VW makes the leap with new mega-platform

Ulrich Hackenberg isn’t yet a household name but if Volkswagen’s multi-billion bet on his big idea pays off, he may join the likes of Henry Ford and Alfred Sloan in the canon of auto industry pioneers.

The world’s automakers have long considered the “global car” to be their Holy Grail – the same basic design that can be built, in subtle variations, and sold in different markets. Take that fundamental concept, stretch it across many different vehicle types, sizes and brands, then build them by the millions, and you begin to sense the enormity of Volkswagen’s rapidly evolving “mega-platform” strategy and its potential impact on competitors around the globe.

Hackenberg’s fundamental rethink of vehicle platforms, the industrial Lego from which cars are designed and made, is helping to power the German company to the top of the global sales charts several years ahead of its 2018 target. It could also make VW one of the most profitable carmakers in the world.

The strategy is not without risk. It could, for instance, expose Volkswagen to the threat of a massive global recall if a single part, used in millions of cars, fails. But rivals have taken note of the power behind its move. Volkswagen’s modular platforms are being benchmarked by most of the world’s top automakers, including Toyota and Ford, according to company executives.

VW’s work on its largest mega-platform, known internally as MQB, began in earnest in 2007 and is being implemented over the next four years at a cost of nearly $70 billion (€52.3bn). The potential payoff is compelling: Projected annual gross savings by 2019 of $19 billion, according to the bank, with gross margins approaching 10 per cent.

Industry-leading levels of commonality – the proportion of parts that can be shared among different models – are nothing new to VW. At a gathering in Japan five years ago, Renault and Nissan executives lifted the hoods on several VW Group vehicles side by side – including models from Skoda, Seat and Audi brands – and saw trouble.

“They had the same engines, the same clutches, the same ventilation – all identical parts,” says an executive who attended the presentation. “It was a level of commonality that didn’t exist at Renault-Nissan.”

VW’s sophisticated and highly flexible platform has the deceptively simple label MQB, a German acronym for “modular transverse matrix”. Virtually all of the group’s small and medium front-wheel-drive family models, including the latest generations of the VW Golf and Audi A3, are being designed around MQB as their base. The new platform features a far greater degree of plug-and-play modularity, flexibility and parts commonality than at Toyota, General Motors, Ford and other competitors.

With the new mega-platform strategy supporting its 12 brands, from Skoda to Audi, Porsche and Lamborghini, VW is poised to snatch the global sales crown from Toyota as early as next year.None of VW’s competitors has the diversity of brands, the breadth of technology, the sweeping geographic footprint or the deep pockets necessary to support and take advantage of such a wide-reaching initiative as MQB.

VW’s suppliers see MQB as a watershed event, a break with a past when really big vehicle platforms might have yielded orders for as many as five or six million identical components over their typical six- to seven-year life cycle. Now, with the implementation of MQB, “they’re being asked for quotes on 35 million parts,” says a senior European industry executive.

More importantly, the flexibility of the MQB system also allows VW to create more cars that are tailored for specific markets at a lower cost, and it doesn’t have to sell so many units to break even.

MQB isn’t the only weapon in Hackenberg’s arsenal. Larger Audi, VW and Porsche models with longitudinal engines will use a similar set of components, dubbed MLB, that already underpins a number of Audi vehicles. And many of the group’s ultra-luxury and performance brands will employ a third component set called MSB, designed for premium rear- and all-wheel-drive vehicles such as the Porsche 911, the Bentley Continental and the Lamborghini Gallardo.

“The toolkits help the brands to preserve their character and sharpen their individuality,” said Hackenberg, now development chief for the Volkswagen brand.

But the huge volumes planned for the MQB derivatives alone could also expose the group to the same sort of mass recalls of millions of cars experienced in recent years by Japanese rival Toyota. If a single part has a problem, and that part is in many different models, a recall affects many more vehicles.

The full rollout of MQB may not be accomplished until the end of the decade. By then, the chief stewards of VW’s corporate strategy – CEO Martin Winterkorn and Chairman Ferdinand Piech – may be retired and the next generation of management moved into the top slots. As for the company’s strategic vision after Piech steps down, Morgan Stanley analyst Stuart Pearson says: “His legacy is the world’s largest and most successful auto company. I don’t think the strategy will change any time soon.”

(Reuters)