BOT-Models as Instrument for Strategic Competitive Advantages in the Automotive Industry
©2003
Masterarbeit
94 Seiten
Zusammenfassung
Inhaltsangabe:Abstract:
Build Operate Transfer-Models roughly mean that a construction company operates a new built facility on his own or by a company, founded on its behalf, for a limited time. The orderer outsourced the production and pays for each manufactured unit (Pay-on-Production) instead of doing the whole investment for the new facility. At the transfer step the orderer either starts with operating the facility on his own, extends the contract with the facility deliverer (respectively with the extra-founded company), or looks for a new partner for operating the facility.
In the middle 90s first BOT projects had been realized in the automotive industry. Only few car manufactures went this way and with different motivations, but all of them expected advantages for their companies.
This dissertation will analyze different motivations that led to the decision to ask facility deliverers for offering BOT-Models. An investigation of the automotive environment will be done and based on these results a statement will be derived under which circumstances BOT projects can fulfill the expectations of their customers and if sustainable competitive advantages can be generated with this approach. As BOT projects include outsourcing of own activities for a long period of time, long-term effects especially on industry attractiveness have to be considered, too.
BOT projects are meant to generate a win-win situation between OEMs and facility deliverers. Hence it is necessary to understand advantages and disadvantages on both sides, which will be done in a study of this paper.
As BOT projects can be realized for construction projects with different degrees of integration into production processes, resulting consequences are different, too. Therefore investigations of this dissertation will be limited to BOT projects with a high degree of integration; nevertheless examples of medium and low integrated facilities will be given as well.
Zusammenfassung:
Betreibermodelle sind eine spezielle Art der Projektgestaltung, die anfangs vorwiegend im öffentlichen Sektor Anwendung gefunden hat. Hier waren die Einbeziehung von privaten Partnern in öffentliche Projekte (Public Private Partnership) und leere öffentliche Kassen die treibenden Kräfte.
Mitte der 90er Jahre wurden die ersten Betreibermodelle in der Automobilindustrie realisiert, zum Beispiel bei VW do Brazil und MCC Smart / Hambach, um nur die Bekanntesten zu nennen.
Diese Dissertation zeigt die […]
Build Operate Transfer-Models roughly mean that a construction company operates a new built facility on his own or by a company, founded on its behalf, for a limited time. The orderer outsourced the production and pays for each manufactured unit (Pay-on-Production) instead of doing the whole investment for the new facility. At the transfer step the orderer either starts with operating the facility on his own, extends the contract with the facility deliverer (respectively with the extra-founded company), or looks for a new partner for operating the facility.
In the middle 90s first BOT projects had been realized in the automotive industry. Only few car manufactures went this way and with different motivations, but all of them expected advantages for their companies.
This dissertation will analyze different motivations that led to the decision to ask facility deliverers for offering BOT-Models. An investigation of the automotive environment will be done and based on these results a statement will be derived under which circumstances BOT projects can fulfill the expectations of their customers and if sustainable competitive advantages can be generated with this approach. As BOT projects include outsourcing of own activities for a long period of time, long-term effects especially on industry attractiveness have to be considered, too.
BOT projects are meant to generate a win-win situation between OEMs and facility deliverers. Hence it is necessary to understand advantages and disadvantages on both sides, which will be done in a study of this paper.
As BOT projects can be realized for construction projects with different degrees of integration into production processes, resulting consequences are different, too. Therefore investigations of this dissertation will be limited to BOT projects with a high degree of integration; nevertheless examples of medium and low integrated facilities will be given as well.
Zusammenfassung:
Betreibermodelle sind eine spezielle Art der Projektgestaltung, die anfangs vorwiegend im öffentlichen Sektor Anwendung gefunden hat. Hier waren die Einbeziehung von privaten Partnern in öffentliche Projekte (Public Private Partnership) und leere öffentliche Kassen die treibenden Kräfte.
Mitte der 90er Jahre wurden die ersten Betreibermodelle in der Automobilindustrie realisiert, zum Beispiel bei VW do Brazil und MCC Smart / Hambach, um nur die Bekanntesten zu nennen.
Diese Dissertation zeigt die […]
Leseprobe
Inhaltsverzeichnis
ID 7641
ID 7641
Birken, Volker: BOT-Models as Instrument for Strategic Competitive Advantages in the
Automotive Industry
Hamburg: Diplomica GmbH, 2004
Zugl.: FOM Fachhochschule für Oekonomie und Management Essen, Fachhochschule,
MBA-Thesis/Master of Business Administration, 2003
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I Acknowledgements
My primary thanks belong to the first supervisor of this dissertation, Prof. Dr.
