By on February 22, 2013

We’ve discussed the importance of scale countless times on this website. La Tribune takes a brief look at Ford, Volkswagen and PSA and the different ways they are working to achieve economies of scale in one of the toughest markets in the auto industry; the C-Segment.

As you’re all well aware by now, Volkswagen’s MQB platform represents the most radical approach to a modular platform. The distance from the front axle to the pedal box remains the sole fixed dimension. Everything else is modular, capable of being snapped into place like Lego. MQB will underpin everything from the Polo to the Passat (B-D segment) and will be built in North and South America, Europe and even China. Annual volumes are expected to be 3.5 million units by 2018, roughly 35 percent of VW Group’s entire global sales.

Slightly more conservative is the path taken by PSA. Not long ago, we published a side-by-side analysis of MQB and PSA’s new EMP2 modular platform. EMP2 is a bit less ambitious, covering only C and D segment cars, MPVs, light commercial vehicles and crossovers. These segments represent a significant portion of PSA’s sales, but the lack of B segment capability is a question mark, especially given the popularity of this segment in global markets, and Peugeot’s own 208. Instead, PSA will leave B-segment development up to Opel, as part of the GM-PSA alliance. While VW touts MQB as a holistic approach to manufacturing, parts procurement and component sharing, PSA’s message with EMP2 has been focused around weight reduction, cutting CO2 emissions and providing flexibility in terms of vehicle size and packaging. Given PSA’s status as Europe’s leader in low emissions vehicles (an average of 112.5 grams/km, 0.1 gram better than Toyota), this is somewhat understandable. Unlike MQB, only the rear sections of the car are interchangeable. Vehicles can be had with a short or long wheelbase, a low or high driving position and a solid rear axle or independent suspension (useful for marketing low-cost variants in emerging markets). Volumes are much more modest; 1.8 million units EMP2 based cars are expected to be sold by 2018.

And what about Ford? Despite the Global C platform being confined to one segment, and thus not exactly modular, Ford has apparently acheived volumes of 2 million C-segment cars annually. The global C platform, which underpins cars like the C-Max, Focus and Escape/Kuga and will likely add a couple Lincoln variants as well. They key difference between Ford, VW and PSA is that Ford is the sole automaker to sell their car globally, as part of the “One Ford” strategy. Rather than adapting models, or even the output of whole brands to regional needs as VW does, or simply not compete in some large markets like PSA, Ford’s entire product line has significant global exposure in a way that the aggregate model ranges of VW and PSA don’t. Ford hasn’t hinted about moving towards a more modular framework in the future. Even in the face of declining sales in Europe and declining market share in North America, Global C’s volumes are impressive enough on their own.

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24 Comments on “Analysis: Three Different Approaches To Maximize Scale...”

  • avatar

    I think VW has the right idea.

  • avatar

    I’m a Ford investor because I think the strategy will pay off in cost savings and simplicity with distribution, marketing, etc.

    However, VW does have the right idea for their massive goals — customization for the market. IMHO, though, they’re pushing away a lot of potential repeat buyers (like myself) who feel the cars are simply becoming a “slightly nicer Camry” rather than a “slightly cheaper Audi.” They’ll lose the uniqueness they once had, and people will in turn be less tolerant of lower-than-Honda reliability. Their brand cachet in the US will start to disappear, but it’s a good business decision because the increased volume and dealer network will help a lot.

    I’m actually considering adding some VW stock to my portfolio…I think they’ll have a really good next decade or so.

  • avatar

    Chrysler did this with the K-Car chassis in the 80s and used one platform for the majority of its car lines. John DeLorean also talked about sharing platforms in his book he wrote in the 1970s. Sharing platforms for car and minivan models has been good over the years and VW’s approach is to get the biggest bang for the buck. Hopefully automakers will have enough flexibility to let each model be customized for its market. A Chinese VW should be different in some ways from an American one. As platforms get shared cars companies need flexibility in different markets because cars will sometimes flop if they aren’t right for the market. Such as the North American Ford Contour based on the European Mondeo of the late 1990s.

