By on December 20, 2011

We have been writing about it for years, now, Bloomberg wakes up to it:

“Volkswagen AG will kick off its biggest technology overhaul in almost two decades.”

Bloomberg still has a hard time of coming to grips with the technological revolution. It’s not just that “more than 40 models will use a set of standardized components such as axles, steering columns and chassis,” as Bloomberg puts it. This is not a parts bin exercise. Through the Volkswagen empire, cars don’t just share the same steering columns. They are designed using standardized building blocks of a common kit architecture.

The kits have Teutonic names like “Modularer Querbaukasten” (MQB)  and “Modularer Längsbaukasten” (MLB). Porsche is developing a “MMB” (Modularer Mittelbaukasten) for Mittelmotor (mid-engined) cars.

Volkswagen engineers are already working on the next generation of Baukastens, which could be the Mutter of all Baukasten.

According to Bloomberg, the exercise may lower costs by 5 billion Euros ($6.5 billion) a year, and cut assembly times by 30 percent.

Not quite understanding the kit architecture, Bloomberg raises the specter that one wrong bolt could now bring the whole company down. They cite Christoph Stuermer, a Frankfurt-based analyst with IHS Automotive, which is not known for its precise predictions:

“If something goes wrong, then one may get hit by an epidemic plague. The more connected the structures, the higher the threat of contagion.”

Volkswagen already has quite cleverly leveraged platforms across models, brands and segments. There is very little similarity between an Audi TT and a Volkswagen Beetle, despite them (and a panoply of others) sharing the same underpinnings. The kit architecture takes this principle to a new dimension. Properly executed, it can make for a very profitable car company. Juergen Pieper, an analyst with Bankhaus Metzler inFrankfurt, estimates that the technology will save 5 billion Euros by 2016, and says:

“The parts-sharing program is a very big lever to improve profitability that other companies don’t make use of because of the complexity. Without this cost-cutting program, margins wouldn’t likely rise from this year’s peak.”

Volkswagen reported an operating margin of 7.7 percent through the first nine months of 2011 and has a goal of lifting that to more than 8 percent by 2018. Without the new vehicle architecture, margins could average about 6 percent, said Pieper.



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28 Comments on “Born From Kits: Volkswagen Invents The Incredible Money Machine...”

  • avatar


    Right now you get about 85% of an Audi when you buy a VW. If this principle goes into play full force, what will be the difference? Just interior bits and plastic outer panels?

    I have a hard time seeing this come to fruition unless they only apply it to their small and mid-sized cars. Even then: the suspension will always be the afterthought…

    It is a cool concept though. It just seems like they will have to completely sacrifice several things to achieve this “profitability”. Their cars have already taken a step toward lifeless… Please no more!

    • 0 avatar

      Audis (from A4 up) already use the longitudinal MLB; Volkswagens (will) use the transverse MQB, and even now have different (transverse) platforms from their Audi siblings.

      As an example of how the modular system works, look at the new Jetta: they can easily produce it with either the low-cost torsion axle (in most US models), or a multi-link independent rear suspension (in the US GLI and all European models). Plug and play, select the components that you need for a given model and market, and leverage commonality. It can actually enable bigger differences between models than the conventional platform approach.

    • 0 avatar

      Seriously. My Mom’s 2008 VW Rabbit was a $15,000 Audi. It’s an impressively nice car. I urged her to buy it immediately before VW figured out how much money they must have been losing on it.

  • avatar
    Educator(of teachers)Dan

    If you can make the cars FEEL different enough in driving and look different enough on the outside and inside, no one will care. GM and Fords old problem was just changing the exterior and interior bits while the basic taste and texture of the loaf was the same.

    • 0 avatar

      yep, that’s the problem. With this kind of thing things liske distance from steering to pedals, hip room and other points that are “fixed” on a platform will be very difficult to mess with. So, I don’t don’t see how they’ll manage to pull off that differentiation.

      I think it’ll be all good and dandy for the company but after a while people will catch on and thre will be a backlash.

      But what do I know. Maybe the Brave New World has finally come.