Klaus Deimel, for his support to create this.
Build Operate Transfer models are a young approach in the automotive industry
to combine outsourcing activities with suitable financing instruments. Therefore
both facility delivers and car manufacturers have little experience with contractual
arrangements. Already gained experiences are an advantage towards competi-
tors and an important basis for future projects. Hence insights into existing pro-
jects are hard to get and especially facility deliverers hide their knowledge. There-
fore my special gratitude address to Joachim Vogel and Dr. Korff (Eisenmann),
Dr. Jaschinsky (Dürr), Stefan Kirchner (MCC Smart), and Willy Meier (WM Con-
sult & Sales) for providing me with empirical information.
As part-time programs are demanding both for the student and the environment, I
want to thank my family, friends, and especially my girlfriend Barbara Kroner for
keeping my back free during this time.
Last but not least my employer DaimlerChrysler AG enabled by cooperation and
support the accomplishment of the whole MBA program and contributed to the
success of this work.
Düsseldorf, June 2003
Volker Birken, Registration Number: 21836
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II Abstract
Build Operate Transfer-Models roughly mean that a construction company oper-
ates a new built facility on his own or by a company, founded on its behalf, for a
limited time. The orderer outsourced the production and pays for each manufac-
tured unit (Pay-on-Production) instead of doing the whole investment for the new
facility. At the transfer step the orderer either starts with operating the facility on
his own, extends the contract with the facility deliverer (respectively with the ex-
tra-founded company), or looks for a new partner for operating the facility.
In the middle 90's first BOT projects had been realized in the automotive industry.
Only few car manufactures went this way and with different motivations, but all of
them expected advantages for their companies.
This dissertation will analyze different motivations that led to the decision to ask
facility deliverers for offering BOT-Models. An investigation of the automotive en-
vironment will be done and based on these results a statement will be derived
under which circumstances BOT projects can fulfill the expectations of their cus-
tomers and if sustainable competitive advantages can be generated with this ap-
proach. As BOT projects include outsourcing of own activities for a long period of
time, long-term effects especially on industry attractiveness have to be consid-
ered, too.
BOT projects are meant to generate a win-win situation between OEMs and facil-
ity deliverers. Hence it is necessary to understand advantages and disadvan-
tages on both sides, which will be done in a study of this paper.
As BOT projects can be realized for construction projects with different degrees
of integration into production processes, resulting consequences are different,
too. Therefore investigations of this dissertation will be limited to BOT projects
with a high degree of integration; nevertheless examples of medium and low inte-
grated facilities will be given as well.
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III Table of Contents
1
AUTOMOTIVE INDUSTRY ...6
1.1 C
OMPETITION IN THE
A
UTOMOTIVE
I
NDUSTRY
...7
1.1.1 Future Fields of Competition...7
1.1.2 Future Core Competencies ...8
1.1.3 Suppliers in the Automotive Industry...10
1.2 E
VALUATION OF
C
USTOMER
'
S
A
CCEPTANCE OF
BOT-M
ODELS
...17
1.3 C
HALLENGES OF MODERN PRODUCTION PROCESSES
...19
1.4 I
MPORTANCE OF
S
CALE
...22
2
BOT-MODELS ...24
2.1 D
EFINITION OF
BOT-M
ODELS
...25
2.2 H
ISTORY OF
BOT-M
ODELS
...32
2.2.1 In the Public Sector ...32
2.2.2 In the Automotive Industry...34
2.3 C
ONTRACT
...36
2.3.1 Contents ...37
2.3.2 Risk Allocation...40
2.3.3 Legal Disputes ...42
2.4 F
INANCING OF
BOT P
ROJECTS
...45
2.4.1 New Basle Capital Accord (Basle 2) ...45
2.4.2 Financing Instruments ...48
2.4.3 Off-Balance Sheet Financing...53
2.4.4 Pay-on-Production ...55
2.4.5 Calculation of Profitability...57
2.5 E
VALUATION OF
BOT-M
ODELS
...59
3
STRATEGIC COMPETITIVE ADVANTAGES ...64
3.1 I
NDUSTRY
A
TTRACTIVENESS
...64
3.2 S
USTAINABLE
C
OMPETITIVE
A
DVANTAGE
...68
4
BOT-MODELS IN THE AUTOMOTIVE INDUSTRY ...73
4.1 I
NFLUENCE OF
BOT-M
ODELS
...73
4.1.1 Influence on Industry Attractiveness ...74
4.1.2 Influence on Competitive Advantages ...77
4.2 F
UTURE
P
ERSPECTIVES OF
BOT-M
ODELS
