Having won the battle of the alpha males, Volkswagen now bares its fangs at two new enemies: Big Toyota, which Volkswagen wants to unseat from its #1 position; and moribund Opel, which VW would rather see dead than alive. VW CEO Winterkorn growled that VW might pull its parts business from Magna if the Canadian-owned partsmaker proceeds with their plan to acquire Opel. “We are looking with suspicion at what’s happening here,” Winterkorn said, according to the German edition of the Financial Times. Things are getting nasty, again . . .
Winterkorn threatened to take the lucrative VW component business from Magna. In this business, suppliers are part of the development process and have access to the crown jewels. They know manufacturer plans years in advance. “When we award new contracts, we will consider carefully whether there could be competitive disadvantages for us,” Winterkorn grumbled in the direction of Aurora, Ontario, and Rüsselsheim, Germany.
An infuriated Opel labor leader Klaus Franz hissed back: “The threat not to award Magna with contracts is tantamount to blackmail. Whoever says a rescue of Opel through Magna poses a competitive disadvantage, is hoping for the downfall of Opel in order to gain an edge for himself and reduce his own overcapacities at the cost of Opel.”
And he is right about that.
Franz groveled that Volkswagen had government support for decades—thanks to Lower Saxony’s controlling 20 percent of the company. (The “VW” law gives Lower Saxony a blocking minority, the non-suspension of which stopped Porsche’s takeover plans dead in their tracks).
Industry insiders intimate that Winterkorn is making it all up. Volkswagen usually is not adverse to getting cozy with other competitors. They point out that VW is the biggest customer of Faurecia, a major European supplier, majority owned by French carmaker Peugeot Citroën.
And they are right about that.
Magna manufactures the BMW X3, the Mercedes-Benz G-Class, the Chrysler 300C and both the Jeep Commander and Grand Cherokee, without anybody complaining.
Magna will build the Rapide four-door coupe for Aston Martin and the Boxster/Cayman line for Porsche. Insiders indicate that nobody seems to be worried about state secrets leaking to the competition.
And they are right about that.
Volkswagen, which competes head-to-head with Opel in most segments, wants Opel out of the way. Berlin seems not to be inclined to give government money to anybody else than Magna. GM is dragging its heels.
The longer the decision drags on, the deader Opel gets. Motormouth Ferdinand Dudenhöffer stated the obvious: After the national elections on September 27, “nobody will give a hoot for Opel.” And with one competitor out of the way, VW would be a step closer towards its declared goal of world domination.
Magna manufactures the BMW X3, the Mercedes-Benz G-Class, the Chrysler 300C and both the Jeep Commander and Grand Cherokee, without anybody complaining.
Can’t speak for the Germans, but the rumour mill is in overdrive that Fiat has bought Bertone’s plant so it can transfer production of European and RHD 300s, Commanders and Grand Cherokees. Marchionne’s revenge for losing out on Opel I suppose…
I don’t see a problem here.
Scenario 1.
Germany aren’t going to give up their 20% of VW anytime soon (though it’ll be interesting to see whether the EU will get tough with them or not) so this will a good time to use the veto to the German government’s advantage.
The German government could veto the outsourcing of the outsourced parts and force the sale of Vauxhall/Opel to Magna, then, tell the 2 to play nicely.
Scenario 2.
The German government tell VW to sit tight until after September when the elections have happened, then recind the loans and watch Vauxhall/Opel fall like a fat kid who’s just been told that cream cakes have been banned.
Either way the German government WILL get their way.
Magna manufactures the BMW X3, the Mercedes-Benz G-Class, the Chrysler 300C and both the Jeep Commander and Grand Cherokee, without anybody complaining.
Magna will build the Rapide four-door coupe for Aston Martin and the Boxster/Cayman line for Porsche.
OK, who or what IS Magna? Are you saying the name brand auto companies farm out the manufacturing or final assembly of the above models to Magna?
If this is true then there is a whole side of auto manufacturing I was unaware of.
Or is Magna just one of the many parts suppliers making various parts for the above models?
It sounds like I could sit at my computer, arrange to have parts shipped to Magna where the parts would be assembled, and then I could stamp my name on the final product – a virtual company.
Folkdancer:
Are you saying the name brand auto companies farm out the manufacturing or final assembly of the above models to Magna?
They sure do. It’s a growing trend in the industry. Valmet in Finland, Karmann in Germany are some other examples.
Frau Puckrik:
Germany aren’t going to give up their 20% of VW anytime soon (though it’ll be interesting to see whether the EU will get tough with them or not).
The EU is free to decide whatever it wants. In the meantime, the 20 percent rule has been written into the Volkswagen AG shareholders agreement. A law is no longer necessary.
Herr Schmitt,
With respect, if the EU thinks it’s unlawful (and personally, I think it is) then the EU tear that agreement up faster than you can say “abwrackpramie”.
Anyway, it doesn’t detract from my original post. The German government WILL have their way.