      • 0 avatar

        A simple fix – dumb down (even further) the consumer and (s)he will never notice anything beyond design and fabric textures…
        And this is well under way. I still remember times when CAR or Autocar would discuss details of car’s mechanicals and systems. Now it all is limited to tidy shutlines and visual “quality” of interior materials. Almost nobody knows or cares about the vehicle guts.
        So I think the VW strategy will work perfectly and other makers will follow.

      • 0 avatar
        George B

        I wonder if this is the reason that the driver’s seat in the new North American Passat is not aligned with the steering wheel and pedals. Did Volkswagen apply narrow European car control fixed points to their upsized, seats farther apart, model?

      • 0 avatar
        Athos Nobile

        If the Polo/A1/Fabia are any indication, I think they’ll pull the rabbit from the hat with this one.

        By the way, it’s good to see you back Marcelo.

      • 0 avatar

        Thaanks Athos.
        Things getting better now.
        How’s Oz treating you?

      • 0 avatar
        Athos Nobile

        “How’s Oz treating you?”

        Bloody good mate

    • 0 avatar

      It has a better chance to succeed when the quality of the underpinnings is high and modern. That wasn’t the case with US companies in the 70s/80s.

  • avatar

    Well, firstly all Volkswagen and Audi cars, and their sisters have already been the same cars bar some exterior and interior bits for ages.
    This differentiates and expands the platform technology a bit, so that you can use the exact same basic ‘parts’ but end up with very different cars. The whole engine-transmission part can be the same for several platforms for instance, and so can the rear suspension piece. It’s a bit like Lego. This is something completely new, which Henry Ford didn’t fine-tune for 20 consecutive years before the great depression, and that Toyota hasn’t done for 40 years, or even Honda did in the 80’s.
    Therefore VW is amazing, and will charge you more for because you are impressed by them telling you they have found a way to cut costs and increase profit…

  • avatar

    There is really only one important question here. Will those common steering columns rattle when adjusted?

  • avatar

    I think it’s funny the way some people appear to be concerned with getting some VW in their Audi sauce. The truth of the matter is, that once the optimum pedal to steering wheel configuration, or wheel to door distance has been determined, there really is no need to re-engineer it over and over for every car. In fact, using this modular build system, your just as likely to get some Audi sauce on your VW.

    It also helps that Audi and VW are perceived as having high quality, sturdy interiors.

    • 0 avatar

      “I think it’s funny the way some people appear to be concerned with getting some VW in their Audi sauce.”

      Agreed. My Scion has the exact same window switches in it as a Lexus. They work well, and nobody’s complaining.

  • avatar

    For what it’s worth, the majority of the Audi lineup shares much LESS with VW than it used to. I’m always amazed at how many on this site continue to believe that the Jetta/Passat and A4/A6 are the same underneath. They are not.

    Audi’s MLP platform is theirs, not VWs. Audi engines sit longways, not sideways, and you do not get Torsen “Quattro” AWD when you buy a VW with 4Motion.

    The A1, A3, Q3, TT, and Q7 are loosely related to VAG sister cars. A4. A5. A6. A7. A8, and Q5 all use Audi platforms. I’m not sure what if anything the R8 has in common with the Gallardo, but I doubt anyone would complain about that.

    • 0 avatar

      +1 Davekaybsc – thanks for re-stating a common misconception.

      MLP and MQB are also the driving forces that have allowed Audi to experiment with niche products like the A5 Sportback and A7 along with mainstream product like the Q5.

      MQB will also allow differentiation for the brands through the ability to choose different metals. Similar to how Audi implemented their “Audi Space Frame” into the MK II TT by combining aluminum into the traditional steel structure, they’ll be able to do things like swap in the use of more aluminum in the next generation A3.

      I really cannot understate how important MQB and MLP are going to be: they’ll allow greater differentiation between product, more flexibility, lower costs, much shorter production times and in theory, better reliability and easier training for technicians due to the increased commonality of subcomponents.

      That all said – the big question is reliability and whether it will improve for VAG. Based on what we’ve seen so far out of Audi’s MLP, things look pretty good. Barring a batch of bad water pumps that Audi replaced in 2010 3.0 V6s, the new MLP vehicles have been significantly better than their predecessors.

