{~~-~

PROCESS'" COVER STORY

It's changing the way cars are designed and built, forcingsuppliers to buy up other companies, and scaring the hell outof unions. Ultimately, it will change the way you buy a car.

Linda Dancer was sturmed when the

Oldsmobile dealer handed her the

estimate to repair the power sliding

door on her 1996 Silhouette mini­

van. "They wanted over $1,000,"

complains the mother of three, who man­

ages the Fowlerville Fairgrounds in rural

Michigan. "We decided not to do it."

Welcome to the world of modular car

parts. For nearly a century the auto industry

built vehicles from thousands of individual

components. if something went wrong with

a part it could be repaired or replaced. But

today automakers are increasingly making

cars and trucks from modules - big chunks

of a vehicle that come into an automaker's

assembly plant pre-assembled by suppliers.

if something goes wrong with a module,

such as the mechanism for the power door

on Linda Dancer's minivan, the whole thing

has to be replaced. That's expensive.

Fortunately for Dancer, the dealer quietly

repaired the door for free. But it's a prime

example of how the coming "mod squad"

world will both change and challenge the

industry. if quality isn't perfect, irate cus­

tomers or warranty costs could cripple a

company. Plus, for the 100-year-old auto

industry, there is a steep learning curve

involved in switching to modular cars made

in modular plants.

So modularization is not something

automakers are adopting willy-nilly. The

stakes are too high. "ifyou don't dot every 'i'

and cross every 't' it could be the ruination

ofyour organization," warns Sandy Munro,

president of manufacturing consulting finn

Munro & Assoc. But for those who can

make it work, the potential rewards are phe­

nomenal.

Why Modular?Thke a look at the pluses ofmodularization:

• It could put a stop to ever-escalating

vehicle prices. For many consumers cars

simply cost too much. To the average Ameri­

can family, purchasing a new car represents

half a year's salary. In the past, automakers

built or bought all the parts that make up a

car, figured out the total cost, then tacked on

the profit they wanted to make. That became

the sticker price. Today, an automaker must

figure out what a customerwill likelypay for a

future model and subtract the profit it wants.

What's left over is the cost So the automakers

better build a car to that cost because if it

doesn't, it's hurting its profit margins.

• Cars and trucks could be assembled

quicker. The goal is to get the vehicle in the

hands of the buyer in less than a week.

Today, it takes about 40 days.

Assembly is faster because less of the

vehicle is assembled in the automaker's

plant. Suppliers will do that at nearby sites

and ship the entire module into the plant,

delivering it to the exact location at the exact

time it's scheduled to be added to the vehicle.

The reduction in parts is impressive. For

example, Ford used to assemble about 120

parts to make the instrument panel (lP) for

the Escort. Today, the IP for the Escort's suc-

cessor, the Focus, comes in as a single part.

• Instead of parking 60 days' worth ofcars on every dealer's lot, automakers couldbuild cars to order. That would free up bil­lions of dollars in finished goods inventory,cutting car prices while providing automak­ers with better profit margins.

• The cost of designing, engineering andmanufacturing a car will be shifted to suppli­ers. An automaker still has to pay for that inthe piece price, but ifthere's a recession or thevehicle doesn't sell, the supplier is stuck withcarrying the overhead, not the car company.

• Buying modules from suppliers freesup space in automakers' assembly plants.The modules also come in pre-acljusted andpre-tested. That saves all kinds of time andmoney. When Mercedes-Benz built its newassembly plant in Alabama, it turned to

megasupplier Delphi to provide modularinstrument panels for the M-Class sport util­ity vehicle. That alone saved Mercedes40,000 square feet of floor space, andbetween 30 and 70 people per shift.

A Risk Worth TakingMost of the progress made in auto man­

ufacturing over the last century has beenincremental- simply refinements to Hen­ry Ford's classic 1913 assembly line. Toy­ota's production system of the 1960s tookFord's idea to its most efficient end, andagain reshaped automaking on a globalscale. Many experts see Modular manufac­turing as the Next Revolution, but makingit happen in such grand dimensions won'tbe easy.

There are major obstacles to overcome.Huge costs. Massive restructuring. Controlbattles between automaker and supplier.And possibly labor war. Indeed, the fear ofunion resistance in North America is whythe real hotbed of modular activity is cur­rently in South America, where mlions areweak.

"If it works down there, tlley'll try to doit up here," predicts Ron Harbour, presi­dent of Harbour and Assoc., a Troy, Mich.­based manufacturing consultancy. Suchefforts could slow even the most aggres­sive company's momentum - and dam­age its product quality in the process. Butthese are risks that automakers and sup­pliers appear willing to take, in order tosurvive and prosper.

Modular Mania:A Special Report

In this special 10-page cover story,Automotive Industries' editors tackle

WHAT IS A MODULE?

In its simplest form, a module is an

assembly made up of different car

parts. When the module is bolted onto

a car, it allows many different parts to

be installed at the same time. It may

be a "corner" module that comprises

the brake, suspension, shock absorber,

wheel and tire. It might be a front-end

module that contains the radiator, cool­

ing fan, headlights and bumper. Or it

could be a rolling chassis that includes

everything needed to make an entire

vehicle but the body and interior.

Typically, a module is made up of

parts that require different engineering

disciplines to interact with one another.

That's different than other assemblies.

For example, bumper engineers

design a bumper assembly but a front­

end module requires bumper, lighting,

cooling and body engineers.

Different automakers and suppliers

have different ideas of how many

modules will be needed to make a car.

Some say 16, some say 8 and others

say three.

One thing's for sure. There is no

industry-wide definition.

Says Bill Carroll, president of Dana

Corp.'s Automotive Components

Group: "Everyone is trying to define

what modular is, from a brake corner

to a rolling chassis to maybe even a

full vehicle. There's no clear answer."

