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Carmaking: A drive to Lego land - FT.com

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November 30, 2010 10:47 pm

Carmaking: A drive to Lego land

By John Reed

hen Sergio Marchionne became Fiats chief executive in 2004, its two main midsized cars the Fiat Stilo and Alfa Romeo 147 had not a single screw in common.

In the space of a decade, the Italian company aims to have only three platforms on which it builds most of its models. Chrysler, its US partner, will also use two of these as the basis for its cars by 2014.
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Carmaking: A drive to Lego land - FT.com

With its own modular design system, the rival Volkswagen aims to slash the production cost of its cars by 20 per cent and engineered hours per vehicle the time each takes to manufacture by 30 per cent. All of its plants, says VW, will be able to produce cars that share modules even though they may range in size from the subcompact Polo up to sport utility vehicles such as the Tiguan. Theoretically, we can build every car in every plant, which makes it very flexible, says Ulrich Hackenberg, the VW board member overseeing the effort. In earlier times we had one plant for every model. At Ford Motor, the new Focus that goes on sale in Europe and North America next year, then Asia from 2012, will have about 80 per cent of its total number of parts in common, whether built in Michigan, St Petersburg or Chongqing. Like its competitors, Ford will chop and change the car to suit tastes in various markets. European buyers will have a diesel option. Many Americans will opt for automatic transmission and all-weather tyres. Crash requirements differ around the world, so some elements will vary. But Ford, whose chief executive, Alan Mulally, is striving to make the companys global operations all work together, describes the Focus as a world car. It plans to build up to 10 models, including an electric Focus, hybrids and a successor to its Kuga compact SUV all atop the same mid size C-car architecture. Behold the automotive megaplatform the clearest sign yet of a race for scale that promises to shake up one of the worlds largest industries. After a crisis that shook carmaking to its foundations, the contours are emerging of a new order that will reward only those producers that are able to make cars in seemingly endless varieties but with more than ever in common under the skin. What carmakers call platform sharing is a long-established practice in a painfully competitive industry. Until recently, platform sharing meant using the same rigid physical chassis to build very similar cars with cosmetic differences, or identical ones with different nameplates a practice known as badge engineering. The products had to have the same size wheelbase and suspension. Now, on more flexible platforms, automakers can plug in different modules and build cars of very different shapes and sizes at the same plant. The economic downturn which accelerated their push into faster-growing emerging markets and low-emission technologies has at the same time intensified carmakers quest for manufacturing scale in an effort to cut costs. As advances in manufacturing technology allow unprecedented flexibility on production lines, further advantage goes to the biggest producers. Automakers adoption of the global platform strategy is similar to Walmarts ability to keep costs low by realising economies of scale, says Anthony Pratt, head of the automotive practice at PwC, the consultancy. While this is not a new trend, this is the first time nearly all automakers are embracing it en masse. Once its C platform is in full swing, Ford expects it to be producing more than 2m vehicles a year about as many as Fiat sells in all. Indeed, analysts predict that the rise of huge-volume car platforms will trigger a Darwinian struggle for survival among supplier groups as they angle for the same global contracts, a battle in which only the biggest and fittest will prevail. The ability of incumbent manufacturers to develop and produce large families of vehicles will also serve as a formidable barrier to entry to the global top table for rising carmakers such as those of China. The push for critical mass in development and manufacturing is driving partnerships between competing producers, as evidenced by Daimlers agreement this year with Renault and Nissan to co-operate on small cars, vans and engines. As Engelbert Wimmer of PA Consulting, which advises the industry, puts it: Now, youre really big or youre dead. ... As the drive for size and the shift to flexible manufacturing both take place, it is VW that may increasingly be the company to watch. The German industry titan is retooling its worldwide operations to reap what it says will be huge economies of scale under a modular-based approach to making cars. VW said last month it would invest nearly 52bn ($67bn) in its automaking operations, much of which will go into retooling its plants. By 2018, VW aims to make 10m cars a year that share these same basic designs. The push is a central part of the strategy of Martin Winterkorn, the trained engineer who turned Audi into a profit machine and is now VWs chief executive, to unseat Toyota by that year as the industrys top producer worldwide. VW is more sceptical than Ford that car buyers around the world will want broadly similar vehicles. While the Golf and Polo models are essentially the same everywhere, the group also builds a suite of products to cater to local markets, including the Lavida compact it makes in China or the low-cost Gol in Brazil. Yet within the groups stable of brands which range from Skoda and Seat up to Audi and Bentley it is doing a very similar thing. VW has long been an industry leader in sharing as much as possible among similarly sized cars, then adjusting their exterior and interior features and driving dynamics in keeping with what is expected of each marque. Audi was able to make the business case for the A1 its smallest
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Carmaking: A drive to Lego land - FT.com