...79
4.3 A
LTERNATIVES TO
BOT-M
ODELS
...80
5
CONCLUSION ...81
6
OUTLOOK...82
7
ADDITIONAL NOTES ...83
7.1 MCC F
RANCE
, S
MART
/ H
AMBACH
...83
7.2 A
BBREVIATIONS
...86
8
BIBLIOGRAPHY ...87
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IV List of Tables, Figures, Formulas
Tables:
Table 1-1
Ranking of Suppliers by Turnover
(6)
...11
Table 1-2
Development of Production Capacities
(7)
...16
Table 2-1
Basic Types of BOT-Models...30
Table 2-2
Production Depths in the Automotive Industry
(26)
...34
Table 2-3
Standard Approach for Risk Classification under Basle 2 ...46
Table 2-4
Economy Potentials of BOT-Models in Percentage
(8)
...62
Figures:
Figure 1-1
Change of Core Competencies
(9)
...9
Figure 1-2
Shift of Competencies from OEMs to Suppliers ...13
Figure 1-3
Change of Sales Pitches for Automobiles
(9)
...17
Figure 1-4
Evolution of Production ...20
Figure 1-5
Production Networks
(26)
...21
Figure 2-1
Classical Structure of BOT Projects
(8)
...28
Figure 2-2
Contractual Relationships of BOT Projects
(26)
...36
Figure 2-3
Vendor's risks during BOT Projects
(23)
...41
Figure 2-4
Trend to Risk Oriented Spread
(24)
...47
Figure 2-5
Cross Border Leasing for BOT Projects ...51
Figure 2-6
Asset-Backed Securities for BOT Projects ...52
Figure 2-7
Prize per Unit Determination ...55
Figure 3-1
Five Competitive Forces determining Industry Profitability
(17)
...65
Figure 3-2
Three Generic Strategies
(17)
...72
Figure 4-1
Raw Material Purchase ...75
Formulas:
Formula 2-1
Calculation of Capital Reserves under Basle 1 and Basle 2...46
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V Introduction
Saturated markets and only small growth in the last years characterize the auto-
motive industry. Therefore OEMs were forced to operate for generating growth
rates above industry's average. A general approach was to expand into new car
segments, either of competitors or into completely new segments, mainly niches.
This challenges on the one hand development departments, on the other hand
production sites had to be constructed for these models. This environment and
liquidity shortages of some car manufactures provided facility deliverers with in-
quiries for a project type that formerly only was used for PPP-constellations
Build Operate Transfer-Models (BOT).
The main characteristics of a BOT project are that the facility deliverer (or a com-
pany established by him) operates and maintains the facility for a limited period of
time. Facility investments are done either directly by the facility deliverer or on his
behalf. The facility deliverer receives only money for each produced unit (Pay-on-
Production), not directly for the constructed facility. Of course terms of payments
differ from project to project, direct investments done by the OEM are also com-
mon, but usually the major part of the investment is on the facility deliverer.
The decision to use the BOT approach includes far-reaching consequences for
the OEM and facility deliverer. Therefore this dissertation will analyze how this
project type fits into the competitive environment of the automotive industry, if and
under which circumstances they are an alternative to the classical integrated pro-
duction method and what requirement have to be fulfilled for generating a win-win
situation between OEM and facility deliverer. Beside direct effects on the OEM
also indirect effects are investigated, especially the influence on industry attrac-
tiveness. As financing aspects are one major motivation of BOT customers, this
issue will be treated beyond the background of Basle 2 and the request for off-
balance sheet financing. Derived from an overview about the automotive envi-
ronment alternatives to BOT projects will be presented at the end of this disserta-
tion.
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1 Automotive Industry
The automotive industry could not manage to realize a turn-around to better re-
sults in 2002. Compared to 2001 the number of produced cars declines by 0,8%,
the turnover could only slightly increase.
Towards this background most car manufacturers are forced to operate. This
means on the one hand to reduce costs and adapt production capacities to mar-
ket volumes or to increase demand for their cars. On the other hand strategic po-
sitioning of brands and products is necessary as otherwise profits are hard to
generate. Beside, it is important to identify the development of the market, of cus-
tomers' demands, and of competitors and the suppliers.