      Will I buy the new MLP based A3 when it comes to the US in 2013? Probably, but definitely not in the first year or two. ;-)

  • avatar

    I don’t see what the problem is if it’s done right. This isn’t like the 80’s and they aren’t going to start building Cimarrons. Even basic 4 bangers today are pushing out V8 hp from 20 years ago. Cars are sophisticated enough these days to do more of this. The gap between the top and bottom of the market has shrunk considerably. A $20,000 car today exceeds my needs enough that it is nearly impossible for me to see the justification for spending 2 or three times as much on a luxury brand.

  • avatar

    I like it. Not only does it make things more efficient and profitable for VAG, but it seems to be that it also allows for “plug and play” upgrades across the model lines, both for special editions from each of the manufacturers and for owners (like me) who like to tinker. A modern and more comprehensive Central Electric II if you will. In the early 90’s swapping a VR6 into your Golf or Jetta was more or less a plug and play job, as the Corrado, Passat and Jetta/Golf shared common wiring harnesses and computer locations.

  • avatar

    Wow. -Is Bloomberg late to the party on this one or what?!

    They have obviously never known the dizzying array of potential engine-swaps into a MkII Jetta/Golf;

    -literally almost Everything fits,

    except a W12.


    -But there might be that one guy who put a VR6 in the front AND the back, so in horseshoes-n-hand-grenades terminology…

  • avatar

    This points up a major difference between American manufacturers and foreign ones. American auto execs would never commit to any platform/hardware, or even any car for a long enough time period to make this work. Hell, GM changed their mind about buying Fiat as soon as the ink on their contract was dry, costing GM a $2Billion penalty. GM actually HAD this kind of modular flexibility at one time, being able to put virtually any engine/transmission combination in (nearly) any car or truck they made. As a result, engine swappers also enjoyed such flexibility. I am all for that.

    • 0 avatar

      GM’s engine swap modularity mostly comes down to using the same transmission bolt pattern on almost everything (well two: one for FWD, one for RWD), and that most engine bays are big enough for physically larger engines to fit. The Fiero is one of those common engine swap recipients, but to put anything other than a same-family engine in it, you will need custom engine mounts, exhaust, etc. And an adapter for the transmission if you want a RWD engine like a V8. It’s not just plug and play stuff.

      Unless you’re talking about the days when some vehicles had a 305, some had a 327, some had a 350…that’s not modularity, it’s the same engine.

  • avatar

    I think this story has run before, and here is my concern: While this approach makes sense from several perspectives, it will inevitably constrain the engineers from optimizing each product.

    There will be a cycle to this. Once VW/Audi realizes that some performance or packaging gain can be attained with a custom component, they will gradually depart from this standardized approach, or at least tune it to be less standard.

    Flexible mfg technology can often permit more customization at similar costs.

    • 0 avatar

      You can still use custom components (an excellent example is the aluminium subframe in the current Audi TT) — they just need to fit within the MQB’s architectural parameters.

  • avatar

    The whole point is leveraging common components. All the manufacturers do it now, this is taking it the next logical step.

    It’s the same reason that it’s almost impossible to find something like a stripper on a lot these days. It’s more expensive to NOT include things like a/c and rear window defrosters than put them into every car.

    What you end up getting is excellent bang for the buck. It’s one reason that even VAGs “cheap” cars were always better than the competition especially when it came to things like interiors and driving dynamics.

  • avatar

    gslippy is right, this to me sounds like a new spin on an old idea.

    Ok sure the Audi doesn’t share the same parts as the VW.. ya know what?

    I don’t care, you line the cars up side by side, along with the Skoda (not available in the USA) in their respective size and the amount of differentiation is negligible.

    On top of that, package in the long wheelbase models that you get here in China and frankly it becomes nearly impossible to tell an A4L from an A6 and an A6L from an A8

    While the company is certainly containing it’s costs through all this shared architecture, they have become so ubiquitous here in Shanghai that they are even more bland looking than Japanese cars. If you guys think Toyota is the definition of bland looking cars, come here. VW/Audi I truly feel is the most bland looking car company for sale today. There is so little differentiation between car sizes and sub-brands that I frequently wonder why they are selling so many different brands.

    It’s so bad here I actually get excited when I see a Lexus just for something different.

  • avatar

    Now, all VW (or someone else) needs to do, is making the specs for each of these components/sub assemblies public, along with a compliance testing procedure; and the automotive industry would finally at least be attempting to play catchup with consumer electronics :)

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