    • 0 avatar

      The late ’90s Contour was done in by persistent engine and transmission problems that lasted throughout the run. The first year model had brake and HVAC problems too, and that kind of roll-out pretty much killed the market for them.

      • 0 avatar

        I think the Mondeo/Contour size wasn’t quite right for North America – it was too small (interior-wise) to compete with the likes of a CamCord, but too big to be in the Civic/Corolla class.

        • 0 avatar

          The contour was first released as a higher quality small car, and the price hit the lower quality big car, the Taurus.

          For the vast majority of buyers, the Supersize car won, even though it didn’t compare in any way to the Contour.

          I had one of the few V6 manual Contours. The dealer didn’t want to bother to find it, and happily would have sold me the Taurus or a slushbox Contour.

          Ford de-contented the Contour until it was Tempo-like on the inside.

  • avatar

    I am interested in seeing how the VW plan goes, specifically will the scalability of this platform (though it seems the term platform is a bit of an outdated concept here) lead to specifically different products that maintain VW’s uniqueness as non-appliances. I agree that if VW’s loose the whole cachet of being unique and different and become a German Camry then they will take a hit in the US market at least because they just become what every other car is only less reliable. Making compromises to chase volume hasn’t been a winning strategy it seems.

    However, the sales success of their latest “tailored for the US market” offerings show that I may be completely wrong.

    • 0 avatar

      “Making compromises to chase volume hasn’t been a winning strategy it seems.”

      It seems there is no bigger poster child for this than GM especially Ron Zarella during the “brand management” years.

  • avatar

    What VW is smart in understanding is that there must be something fundamentally different between a $20K car and a $50K car. With VW/Audi a $20K car gets a transverse engine with a MacPherson strut front suspension, and a $50K car generally (with the exception of the TT) gets a longitudinal engine with the four-link front suspension. Unlike, for example, how Ford and GM think a top of the line Lincoln or Cadillac can have the same transverse engine with a MacPherson strut front suspension layout as a Taurus or Impala.

    This “all my cars are on the same platform” crap is borderline meaningless. Am I to believe that, before MBQ, a VW Polo and a VW Golf shared no common parts or design concepts, just because the Polo was on the AO platform and the Golf was on the A platform? The MBQ platform, as utilized for the Polo, will probably be as different from the MBQ platform, as utilized for the Golf, as the A and AO platforms are from each other.

    The common distance from the distance from the front axle to the pedal box is going to make the large MBQ platform cars look like crap. Nothing makes a front engine car look cheap and ungainly more than a short distance between the front axle and pedal box (which equates to almost no fender between the front tires and front doors). But that’s probably fine with VW. You want a large car that does not look cheap and ungainly? You have the spring for the MLB longitudinal platform.

    • 0 avatar

      Or they could go back to more worldwide platform sharing with Audi. My Passat has longi engine and 4-link suspension (which is highly overrated and poorly designed), all for around $22k base model

      But your point is solid — excessive platform sharing will eventually piss people off…just ask buyers of the old X-type Jag…er, Mondeo (or even S-type, which shared platforms with the Lincoln LS). There’s a political element to platform sharing that VW has managed to sidestep for many years.

      The new US Passat will be a winner because it’s tailored to the US market. But I personally want…nay, NEED a wagon. The lack of wagon here is a deal-killer, something that can’t be made up for with a goofy Tiguan or pricey Touareg.

      • 0 avatar

        Highly over rated and poorly designed?
        How so? Our Audi A4–same suspension right?—drives and handles GREAT. Smooth, road hugging–add an upgraded sway bar and PRESTO—brilliant!
        Are you complaining about replacing the rubber and bushings after 100K miles? Come on. Replacing them—the feel of a brand new car is back (along with the usual shock/strut replace at that mileage–normal anyways.)