This chapter describes the automobile market, the fields where competition in the
automotive industry tends to take place, makes an analysis which competencies
will be important to control for OEMs in order to stay competitive, and shows the
developments among suppliers. Further on a characterization of the evolution of
production processes will be done as well as an evaluation, if customers ac-
cepted outsourcing of production processes in the framework of BOT-Models.
These factors are essential to the question, if BOT-Models are an appropriate
instrument for gaining strategic competitive advantages.
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1.1 Competition in the Automotive Industry
1.1.1 Future Fields of Competition
In the next years competition in the automotive sector tends to get harder. The
main driver for this development is stagnating demand especially on the impor-
tant NAFTA market since terrorist attacks at 11
th
September 2001. In 2003 the
weak dollar in comparison to the Euro made the situation get worse, especially
for those export-manufacturers that produce mainly in Europe and have not
hedged on currency risks (e.g. VW). Further on the very asset intensive automo-
tive industry with long-term growth rates of only 2% - 3% does not count to the
favorites of the financial markets. The shareholder value approach led nearly
every OEM to reduce costs and to increase prize pressure on the suppliers (also
after the "Lopez-Syndrome" era). Changes on the European Market, as the de-
regulation of the distribution of cars, will increase competition additionally.
This situation will force OEMs to detect the fields competition tends to take place,
to rethink their strategic position and to reorganize their supply chain.
In the automotive industry fields of competition are partly heterogeneous. While in
the lower and lower-middle class segment a lot of competition is done over prize,
from the middle class segment upwards brand image and differentiation with
technical features plays an important role. In niche segments as SUV and con-
vertibles both strategies can be found. An overall increasing safety conscious-
ness and importance of economy of cars is responsible for a demand for cars that
are fitted with latest technologies even in lower segments. Also comfort features
like air-condition get more and more common in all segments. Therefore car pro-
ducers have to provide customers in the lower segments with high-equipped cars
at reasonable prizes while in upper segments high technology and brand image
are the key-issues to gain success. General criteria like the very important de-
sign-criterion and quality demands overlay customers' buying decisions in all
classes (see Figure 1-3).
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1.1.2 Future Core Competencies
Within the last ten years German OEMs of the automotive industry have reduced
their production depth from 30% to 25% in average. This reduction simultane-
ously means a shift of competencies to suppliers that adopt more and more for-
mer tasks of OEMs. It is foreseeable that this trend will continue, but car manu-
facturers have different strategies related on the degree of outsourcing (see
Table 2-2).
The main driver of the change process is the increasing number of car models
and variants of one model line. Car manufactures are forced to differentiate their
model program and to take place within niches with the consequence that their
resources for R&D meet with limitations. Therefore also the development espe-
cially for those parts that are highly innovative (e.g. electronic components) will
be outsourced. VDA President Prof. Dr. Bernd Gottschalk estimates that until
2010 up to 50% of all development activities will be on the suppliers' side and that
also competencies for parts like steering, brakes, body parts, and interior equip-
ment will be outsourced.
But opinions about this topic are different. An opinion poll ("Auto 2010") at man-
agers of the automotive industry done by the consulting company accenture
GmbH comes to the result that there are two different groups among the ques-
tioned persons the dynamics (59%), who expect dynamic changes within the
automotive industry until 2010, and the stables (34%), who do not believe in such
changes. A negligible share of 7% cannot be classed with one of these two
groups. Both groups have partly different opinions to certain evaluations: 50% of
the dynamics believe in a takeover of the R&D leadership by the suppliers and
40% think that the future will lead to centralized company overlapping production
steps. The stables do not believe in those developments. The most significant
differences can be found by the evaluation of outsourcing: While 54% of the dy-
namics agree with the outsourcing of single or complete production steps the sta-
bles disagree with 51% to this thesis. On the other hand unanimity was between
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both groups that until 2010 there will be no development and production of own
cars through specialists and that OEMs will do both the overall plan for an auto-
mobile and the integration of several systems. Only production cooperations as
they already function today are thinkable. This includes that 38% of all questioned
persons regard a complete outsourcing of the production as thinkable.
The most important competence will be to react on customer needs with innova-
tive and strong marketing concepts. As the brand image is a significant factor in-
fluencing the customer value of cars, the brand management will stay core com-
petence, although, with exception of the premium brands, this factor will loose at
importance in favor of ecological and economical characteristics.
