Volkswagen de Mexico's Puebla plant was originally intended to be Volks-wagen AG's North American production base for the Golf, Jetta, Cabrio and old Beetle for the Mexican market. With the recent introduction of the New Beetle, the plant is going global, and its suppliers are going along with it.
Fritz Fruholz has been purchasing director of Volkswagen de Mexico since January. He has served in purchasing management in Puebla for the past four years. Mexico Correspondent Guillermo Lira recently interviewed Fruholz in Puebla.
How many Tier 1 suppliers do you deal with now?
We have 885, of which 597 are not in Mexico. This includes suppliers to the new A4/Beetle platform, also the old Beetle and suppliers to the Golf and Jetta. It also includes our engine production.
Do you see the number going down?
The number of Tier 1 suppliers will. With the consolidation going on, the system suppliers - the full-service suppliers with development responsibilities - will be fewer.
Did you bring in a lot of new suppliers with the new A4 platform?
We had very few new contracts. Most of the suppliers are continuing.
How do you classify suppliers? You have 'A' suppliers, which is a VW classification. You also require QS-9000 and VDA 6.1 certification.
We have the approach that is used in the VW organization worldwide. We check the performance of each supplier, and based on the evaluations we have an 'A,' 'B' or 'C' categorization.
Of course, it is our goal to have every supplier in the A category. We have some B suppliers, and we are eliminating the C suppliers. Basical-ly, C suppliers cannot supply us anymore. We have two or three at the moment, but it takes a while before you can phase them out.
If a supplier wants to sell to VW, which certification should it have?
It will now have to have the VDA 6.1. This is the latest on which our plant has been certified. A lot of our suppliers are in the process of getting it. It is the only way they can export to Europe. With the New Beetle, the VDA 6.1 is a requirement, since the car is going to be exported.
And this is in addition to ISO-9000 certification. There are now something like 12 additional points that VW wants to see beyond the requirements of ISO-9000.
When will the suppliers have VDA certification?
By the end of 1998.
Do you already have a price goal when you approach a supplier?
When we source a new part, we obtain quotes from a big base of suppliers, not only in North America but around the world. A good price in Europe is not necessarily a good one in North America.
Our job is to get the best deal overall. It's not only price, it's price, service, quality - it's a package. You have to consider that to sell a car here is different from Europe. If you want to be competitive, you have to have a competitive price in every component.
So you might buy at a different price in Germany?
Generally, one source supplies a component across a platform. That's one of the advantages of having a common platform.
But for a component in very high demand, one set of tooling at one supplier is not enough. If we find this problem, then we'll look for a supplier in the region. It could be an American supplier or the same European one with a new operation here. We would still negotiate the best price for the North American region.
Do you have an annual cost reduction goal?
We have a target, but it is confidential. Our idea is that if the supplier has more freedom to develop the product, they will be more productive. That's the way we are trying to operate.
Do you foresee suppliers selling you big systems in the future, such as a complete interior?
Initially, for the New Beetle, we attempted this. But an interior of a car has different technologies. We didn't find a supplier that had all these technologies together that could sell us the best.
So how do you do the New Beetle's interior?
It's a difficult example. It's not a conventional car. The dash is really different. You can't supply the dash with the instrument clusters, the wire harnesses and the firewall from a single supplier simply because of the way it is designed. You only can supply the instrument panel.
You mean it's a difficult car to buy parts for?
It's a difficult car to manufacture. You name it - the shape of the glass - it was a challenge to make it. The suppliers developed new technologies to manufacture it, technologies that have not been used in any other car.
What's your view of the worldwide consolidation of suppliers?
It's good, on the one hand, because the suppliers are becoming stronger. They have greater r&d capabilities to become system suppliers.
On the other hand, the bigger the organization becomes, usually the more inflexible it becomes. You lose some flexibility that you had before. Because of the mergers, more activity is in fewer hands. You have to fight to get what you want. It's more difficult to deal with them.
I think there are more advantages, but certainly there are disadvantages.