Carmakers Bet on Big Global Platforms to Cut Costs

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Automotive News Print Version

August 14, 2014

Copyright 2014 Crain Communications All Rights Reserved

The auto industry's switch to global platforms is rapidly picking up momentum.

In 2020, the top 10 platforms are expected to generate production of 27.8 million vehicles, according to IHS Automotive, a consulting firm based in suburban Detroit. That's up from 19.2 million units this year.

Global platforms cut costs with economies of scale as millions of vehicles share parts. The massive platforms also spread the costs of product development and manufacturing tools over more vehicles.

Automakers are keen to reduce costs, in part, because they are adding expensive technology to save fuel, improve safety and connect cars to the Internet.

The No. 1 platform will be Volkswagen AG's one-size-fits-all MQB platform, which will provide the underpinnings for the Golf, Jetta, Beetle and Passat as well as a bevy of Skodas, Audis and Seats.

Volkswagen's various brands are expected to produce nearly 5.8 million vehicles from MQB, according to IHS.

By then, Volkswagen may or may not top Toyota Motor Corp. or General Motors in terms of overall sales. But VW will produce significantly more vehicles from its MQB platform than any other company.

According to IHS, VW's closest rival will be Renault-Nissan, which will build an estimated 3.5 million vehicles on its CMF2 platform. Toyota's NGA-C platform will be in third place, with 2.8 million units.

While automakers are betting heavily on global platforms, IHS forecaster Mark Fulthorpe says it's not yet clear how much money they'll save.

"It's a little too early to tell," Fulthorpe said. "The appeal [of global platforms] is that the automakers will become far more efficient with their R&D expenditures. And that's going to take a little longer to quantify."

The Detroit 3 don't share Fulthorpe's wait-and-see attitude.

Each of the purchasing chiefs at GM, Ford Motor Co. and Chrysler Group told Automotive News that global platforms have generated significant savings in R&D and purchasing expenditures.

"We've made progress on all levels," said Hau Thai-Tang, Ford Motor Co.'s purchasing chief.

Ford currently has nine global platforms, down from 27 in 2007, he noted. "In terms of R&D, we've had huge cost reductions," Thai-Tang said.

In May, Fiat Chrysler Automobiles told investors that it expects to derive 95% of its vehicle production in 2018 from nine global platforms, down from 12 platforms in 2013. By sharing purchasing and engineering, the companies expect to save $2 billion by 2018.

"The savings come in all these buckets," said Chrysler purchasing chief Scott Kunselman. For [product] development, common platforms, common suppliers, economies of scale—I'm seeing [savings] in every instance."

While each of the Detroit 3 is developing global platforms, Volkswagen AG appears to be pushing hardest. The automaker unveiled its MQB platform when the redesigned Golf debuted in 2012.

The MQB offers a standardized portfolio of components for the vehicle's front end up to the A-pillar. That includes engines, transmissions, front suspension, HVAC, engine cradle, pedestrian safety parts—you name it.

"It's clear there is far greater cost tied up in the front of the vehicle," Fulthorpe said. "They are driving very, very hard to consolidate that part of the vehicle."

By standardizing the front end of the vehicle, Volkswagen can vary the wheelbase, so that the Golf and Passat, for example, can share components.

Fulthorpe estimates that an automaker needs to produce 1 million-plus units to get the full benefit of a global platform. That isn't possible with luxury flagships such as the Mercedes-Benz S class or the BMW 7 series. But the luxury automakers are forming alliances to design and produce models for the entry-level premium market.

In March, Reuters reported that Mercedes has formed a partnership with Infiniti to build the next-generation Mercedes GLA SUV and develop small premium cars.

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