61%
81%
80%
46%
67%
92%
0%
20%
40%
60%
80%
100%
Production
R&D
Marketing
Consent
2010
2005
Figure 1-1
Change of Core Competencies
(9)
Due to the change of core competencies and the shift of tasks on suppliers there
will be a new situation in the cooperation between OEMs and suppliers. Espe-
cially as additional tasks have to be adopted by suppliers, new types of suppliers
emerge, particularly when R&D activities and integration of sub-suppliers count to
these additional tasks. The following chapter will describe the changes on suppli-
ers' side.
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1.1.3 Suppliers in the Automotive Industry
In the production environment of OEMs in the automotive industry three different
types of suppliers appear. First there are companies that develop and construct
facilities (for instance paint shops) that are either directly used by OEMs to pro-
duce cars or operated by the deliver for instance as BOT-Model. Second there
are suppliers that deliver parts, modules, and systems, which are used in the
body shop, paint shop, or are mounted in the final assembly. Third there are pro-
ducers of cars that operate as Contract Manufacturers and built complete cars on
behalf of OEMs.
Facility Deliverers
The market of Facility Deliverers was subject to many consolidations, which fi-
nally led to an oligopoly situation. After ABB retired as turnkey deliverer from the
paint shop business and Dürr AG as the world's biggest deliverer for paint shop
facilities bought up Alstom Automation S.A. (today: Dürr-AIS S.A.) and
C. Schenk AG, there are only two companies delivering turnkey paint shops in
Europe, Dürr and Eisenmann. With 4% - 7% growth rate this branch is above av-
erage of the OEMs' growth rates.
The reduction of production depth of OEMs led to changes of products offered by
facility deliverers. Car producers often ask for Built Operate Transfer models as
alternative to common turnkey facility. Therefore Facility Delivers had to react
with additional offers as this new demand was and already is a chance for con-
tinuous growth and sustainable relationships to their customers. Contrary to this
trend most Facility Deliverers see the development and construction of facilities
also in the long-term as their core competence and the operating of facilities as
subordinated measure for selling them.
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Suppliers of Parts
As car producers since the beginning of mass production did not produce all parts
on their own, suppliers providing OEMs with means of production are traditionally
tightly bound into their production chains. This began with speedometers, coolers,
lamps, and other electric components and soon went on with other parts for the
power train, steering, breaking, interior, and exterior. Suppliers of Parts are
organized depending on the nearness to the OEM within the supply chain: Those
who provide an OEM directly with parts are so-called Tier 1-Suppliers, those who
deliver the Tear 1-Supplier with parts are called Tier 2-Supplier and so on. Nowa-
days a car manufactures gets about 8.000 components from up to 250 suppliers
for a car of the luxury segment.
Turnover 2000 in
Mio. US-$
Turnover 1996 in
Mio. US-$
Increase
1. Delphi Corporation
26.480
26.000
2%
2. Robert Bosch GmbH
20.800
16.300
28%
3. Visteon Automotive Systems
18.569
16.400
13%
4. Denso Corporation
16.392
13.000
26%
5. Lear Corporation
14.100
6.249
126%
6. Johnson Controls Inc.
11.869
5.942
100%
7. TRW Inc.
11.000
6.493
69%
8. Magna International Inc.
10.100
4.200
140%
9. Dana Corporation
9.467
5.450
74%
10. Valeo
8.592
4.600
87%
Total
147.369
104.634
41%
Table 1-1
Ranking of Suppliers by Turnover
(6)
Table 1-1 shows the biggest suppliers in the automobile sector with their turnover
in 1996 and 2000. The average increase rate of suppliers with 41% in four years
is higher than those of OEMs, mainly reasoned by the outsourcing activities of
OEMs and the increasing degree of equipment in modern cars. For the next ten
years an increase of 42% is forecasted
(6)
. Probably several companies will fall
victim to this fast growth: Estimations say that the number of suppliers will de-
crease by 50% to 4.000 until 2010
(15)
. Mainly those companies that are not able
to keep pace with market growth are endangered to be bought up.