model yet, and a challenge to BMWs Mini in large part by sharing architecture with the VW Polo and Seat Ibiza. VW says it plans to pursue common car platforms at a magnitude not yet seen in the industry. Within a decade. it plans to consolidate the bulk of the vehicles it makes from compacts to SUVs around two basic modular designs, one with the engine mounted longitudinally and a second with a transverse position. It also plans a third new small family group of cars, built in co-operation with Suzuki, its Japanese partner, to target emerging markets and megacities. With the big cost savings VW foresees and huge volumes of cars with more commonality it, like Ford, can plough more money into features that provide an edge against competitors, such as infotainment systems, or speed up the rate at which it refreshes or replaces models. By localising production of more models, VW and its big peers can also avoid import duties in a potentially less free-trade world. Nissan is using a similar modular approach to building small cars, the most difficult vehicles for any automaker to turn a profit. On its new V platform it is building the Micra at plants in China, Thailand, India and Mexico. The V stands for versatile, and the Japanese producer will also make two other body types probably a saloon car and a people-carrier in the same places. The modular technology allows Nissan to add a different engine, transmission or front or rear end in a manner that one senior executive likens to a popular childrens toy. Weve invested in a big Lego box, says Andy Palmer, Nissans head of product planning. The fact that you can put different permutations together gives you a great degree of flexibility. Nissan expects the platform to produce more than 1m cars a year. The cost argument is compelling, and covers more than just how and where vehicles are manufactured. On top of what Ford saves on purchasing, it economised on engineering and design by developing the coming Focus in one place its global small-car hub near Cologne. By developing a globally similar car, Ford will also save on marketing costs as it reduces the number of messages it needs to use in promoting the model. But there are some risks for carmakers in creating a Lego box, Walmart world of increasingly commoditised products. Clipping the same part or module from the same supplier on to many models can make for recalls running into the millions, as happened at Toyota, which has recalled more than 12m vehicles over the past year. You have to get it right, says Wolfgang Bernhart, a consultant with Roland Berger Strategy Consultants. If you have a problem in a module and use it in all your cars, you have the same problem everywhere. ... Another danger for an industry that depends on keeping customers engaged is that carmakers will produce bland, homogenised products they reject. GM was roundly derided in the 1980s for badge-engineering in a way that brought differently branded cars that were too similar to each other in look. Some early signs of strain are showing at VW in its race to the top of the industry. Skoda, VWs Czech value brand, has been adding more upscale features on to its cars in a move that some analysts warn could dilute its cheap-and-cheerful market niche and cannibalise its parent brands sales. While the Audi A1 received mostly adulatory press, some reviewers described the cars price tag about 16,00025,000 depending on the features customers select as demanding for a vehicle that shared underpinnings with the cheaper Polo. Fiat says that it is remaining vigilant as it undertakes its own ambitious consolidation of platforms in co-operation with Chrysler. The Italian carmaker wants the shared parts in its cars to rise to 75 per cent by 2014, from 55-65 per cent now and, as evidenced by the Stilos lack of crossover with the Alfa 147, essentially nil less than a decade ago. The three architectures will account for 70 per cent of the 6m cars the two companies hope to be making by 2014. For a group that makes everything from the basic Uno up to racy Ferrari sports cars, Fiat says it is on guard to maintain its cars distinctiveness. Does this mean the soup needs to be the same for everybody? asks Harald Wester, Fiats chief engineer, before answering decisively in the negative. In a warning that others in the industry will heed, he says: The standardisation push coming from the industrial community of the company has to be counterbalanced by the brand people, the product people, who have to be very careful watchdogs and gatekeepers of the coherence and integrity of the products. ............................................................. QUEST FOR A WORLD CAR The chequered history of Fords efforts to find one vehicle that fits all The notion of a world car suitable for customers everywhere is the holy grail for carmakers.

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Ford Motors attempts to satisfy the world with a single model have a chequered history. In 1993 the US carmaker launched the Mondeo, a European-engineered midsize model with global ambition built into its name. As part of a push by management to unify global operations, it also built two US variants: the Ford Contour and Mercury Mystique. For Americans used to econo-boxes no-frills Japanese-built small cars they were a revelation, equipped with features such as charcoal-filtered climate systems and all-speed traction control as standard. But the back seats were too small for US tastes, and some wondered why the cars were so close in price to larger models such as Fords Taurus. When a Ford executive let slip that the global-car programme had cost $6bn, it was lambasted in the media as bad business even if the figure, which included the retooling of factories and development of a new engine family, was misleadingly high. A few years later, Ford generated more bad blood by using the Mondeo platform to build Jaguars X-type compact saloon. Fans of the UK marque, which Ford has since sold to Tata Motors of India, resented what they saw as a ham-fisted introduction of a mass-market car into a more exclusive line-up. The car sold poorly. Today, Ford like most of its competitors is pushing to cut costs by limiting regional variations in its vehicles. It is talking about world cars again as Alan Mulally, chief executive since 2006, seeks to make better use of global operations under his One Ford turnround strategy. The company claims buyers worldwide are starting to demand similar cars. Theres a great deal of convergence globally, especially around certain segments, says Derrick Kuzak, head of product development. During the credit crunch, for example, as US fuel prices spiked, Ford noticed buyers of its F-Series truck trading down to cars such as the Focus. Customers then began to demand the better-crafted and better-equipped interiors to which Europeans are accustomed. The proliferation of information about cars on the internet has played a role in the growing compatibility of tastes around the world, Ford says. Mr Kuzak says the company has therefore resisted any urge to dumb down interiors on the US version of the new Fiesta, its recently launched small car, which like the Focus it developed in Germany but sells worldwide. A decade and a half after the Contour and the Mystique, Americans are ready to pay more for well-equipped smaller cars: the US version of the Fiesta is selling well.
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