[Thescout13]

Originally Posted by CityLife

As I suggested, my hope is that this is already planned. I don't think the costs would be astronomical. There are LCIs for most models already, I don't think this would be that different. I did not suggest they do this after a week. Also, as I suggested this is used as a hedge against a risky design. What good does saving a bit of money in R&D by not having a contingency plan on a risky model do when you put your entire bankroll on one bet that the public love something drastically different than what they are accustomed to, there is an impact to net income from losing sales/revenue as well, it isn't just about saving money.

Just a side note, corporate finance and management boards typically do not approve/disapprove one part being changed on one of a couple dozen models. They usually approve overall budgets by department/business unit and company(an FP&A group would likely generate budgets by vehicle and roll it up for board approval). They could care less about a bumper, as long as you stay within your overall budget from an expense standpoint and are able to meet or exceed sales expectations. Even when looking at in on a model by model basis(each model having its own P&L), you would just budget for the LCI over the life of the vehicle (say 5 years, and beginning in year 3). You absolutely can get this approved even if there is some additional cost, because you recognize the necessity to keep revenue and sales momentum in the middle of the cycle, without it I dont know how you project steady sales beginning in year 3. One way you can get an expense approved is by showing corresponding revenue increases.

The ONLY thing that I am suggesting that is done differently here from the past is that the LCI grill be changed, while in the past it has just been lights and other similar smaller changes. As long as the parts that bolt onto the vehicle are the same dimensions, I don't think it is that much of a reach.

Yeah, I get that management/finance doesn't approve an individual component. My point was more that the overall budget/design wouldn't have been approved for a parallel track through SOP. There would have been a divergence point (likely around DVT or as late as EVT) where one design/major component would need to be finalized (as you know there are costs, both monetary and time, to source the molds, source the supply, line up capacity requirements, etc.).

Agree that if revenue takes a hit, an emergency injection of capital to fix the issue would 100% get approved.

Re parts that bolt on, while I generally agree with what you are saying, changing the overall bumper design and developing new kidney grills means that there would be additional costs to design, test, and source those components. It's an added cost beyond just modifying the bumper molds and the lights like you noted is usually what's done with LCIs.

I appreciate the response, and I am sure we can go on and on about this process offline if you'd like (I too work in the HW/Component/Auto supply chain side, though as an attorney, so am decently versed in this as well), just didn't have time to write a dissertation on why I thought what you were saying was, while hopeful, likely unrealistic while I was on my way to the bathroom.

Will try to be more detailed in the future.