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The main problems for small and medium sized companies in the supplier branch
are to get liquidity because of changes, that the New Basle Capital Accord (see
chapter 2.4.1) will bring with it, and to get qualified personnel. And liquidity is cru-
cial as more and more R&D activities have to be covered by suppliers and are
often the admission for a following production contract. Further on more and more
OEMs demand the construction of industry parks in the direct neighborhood of
their production sites. But most of the small and medium sized companies are not
stock companies and only a percentage less 10% plans an IPO. Therefore the
ways to financial markets are locked and bank loans, that are particularly for risky
investments covered with high interest rates, are the most frequent used financ-
ing source. A lot of examinations look for alternative financing methods for small
and medium sized companies when Basle 2 comes into force. Depending on the
financial standing of the respective company and the economical environment
and the company's strategy this question only can be answered for each case
separately.
The increased spectrum of tasks OEMs demand from their suppliers include be-
side R&D activities also the adoption of organizational tasks like supply chain
management. Most OEMs want suppliers to deliver a complete product that cor-
responds with the customer's needs and quality requirements. The ongoing get-
ting shorter time-to-market is another important challenge the suppliers have to
be able to control. Due to this wider range of tasks new types of Supplier of Parts
emerge:
The supply chain in the automotive industry is organized as a pyramid. At the top
of the pyramid stands the OEM who is in charge of the control of the complete
object. While in the former world of the automotive industry usually Tier 1-
Suppliers stand on the next layer below the OEM, Tier 0,5-Suppliers will directly
be subordinated as System Integrators. The tasks of the System Integrators are
to generate ideas, to develop concepts and products, to plan a product range, to
manage logistics (including JIT-/JIS-delivery), to supervise the supply, finance
and complexity management, and to carry out the quality management. Further
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on there are System Specialists and Module Suppliers who both have to have
competence for the integration of technology. While the Module Supplier also
must be capable of integration into production and manufacturing processes and
is responsible for the lifecycle of his product and its delivery and assembly, the
System Specialist is responsible for specific integrated systems and OEM over-
lapping standardization, which is mainly important for electronic systems. The
classical part and component supplier will already exist but he will more and more
become Tier 2 to n-Supplier. Also the classical part and component supplier has
to react on the increased outsourcing activities and has to provide his customers
with material, product, or process specific innovations.
Figure 1-2
Shift of Competencies from OEMs to Suppliers
Although OEMs demand more and more tasks and competencies from their sup-
pliers, cost pressure in this branch is already on a high level. It is not unusual
when OEMs charge prize decreases of 1% - 3% per year, and the increased risk
adoption resulting from an increased spectrum of responsibilities seldom is ade-
quate honored. Especially commodities (standardized products) can be sold with
only small margins.
OEM
· Brand Management / Branding
· Design
· Development Integration
· Production & Process Development
· Production
· Supply Network Management
· Purchase
· Sales / Marketing
·
After Sales
Supplier
OEM
· Brand Management / Branding
· Design
· Final Assembly
· Sales / Marketing
·
Services
System Integrator
System Specialist
Module Supplier
Supplier
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Suppliers react in different ways on the growing tasks on the one hand and the
increasing prize pressure on the other hand. A proper risk management is indis-
pensable and includes market analysis at the end-user, the car drivers. According
to the motto "The OEM will not expensively pay for things the customer slightly
appreciates" some suppliers start to create an own brand identity in awareness of
the end-user. This trend is mainly pronounced at suppliers that are also active at
the aftermarket but is also for other suppliers attractive as a new law of the Euro-
pean Union allows suppliers to vend their products as Genuine Spare Parts if
they were the official supplier for the respective OEM with these parts. It is re-
markable that the big suppliers (except Bosch) are backward related on the crea-
tion of a brand consciousness of the end-users and that small and medium sized
companies (e.g. Webasto, Eberspächer, Recaro, BBS, Brembo and most audio
and navigation specialists) are pretty successful on this field.
Another measure to increase the bargaining power towards the OEM is to de-
velop products that have a clear USP on the market. Usually the rights at inven-
tion that are developed on behalf of OEMs are transferred from the supplier to the
OEM. Therefore only innovations that are independently developed are suited for
an enlargement of bargaining power of suppliers that can be used to work con-
trary to prize pressure of OEMs.
As prize pressure was substantial responsible for a consolidation wave and con-
centration process on the supplier market, there are in some fields only a handful
suppliers left, for instance in the interior business. Other businesses like the very
important and fast growing diesel engine direct injection systems are nearly or-
ganized in a monopoly situation: Bosch is market leader with 90% of common rail
systems and VW, the only OEM not using common rail technology for diesel di-
rect injection, could not find a supplier except Bosch to get in the development of
its Pumpe Düse technology. As this would increase the bargaining power of
Bosch additionally, VW went a new way and established a joint venture with Sie-
mensVDO instead of outsourcing.
