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Doug Smock

Ghosn Offshores Engineering to Hanoi: A Big Mistake

It makes imminent sense to design cars or other products in Asia for cars that are sold in Asia. GM did that with Buick and ended up with a different look and feel that was a huge hit in China. It doesn’t make so much sense, however, to offshore significant amounts of design work to low-cost countries like Vietnam, which lack skilled and experienced design engineers. Nissan has put together a team of 700 Vietnamese engineers in Hanoi to design basic auto parts. According to a story in yesterday’s Wall Street Journal, “The Vietnamese engineers, many of whom have never driven a car before, earn about $200 a month—about a tenth of what their counterparts bring home in Japan.” Sure new software programs are a help, but there’s no replacing years of hard-earned knowledge on materials’ and other technology. Even experienced engineers sometime stub their toes because of poor knowledge of how a part design can affect tool costs, to say nothing of how a poor design can cause partial or total tool failure. Nissan/Renault CEO Carlos Ghosn gets a lot of props on Wall Street, but his approach to low-cost engineering is naïve and foolhardy.