Companies are free to consider any factors they wish when choosing suppliers. How often is a supplier chosen because of “a good relationship”, carnal or otherwise?
VW may choose not to do future business with Magna because it doesn’t want to help a company it views as a key competitor. So it goes.
“Frau Puckrik:”
What, Katie’s married? You are going to ruin a lot of guys hopes on TTAC :).
folkdancer wrote:
It sounds like I could sit at my computer, arrange to have parts shipped to Magna where the parts would be assembled, and then I could stamp my name on the final product – a virtual company.
This is a major reason why I think it’s possible that the Volvo AB repurchase of Volvo Car Corporation could work. Whereas a decade ago Volvo management thought they needed to sell themselves to a major producer in order to achieve the required economies of scale for new vehicle development, their range of options is much broader now. A virtual car company is quite feasible.
I hope, the following links shed some light:
Here’s the link to the Magna Steyr Website: http://www.magnasteyr.com/xchg/complete_vehicle/XSL/standard.xsl/-/content/903_905.html
Here’s a Wikipedia link: http://en.wikipedia.org/wiki/Magna_Steyr
Here’s a link to its predecessor, Steyr-Daimler-Puch (c.f. http://en.wikipedia.org/wiki/Steyr-Daimler-Puch)
Finally, a link to an earlier predecessor, Austro-Daimler (c.f. http://en.wikipedia.org/wiki/Austro-Daimler)
So, they do have some experience and a history in building and developing cars. You will note, that Ferdinand Porsche was involved. Frank Stronach, Magna’s founder, was born in the Steyr region, btw.
folkdancer, you do not even need to arrange for parts to be shipped to Magna, they build parts themselves. It is quite feasible to contract with them to do ALL work from design and development to manufacturing! You supply the specifications and they do the rest.
herb, Ferdinand Porsche did indeed work for Austro Daimler (for a long period of time) and Steyr (briefly). Handling and roadholding abilities for both makes of cars markedly improved after his departure (feel free to draw your conclusions).
Better to spend German money on German workers, kill Opel and tell GM and Vauxhall to go and fly a kite. No point in letting them take the loans and split into the night.
venator: Who needs road-holding when there are mostly dirt tracks? Low design priority. But great cars they had, although somewhat oversized (c.f. http://de.wikipedia.org/wiki/Austro-Daimler_ADR; in German only, w/pics). They should have made attempts to sell them in the US.
What is it with the knuckleheads that run companies?
Why do they always have to “unseat” the number 1 in sales?
Instead of concentrating on building and selling fun, high quality, unique, economical, best in its category cars, they talk about being top dog in sales?
I was always told, try to be the best you can, do what you love to do everyday, and you will be successful.
And very possibly become rich and famous from that.
Meanwhile, you are happy and good at what you do.
What drives this fastest gun thinking?
@Herr Schmitt
“World domination”
There will always be some of us who will refuse to drive toyonda and vws. Oh the hubris!
@Katie
Didn’t really understand what you were saying
@KatiePuckrick: It’s worth noting that “Germany” does not own 2o% of VW; rather, the state of Lower Saxony does (and has done so since VW was originally privatized).
Also, the EU commission has no issue with the ownership, only with the (federal) German laws that give Lower Saxony additional influence.
Thank you to all those who provided links to Magna and Steyre history. I had a great education reading the histories of the various subcontractors in several countries.
I thought that subcontractors just made the occasional hearse or limo. I never realized that whole production runs were done by outside companies.
What drives this fastest gun thinking?
It’s in their performance contracts, and it comes from the crazed school of “best practice” American business that “bigger is always better”.
It’s bad news in the medium term but “appears” great in the short term.
@FolkDancer
The business of “contract manufacturing” is by and large dying out (these are sometimes referred to as “Tier 0.5” Suppliers). When most OEMs were trying to sdubstantially increase their model line ups in the 90s, specialist manufacturers were awareded contracts to make cars that the larger OEMs neither had the capacity or the skills to build.
Magna-Steyr have a plant in Austria (Steyr) where they specialised in 4WD systems, so did the first SUVs for BMW (but BMW are now bringing these contracts back in house, e.g X1 SOP in Leipzig in a couple of months time). Bertone specialised in cabrios but are now bankrupt, Karmann is I think, up for sale, having no new contracts.
The niche in which the contract manufacturers were working has been drying up, which is at least one of the motivations for Magna to make the transition to finally becoming a Tier 0 OEM. And of course, they are run by a guy who is very much a Big Dog, Alpha Male as Bertel likes to call them. Has he managed to loose his Austrian accent as well as The Californian Governator?
@herb:
Frank Stronach was not born in the Steyr region(Upper Austria), instead he comes from Weiz(Styria), about 15km from Graz. Ferdinand Porsche only designed the Steyr 30 for them and by the time the car was displayed at the 1930 Paris Auto Show, he already had left the company.
The real news is that Volkswagen will be bringing back the Phaeton after it pulled the model out of its U.S. lineup due to poor sales.