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Contract Manufacturers
Contract Manufacturers are able to assemble cars like OEMs and are a pure
European phenomenon. To a greater or lesser degree these companies also
have engineering capacity to develop whole cars stopping short before the point
of becoming brand name companies themselves. In most cases Contract Manu-
factures assemble niche products and receive parts like engines, gearboxes, or
axles that are the same as in other models of the OEM. The most important Con-
tract Manufacturers are Magna Steyr, Karmann, Bertone, Matra Pinifarina, Val-
met, and Heuliez. In order not to be dependent on only one customer Contract
Manufacturers usually produce several models of different companies at one pro-
duction site (Magna Steyr: BMW X3, Chrysler Voyager, Jeep Grand Cherokee,
Mercedes-Benz E-Class 4-Matic, Mercedes-Benz G-Class, Saab 9-3 Converti-
ble).
Due to the increasing number of niche products Contract Manufactures will get in
future enough orders especially because of their ability to adopt R&D tasks and
because of their experience in special fields (e.g. Magna Steyr: four-wheel drive
vehicles; Karmann: convertibles).
Summarizing the development of the different types of suppliers leads to the re-
sult that Contract Manufactures have gained good growth rates in the past and
can look forward into the future, as the ongoing trend to niche products in the
automotive industry is a guarantee for prospective orders. Competition among
Contract Manufacturers is healthy, especially in comparison to Suppliers of Parts.
This branch is dominated by cost pressure of OEMs and a high degree of con-
solidations, intensified after the major suppliers Delphi and Visteon were sepa-
rated from their parent companies GM respectively Ford and are on hunt for new
customers. On the other hand Suppliers of Parts benefited the most from the out-
sourcing activities of OEMs, which results in considerable growth rates but also
means the adoption of new competencies. Facility Delivers are the benefiting
third party: For them it plays no role if OEMs produced cars on their own or out-
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IOM
Essen
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sourced these activities to Contract Manufactures, the market for turn-key deliv-
erers of facilities had been reduced to few suppliers and order positions are good.
One main reason for these chances is the need for redistribution of production
capacities between car manufacturers and between production regions. Although
there are overcapacities in the automotive industry and the sales volume of cars
is expected to stagnate at 55 Million units per year, OEMs plan to reduce capacity
by 3,05 Million units on the one hand and to increase capacity by 1,25 Million
units until 2005 on the other hand.
1. GM Group
1. Ford-PAG
- Opel
- 350.000
- Volvo, Jaguar
+ 150.000
- GM North America
- 800.000
2. DaimlerChrysler
2. Fiat
- Mercedes-Benz
+ 100.000
- Fiat / Lancia
- 300.000
- Z-Platform (Smart / Mitsubishi)
+ 200.000
3. Ford
3. Toyota
- Ford North America
- 1.000.000
- East Europe
+ 150.000
4. DaimlerChrysler
4. VW Group
- Chrysler
- 300.000
- China
+ 100.000
- Mitsubishi
- 300.000
- Audi
+ 100.000
5. PSA
- East Europe
+ 150.000
6. BMW
- Germany / USA / China
+ 200.000
7. Hyundai
- Europe
+ 100.000
Capacity Reduction until 2005
Capacity Increase until 2005
Table 1-2
Development of Production Capacities
(7)
In addition to the pure facility construction the BOT business is another field
where Facility Delivers probably can generate growth and benefit.
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IOM
Essen
Volker
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1.2 Evaluation of Customer's Acceptance of BOT-Models
An important question that should be taken into consideration before every make-
or-buy decision is the acceptance of the customer. In some cases it might be very
important to the customer that the product is manufactured by the brand company
itself because otherwise the genuineness is not given.
An appropriate approach to meet this question is the Customer Value approach.
The customer value reflects the value of a product or service from the customer's
point of view. This value is more important than the real value of a product or ser-
vice as the decision whether a customer buys the product of the own company or
of a competitor mainly is determined by the prize and the customer value. There-
fore companies analyze customers' needs in order to create only the value that
the customer wishes as adding values to a product that are not demanded by
customers means higher costs for the producer without creating a better product
from the customer's point of view.