    • 0 avatar
      George Herbert

      racer-esq writes:
      What VW is smart in understanding is that there must be something fundamentally different between a $20K car and a $50K car. With VW/Audi a $20K car gets a transverse engine with a MacPherson strut front suspension, and a $50K car generally (with the exception of the TT) gets a longitudinal engine with the four-link front suspension. Unlike, for example, how Ford and GM think a top of the line Lincoln or Cadillac can have the same transverse engine with a MacPherson strut front suspension layout as a Taurus or Impala.

      The strut doesn’t necessarily mean lousy handling; look at the 911, Boxter, Cayman. They’re all struts up front, and in back on the Boxter/Cayman. One could imagine a standard mounting pattern to which a basic (stamped steel) lower arm and consumer grade strut went, or optionally a seriously better balanced aluminum arm and connectors and strut. Design the bolt pattern that you can do either.

      This also gives a nice aftermarket upgrade path for the tuners; just take your little sedan in, and get the high market racing suspension units…

  • avatar
    Glenn Mercer

    I am distrustful of OEM arguments about platforms (or modules or kits or whatever they call them in a given decade) and the resulting beneficial scale economies, for at least four reasons:

    1. They have been discussing and touting all this for decades. As TTAC commenters point out, we had platforms and modules in the past, we have them today, and we will have them in the future. I don’t see how things are fundamentally different now.

    2. There is a definition problem. I have not seen an OEM in recent memory actually nail down what a “platform” or “module” is. An OEM can declare that it has the same platform underlying cars A B and C, where 70% of parts are common. Another one can declare it has the same platform underlying cars D and E, with 95% of parts common. So, which platform is “better?”

    3. The auto industry’s romance with scale verges on religious belief. If we look at OEM profitability over time we see no correlation with size of company (anyone remember GM’s bankruptcy?). Can anyone explain why BMW thrives when it is “too small” to do so, given assertions of 6 mm units as minimum economic scale? There is also, in my experience, no economic analysis showing that higher volume per platform or module leads to better financial performance. ASSERTIONS that it does — no evidence.

    4. When we look at scale we have to understand WHICH scale we mean. If a given part (say, a brake rotor) is made on a brake supplier production line whose maximum annual output is 500,000 units, then to go to a platform of 5,000,000 units will demand building 10 separate supplier production lines, and replicating 10 sets of tooling. Where are the scale economies here, beyond some shared engineering work and some purchase orders? If the 5,000,000 car units will be made in OEM plants around the world… perhaps 10 plants, aren’t we replicating the OEM lines and tooling again, too? If we mean to build one giant 5,000,000 unit plant, are we taking into account the cost of shipping all these cars globally?

    I am not saying scale does not matter. It does. I especially think it matters a lot in the distribution side: having lots of dealers in the market to keep the brand in everyone’s face constantly, having huge advertising budgets to wrangle media discounts, etc. And of course it matters in engineering and in manufacturing. It is hard to conceive of a viable mass-market plant working below 250,000 units annually capacity (1 minute takt time and 2 8-hour shifts 5 days a week for 50 weeks a year is 240,000). And we certainly do not want to engineer every fastener for every model individually (cf. British Leyland). But I have yet to see a car company actually demonstrating WITH HARD NUMERICAL DATA what the benefits of platforming or modularizing are, in FINANCIAL terms (don’t tell me your platform is “lighter,” or “simpler” or “stiffer” if you can’t tell me if that matters or not on the financial statements!)

    I Rest My Rant

    • 0 avatar

      While I think your rant has some merit, BMW is a very poor example to use, since they make “upmarket” cars and their profit margins are enough that they shouldn’t feel the need to go platform sharing.

      Shouldn’t… but considering they’ve felt the need to build as many damn models off of each platform as inhumanly possible, I think they’re firm believers in platformization, with multiple MINI and BMW variants budded off of shared platforms, even up to the 5/5GT/7-series. Even worse, the next X1 will be based on the Countryman platform… no big loss there, though… the Countryman is a much better car, even with the rattles.

