Volkswagen AG wants to do something that has nearly driven Ford Motor Co. and General Motors to ruin: Jettison its parts factories.
Selling or spinning off parts plants is a strategy that brings auto executives applause from shareholders, investment funds and banks. But the examples of Ford and GM illustrate its dangers.
Delphi and Visteon, their former supplier divisions, have hardly emerged from their spinoffs as viable companies. Their former parent companies now must help them restructure at great cost.
Even GM subsidiary Opel has not been able to find a buyer for its Kaiserslautern, Germany, components plant.
Porsche, Toyota successful
In the auto industry, the trend toward the lowest possible vertical integration is seen as the key to solving almost every problem. But the world is not that simple.
Porsche is extremely successful with its low vertical integration of less than 20 percent. But Toyota is just as successful, even though it is producing, not purchasing, many components on its own.
For example, Toyota produces 70 percent of its hybrid Prius in-house. That not only keeps the company's key technology out of the competition's reach, it assures continued high quality.
Outsourcing alone is no solution. What works for a niche manufacturer such as Porsche doesn't necessarily work for a volume manufacturer such as VW.
It's self-evident that a well-run auto company should not manufacture simple components such as exhaust equipment, molded parts or axles, or components requiring high investment such as brake systems and engine controls.
But what about seats? No part of the vehicle comes closer to the customer. A good seat can be a decisive selling point.
When the outsourcing wave comes to an end and all the cars are driving around with the same seats, steering and transmissions, each car will be interchangeable with every other.
In the United States, Ford and GM have shown that this road leads to characterless, plain-vanilla products. A middle path between purchasing and manufacturing on its own would be better for VW.
In any case, the sale of factories does little for VW's core problems: underused factories and overpaid workers.
If VW doesn't tackle these issues quickly, the seating in the executive suite will soon become uncomfortable indeed.
Guido Reinking is editor for Automobilwoche. You may e-mail him at [email protected]