects on common portions while nevertheless preserving the diversity and
identity of the vehicles. For example, Toyota sells, on the basis of the same platform,
vehicles as different as a sedan, a van, a Lexus, and an SUV.
Summary
From the postwar period until the present time, the development of project management
has radically changed structures and processes within car manufacturing companies. But on
the reverse, we can say that project management had been changed by its implementation
within the automotive context: from technique and tool orientation to more strategic and
organizational approaches, from highly precise contractualized relation patterns to proce-
dural open learning ‘‘meta-rules.’’ The auto industry was a latecomer to project manage-
ment, compared to military equipment or construction business. But these sectors are now
trying to transform there project management tradition and adopt the project management
practices that were developed in the late 1980s and 1990s in the auto sector. We can see
various reasons behind such a dragging effect: the economic importance and symbolic no-
toriety of the auto sector, of course, but also the importance of researches in management
science and economics in the field, that happened to evaluate the performances of various
project patters and to trace the transformations round the world.
This process is not yet complete, since performance limits are constantly increasing.
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PROJECT MANAGEMENT IN THE

Christophe Midler, and Christian Navarre

Professional Associations and Global Initatives 1369

First Phase: From the Postwar Period to the 1960s

1370 The Wiley Guide to Managing Projects

Second Phase: From 1970 to 1985

Professional Associations and Global Initatives 1371

FIGURE 55.1. THE FUNCTIONAL STRUCTURE.

Source: Adapted from Clark, Hayes, and Wheelwright, 1988.

1372 The Wiley Guide to Managing Projects

FIGURE 55.2. THE PROJECT COORDINATION STRUCTURE.

Source: Adapted from Clark, Hayes, and Wheelwright, 1988.

• the number of vehicles offered to consumers was increased by a factor of ﬁve;

Professional Associations and Global Initatives 1373

TABLE 55.1. FRAGMENTATION OF AMERICAN AUTO MARKET.

Third Phase: 1985–1995—The Rise of Project Functions and the

1374 The Wiley Guide to Managing Projects

TABLE 55.2. ADJUSTED LEAD TIME AND ENGINEERING HOURS.

Adjusted engineering hours (EHAD):

Professional Associations and Global Initatives 1375

FIGURE 55.3. THE PROJECT DIRECTOR STRUCTURE.

Source: Adapted from Clark, Hayes, and Wheelwright, 1988.

Overhaul of Project Control Processes

1376 The Wiley Guide to Managing Projects

ect participants, within a framework deﬁned by ‘‘meta-rules’’ guaranteeing minimum co-

The Development of Concurrent Engineering

Professional Associations and Global Initatives 1377

The Dynamic of the Technical Trades Involved in Projects

A Change in Relations with the Outside World:

1378 The Wiley Guide to Managing Projects

Developing Project Management Professionalism within Automobile Firms

The Results: The Spectacular Success of Western Carmakers

Professional Associations and Global Initatives 1379

New Difficulties in the Late 1990s

Fourth Phase: 1995–2003

1380 The Wiley Guide to Managing Projects

• Deployment of the project function downstream of initial product development

Professional Associations and Global Initatives 1381

• Increasing numbers of projects conducted by intermanufacturer partnerships

Deployment of the Project Function in the Commercial Phases

The Management of Radical Innovation Projects: The Growing Importance of

1382 The Wiley Guide to Managing Projects

The Development of Projects by Intermanufacturer Partnerships and the Interfacing

Professional Associations and Global Initatives 1383

The Growing Importance of the Platform Concept in Vehicle Design Strategies

1384 The Wiley Guide to Managing Projects

The New Boundaries of Manufacturer/Supplier Relationships and Vehicle Programs:

Professional Associations and Global Initatives 1385

to more than one manufacturer are in a position to gradually deﬁne ‘‘commonalities’’ in

Limits of Performance in New Product Development Are Constantly Surpassed

1. Cost of development of a new vehicle: between USD1bn and USD1.5bn (compared

1386 The Wiley Guide to Managing Projects

Ashley, S. (1997). Keys to Chrysler’s comeback, Mechanical Engineering

Professional Associations and Global Initatives 1387

1388 The Wiley Guide to Managing Projects

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