Int. J. Production Economics 105 (2007) 459–474 Product development process with focus on value engineering and target-costing: A case study in an automotive company Ugo Ibusuki à , Paulo Carlos Kaminski Department of Mechanical Engineering, Polytechnic School of the University of Sao Paulo, Av. Prof. Mello Moraes 2231, Cidade Universitaria, 05508-900 Sao Paulo, SP, Brazil Received 1 October 2004; accepted 1 August 2005 Available online 8 August 2006 Abstract This research suggests a methodology for the product development process in an automotive company, aiming at the correct systematic approach of Value Engineering (VE) and target-costing in cost management. VE and target-costing are complementary processes, because while one allows the identification of where cost reduction could be achieved, the other shows the target to be achieved to guarantee the long-term profitability plan of a company. In order to do that, work plans were developed, with the application of the VE methodology at three subsequent stages: concept, project and validation. This proposed approach was validated in a case study focused on the engine-starter system of a vehicle, aiming at improved product cost, functionality and quality accomplishment, in accordance with customer needs and the company strategy. r 2006 Elsevier B.V. All rights reserved. Keywords: Value engineering; Target-costing; Cost management; Cost reduction; Product development 1. Introduction Since the beginning of the automotive industry’s history, the main automotive companies have pursued several of differentiation strategies in the production of passenger cars. Technological and market changes created the potential for Henry Ford to modify the rules of the game by adopting the classic strategy of leadership by cost, based on lower production costs of a standard model sold at low price. Ford dominated the industry quickly at world level. However, by the end of the 1920s, economic growth, growing familiarity with the automobile and technological changes had created the potential for General Motors to change the rules once again, using a strategy of differentiation with a wide range of products and details at premium price. With the growing increase in competition, in the most recent decades, companies sought to create higher value in their products for customers. Japanese companies, like Toyota, succeeded in doing so, with products of higher quality at a lower cost. Therefore, a program of new product develop- ment must include projects designed to lower product cost and to enhance the value to the customer, because due to growing competitiveness, customers always demand new products with better quality and functionality, without an increase in price (Roy et al., 2004). ARTICLE IN PRESS www.elsevier.com/locate/ijpe 0925-5273/$ - see front matter r 2006 Elsevier B.V. All rights reserved. doi:10.1016/j.ijpe.2005.08.009 à Corresponding author. Tel.: +81 44 330 7196; fax: +81 44 330 5812. E-mail address: ugo.ibusuki@poli.usp.br (U. Ibusuki).