65%
74%
57%
42%
65%
62%
85%
85%
59%
67%
0%
20%
40%
60%
80%
100%
Technical Features
Ecology
Pruchase Prize
Economic Efficiency
Design
Consent
2010
2005
Figure 1-3
Change of Sales Pitches for Automobiles
(9)
The automotive industry is traditionally characterized by strong brand-loyalty,
which will especially in the volume segment decrease within the next years as
67% of questioned automobile managers expect. For premium brands only a per-
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IOM
Essen
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centage of 22% sees that danger
(9)
. This means that mostly in the volume seg-
ment other sales pitches move stronger into the foreground and, as the evalua-
tion of the interviewed automobile experts shows (see Figure 1-3), a shift be-
tween the different arguments is expected to happen. While the design defends
the most important position, ecology and economical characteristics increase
their meanings. Beside the product characteristics services around the car will
have intensifying importance. Finance services, assurances, mobility offers, and
fleet management will belong to the offers of nearly every OEM within the next
ten years.
These aspects and the fact that even car models with a high degree of involve-
ment on the customer's side (Porsche Boxster, Saab 9-3 Convertible, Mercedes-
Benz G-Class) are built at Contract Manufacturers and perform very successful at
the market show that the customer value is not decisive damaged by an
outsourcing of production steps. In this context should be mentioned, that no
OEM gives the production of his top-model in other hands and that the production
of core-elements (e.g. engines) even in case of production at Contract
Manufacturers stays task of the OEM.
Further on the trend to equal products in niche segments that are sold under the
name of different brands reflect that the origin plays a subordinated role towards
the brand. For instance PSA and FIAT sell an equal minivan under four different
brand names (Citroen Evasion, Fiat Ulysse, Lancia Z, Peugeot 806) in order to
reach more customers and in case of VW Group and Ford, who built the Ford
Galaxy, VW Sharan, and Seat Alhambra in an extra for this purpose constructed
plant in Portugal, the Sharan is despite a prize extra charge of 2.000,- towards
the technical identical Alhambra the best sold model of this trio.
Therefore it is not to be expected that outsourcing of production steps in form of
BOT-Models will decrease the customer value noticeable as long as this form is
not applied to top-models or parts with high involvement (e.g. engines of sports
cars).
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IOM
Essen
Volker
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1.3 Challenges of modern production processes
If one looks back to the historical development of production processes since the
industrialization one recognizes a continuous increase of complexity (see Figure
1-4). While the first intention of mass production and automatic installations was
to reduce production costs, soon it was necessary to improve quality of the mass
products as the lack of quality affects the competitiveness of these products
negatively. Nowadays TQM and quality certifications play an important role in the
automotive industry. After QS 9000 as general standard and VDA 6.1 as special
standard for the automotive industry a new quality guideline TS 16949 gains
more and more importance in the automotive industry as it combines both QS
9000 and VDA 6.1.
While Henry Ford already was able to announce that one could have any color of
the Model T as long as it is black, soon the next step in form of demand for wide
product variation challenges the automobile production process. This demand got
continuously stronger, so far that nowadays some psychologists rather speak of
an Egomobile than an Automobile. This trend is the main reason for the demand
for niche products and a wide range of optional equipment. The demand for niche
products causes on the other hand lower production volumes per model and in
comparison to classical models niche products have a shorter life cycle. This
means that niche products have either to be built in line with different products
(which is especially in the body shop problematic) or other ways have to be found
to make production of those products under economical aspects acceptable (e.g.
contract manufacturers, strategic alliances). The increase of optional equipment
and variants of interior components mainly challenges the final assembly and the
logistic of plants. New approaches like industry parks and Just-In-Time and Just-
In-Sequence delivery systems of parts managed to handle this.
The next demand challenging the automotive industry was the factor time, in two
forms. On the one hand the production had to become faster in order to reduce
the delay time between purchase order of the customer and delivery, on the other
hand the run-up phase at model changes had to be shortened. The reduction of
Details
- Seiten
- Erscheinungsform
- Originalausgabe
- Jahr
- 2003
- ISBN (eBook)
- 9783832476410
- ISBN (Paperback)
- 9783838676418
- DOI
- 10.3239/9783832476410
- Dateigröße
- 753 KB
- Sprache
- Englisch
- Institution / Hochschule
- FOM Essen, Hochschule für Oekonomie & Management gemeinnützige GmbH, Hochschulleitung Essen früher Fachhochschule – unbekannt
- Erscheinungsdatum
- 2004 (März)
- Note
- 2,0
- Schlagworte
- betreibermodell production automobilindustrie outsourcing finanzierung