    • 0 avatar

      I understand what you mean by having 10 different suppliers. But hear me out here.

      Since this is capitalism those 10 suppliers will compete with the other suppliers. Sure initially the price might be high due to shortage due to production capacity. If a company is at max output they will not just dump their product on the market.

      But, after they get going they will increase there production in attempt to get more of the supply money. This increase in production by everyone will result in reduced prices.

      Heck if they end up with oversupply the parts price will drop dramatically.

      Basic economics.

      • 0 avatar

        A supplier will also has a easier time with absorbing the development cost if he knows that he’ll be selling 500k of the part per year to the OEM instead of 50k. More parts commonality also means more options for the customer in the end as parts can be used across many models, it makes no sense to develop an electric sunroof module for 5000 sales a year per model, but if 10 models share the same parts, well then it probably makes sense to develop the module.

    • 0 avatar

      I think you touch on another fundamentally good point. PROFIT is the measure of good business. Unfortunately, w/competition and commoditization becoming more and more prevalent, volume and efficiency in its context seem to be the only avenues to profit. Everyone is trying to find the cheapest way to make the same widgets.

  • avatar

    This kind of peek into the industry is fascinating. Given the cost involved in developing a chasis, it makes sense to maximize its use. I think it is better to share a platform across multiple lines than it is to beat it to death by using it to underpin cars for decades.

  • avatar

    Mazda are doing something similar aren`t they with the new 3, 6 and CX5 all riding on the same platform. Since these three vehicles are their core products (from a volume perspective) they are achieving economies of scale. Albeit on a smaller scale because they are a much smaller company. It also sounds like Mazda are “outsourcing” non core platforms – the new MX5 with FIAT and the new Mazda 2 with Toyota (Yaris).

  • avatar

    Sharing components across different platforms: spatial economy of scale

    Sharing components across different model years: temporal economy of scale.

    As TTAC has pointed out in the past, the Japanese are good at reusing parts through successive generations, while (mostly) successfully conveying the idea that each new generation is a totally new car (2012 Civic being the big exception) My bet is that if you compare the spare parts department at any automotive supply house, the bins for the Japanese cars are going to be less varied than the ones for the domestics.

    I think for the most part, platform sharing is like “SkyActiv”, it’s a term that’s applied to the engineering of the car that has been happening all along. We didn’t just discover platform sharing, but slap a marketing term onto it and you have a topic of conversation.

    • 0 avatar

      Very good way of thinking about it. I can see the cost saving and reliability improvements that come from sharing components across different model years.

    • 0 avatar

      Good point! BUT that thinking hampers the Japanese in some ways, the same cheap as defroster switch that my highschool friend had in his 89 celica was last spotted in an 08 lexus, somewhat cheapening the impression of the lexus.

      I think the big thing about platforms are a way of thinking from the get go when a part or component is engineered.

    • 0 avatar

      Not it is the exact opposite the Japanese companies tend to change the common replacement items like brake pads, calipers and rotors more frequently than the US companies. Heck the Japanese often used to have 3 different brake systems for the various different versions of the same model in the same year. There is big money is in replacement parts and making it unprofitable for the aftermarket to tool up is their game. It is not uncommon to get OE parts in aftermarket boxes because it is cheaper for the aftermarket supplier than tooling up for their own production run.

    • 0 avatar

      The Germans have been the true masters of this. There are parts on my 2011 BMW that I am pretty sure are the same as on my ’86. There were parts on my ’90 VW that were the same as on late ’60s Beetles. The Europeans even do it across makes – the big OEMs sell the same bits to everyone in the industry. Bosch, Hella, Valeo, etc. I doubt you will find many parts that are the same on a Nissan and a Toyota, but you can find plenty that are the same on a Volvo, Saab, BMW, VW, and Mercedes. Of course, part of it is they all HAD to do it, they were too small individually.

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