Dana Corp. probably has pushed the modular supply concept as far as any company to date with its Dodge Dakota rolling chassis. The light-truck chassis, built in Curitiba, Brazil, is assembled and supplied just in time to a Dakota plant nearby. But the module business involves more than just wrenching a few parts together. Integrating bits and pieces into a ready-to-install assembly requires new engineering and management skills. Competition is fierce, and bigger investments carry bigger risks.
William Carroll, president of Dana's Automotive Systems Group, discussed the company's modular strategy with Automotive News Staff Reporter John Couretas this month at the SAE Interna-tional Congress and Exposition in Detroit.
The vehicle market in Brazil has tanked. How is your rolling chassis project faring?
No one anticipated this when we got into it. We built an 80,000-square-foot assembly facility for the rolling chassis, and the economy got us. Activity is probably about a fourth of what we thought it was going to be. But that's short term. We're crossing our fingers that the economy is going to start picking back up in the second half.
Modularization has its drawbacks, you might say.
We spread the risk for the automaker. We accept that these kinds of things are going to happen. For us, the win-win is to integrate as much product as we can in that chassis to control costs, and quite frankly, make a few dollars out of it.
How are roles defined in a modular world?
It allows the automakers to dedicate themselves to their core activities. And it allows certain suppliers to focus on cost, design, speed to market - all of those things that are important. At the same time, you're spreading the investment, too.
We can hear the next rallying cry for suppliers: Get modular or die.
It's not for everyone. This is not for every part of the world. It's going to be very difficult to do a rolling chassis in the United States, in North America, with the established labor agreements. I don't want to say it couldn't happen, but it's going to be more difficult.
The field is getting crowded. As suppliers consolidate and combine, they often acquire the ability to build a module - or a bigger module.
Every day we find somebody new. TRW and LucasVarity, even Benteler is doing modular. Everybody's doing it. The (original equipment manufacturer) has sensed that there's something here.
Your rolling-chassis project strikes me as a pretty big supply-chain management challenge. What have you learned in that area?
We're really taking responsibility for the second-tier guys. We're taking over the contracts that Chrysler had already established. Dana supplies the frames, we have the drive lines, we have the axles, we have fuel lines, brake hoses. So a lot of it is in our control to begin with. Tires, fuel tanks, steering linkages, things like that, are sourced outside. We've got 70-some suppliers and 200-and-some part numbers that we do control.
How do you keep all this humming along when you're at 25 percent of volume projections?
It's just like anything else: stronger communications. I'm not going to argue, we have a lot of inventory because of this downturn. Localizing the product would be good, and most of it is being localized in Brazil. It's working, we think, remarkably well. That had to do with the preplanning and with working closely with suppliers up front.
Does Dana look at modularity expertise as a key competitive advantage?
A lot of people think all Dana is doing is setting up a barn and slapping some products together. But Dana developed the information technology, the supply chain management, the process technology, the logistics of putting this together, the eventual design of the componentry and line sequencing. That's the technology we're talking about.
Can we expect to see more rolling-chassis projects from Dana?
What we did in Curitiba we can pick up and move anyplace in the world and virtually plug it in to other customers, with variations, of course. We did this thinking, let's not make this one off, let's make this a process. That's a piece of technology that we say is resident inside Dana.
Will your warranty responsibilities change as you take on more responsibility for sourcing the rolling chassis?
Eventually, yes. We might have brakes that we put on it, but in many cases Chrysler tells us what to put on the axle. They specify the price; they specify the supplier. When we take this thing over, eventually, our part of the deal is that we will take responsibility for that supply chain. That's a hell of a deal, when you think about it. If we want to play in this game, if we do what we say we want to do, we have to accept that.
You've got new modular business with GM's Australian unit, Holden Ltd., supplying front corners for the Commodore passenger car. Where is that headed?
We've got corner modules - struts, shocks, wheel end and part of the steering. And that goes into a module. Toward the end of this year, we will start to take over the drive axle module. The whole rear. It's a different variation on modularity.
How much of that module is built with Dana parts?
Strategically, we didn't have any of this business with GM down in Australia. It's giving us a chance to take over the supply of the components. Now it gives us a chance to put our axles on it, our driveshafts on it and whatever componentry that we can put there.
So the idea is to get as much Dana content on the module as possible?
Right. Part of the contract, when we get into this, is that we want the eventual design as well as the sourcing responsibility as time goes on. And that means our products.
Are you seeing more future vehicle programs designed with modular assembly in mind?
Yes. Modularity and standardization, where you can have large volumes around the world with the same platforms. I think it's certainly coming. There will be variation by regions. But it's a lot better if you could say to a customer: I have this design for a million vehicles in three regions. Not just 100,000 in one region.
Are you getting much resistance from manufacturers who don't want to give up control?
Certain OEs react differently. There's a cultural aspect to it. With some of the Asian OEs, modularity is a difficult idea for them - to give up control, to some extent. But as OEs globalize, it starts to become easier. If you're putting a facility in Argentina, but you're based in Japan, it's a little easier.
What other barriers are out there?
If I take a look at our market globally, 48 percent of our drive shaft and axle market is still integrated with the OEs. It's difficult for us to get an axle module from Daimler - they've got their own castle. Others have their own Visteon or Delphi doing their axles or driveshaft or frame.
As you push modularity to new levels, you start looking a lot like a vehicle assembler.
We do have the responsibility to assemble part of the vehicle. We have no intention of ever getting to the point where we would put somebody's nameplate on a vehicle. It's not what we want to do.