Modular Mania head-on. We explain whysuppliers are salivating at the prospects ofa modular future - and why some of theindustry's best-known experts call modu­larization "dangerous."

We'll talk to the field marshals who areleading the modular charge, and find outwhat "going modular" means to their com­panies' R&D costs, purchasing plans, andmanufacturing operations. We'll take youto today's leading modular auto plants,and provide a glimpse of the factoriessoon to come. And we'll tell you why themodular concept won't blossom withoutorganized labor's blessing.

It's a transformation taking place global­ly. Here's what Modular Mania's all about

f'1:PROCESS f MODULAR MANIA (CONTINUED)

Changes In the Wind

ISSUE TREND OUTCOME

Modularization is shaking up the industry more than HenryFord's moving assembly line did 100 years ago.

Supplier R&D costs up Suppliers do more work but R&Dcosts continue to average between3%-6% of sales; sales volume,however, will increase.

Number of suppliers down Could decline 25%-40%

Number of workers down Could drop 30%-60%

Cost savings up Could be 25%

To the average consumer, click­ing together a bunch ofmodulesto build a vehicle should be ­pardon the pun - a snap. Notso. As automakers start down

this road, they're beginning a trend that ismore revolutionary than the moving assem­bly line invented more than 100 years ago.

The entire automotive infrastructure ischanging. Suppliers are becoming morepowerful and defining vehicles from thevery beginning of development programs.Some will go out of business, and thosethat remain will be heavily involved inpartnerships. The number of workers inassembly plants will dwindle - some saybetween 30% and 600A>, depending on thevehicle as they strive to cut waste andcosts by up to 25% (see chart).

That's the scene five to 10 years fromnow, but the dlive toward modularizationis dramatically changing the industryalready. Faced with sliding margins and anever-ending desire to cut costs, automak­ers are pushing more and more researchand development costs into the supplybase as they ask Tier One companies todesign and build modules.

Changing Supplier RelationsThe suppliers' R&D bill is going up, but

then so are their sales. "We'll keep ourR&D costs around 5% to 5.5% of sales,"says Dan Jannette, president of Lear'stechnology division. But Lear and otherTier One companies that expect to soonbecome systems integrators - suppliersthat create and assemble huge modulesfor the automakers - are licking their col­lective lips at the skyrocketing bottom linethey envision with modules. For their part,the automakers are drooling over savingin the range of 20% to 30%

To accomplish those goals, these sup­pliers are buying up one another and

quickly gobbling up smaller companieswith specific expertise. That meansthey're working with fewer Tier 1\vo andThree suppliers. "We are looking for a 25%reduction in our supply base over the nextfive years," predicts Lou Salvatore, Lear'spurchasing chief. "Our suppliers must alsobe able to put together a module or sys­tem and assemble multiple technologies."

The idea is to "leverage the knowledgeof suppliers," says Gary Cowger, whorecently left Opel to run General Motorslabor relations. "We are co-designing withthem from the beginning."

Power ShiftAs the suppliers build more of the car,

they could become more powerful thanthe automakers, says Sheila Ronis, presi­dent of The University Group, a consul­tancy in Birmingham, Mich. "The auto­makers need to figure out what they needto do to keep their core competencies,"she says. "If they don't, they will give upcontrol to the suppliers." Other expertsdon't see such a massive power shift. Butthey do believe the suppliers will controlmore of the design and engineering ofvehicles.

Other changes are in the wind. Today,all cars and trucks are built in automal<ers'assembly plants. Perhaps not for long.GM, for example, has launched Project

Yellowstone for modular assembly plantsin the U.S. In traditional plants, parts, com­ponents and a few modules are added tothe vehicle as it glides down the assemblyline. At a Yellowstone plant, the vehicleleaves GM's plant at a certain point andmoves into an adjacent supplier operation.For example, the entire interior modulewill be added to the vehicle while it is out­side GM's plant.

Ford and DaimlerChrysler also havemodular strategies.

And the winner is...Chrysler will likely lead the move to

modularity in North America, predictsSandy Munro, president of consultinggroup Munro & Associates. Meanwhile,GM's plan could flop. "It isn't becauseGM is big and stupid or anything likethat," he says. "It's because GM doesn'thave a good relationship with the union,period." That is obviously why GM isbringing Cowger back from his whirl­wind four-month stint as head of Opel.Cowger is a manufacturing whiz, andGM hopes he can quickly improve itsstrained relationship with the union.GM's future, and the future of its modu­lar programs in North America, restssquarely on his shoulders.

If GM can patch up its labor relation­ship, some suppliers believe it willleapfrog all other automakers in moving tomodular production to boost its produc­tivity. But that's a big "if."

~!PROCESS ~ MODULAR MANIA (CONTINUED)

How Modular Plants Work

c.<:o-,

really leverage their suppliers, like electron­ics supplier Magnetti Marelli, to go alongwith the modular plan."

Berkt Group worked with Fiat duringthe Tipo program of the early 1980s, andhelped the automaker map out the car's 14modules. Bump notes that the Cassinoplant and 11po were launched beforeprocesses like design for assembly and sys­tems integration made modular a moreattractive strategy.

Because of this, the early Cassino-built11pos became infamous for poor service­ability - the modules made them expen­sive to repair.

Automakers began studying the benefits of modular construction before 1920, as AIreported in 1916. Some of them adopted elements of it, such as proprietary enginesupply, in the early years. But it took the Second World War, and its huge demands onship and aircraft production to prove modular 4,""construction on a grand scale. '.

In the U.S., modular assembly allowed Henry .. !J. Kaiser to build over 1,200 Liberty and Victory I Icargo ships, which his yards spit out at the rateof one per day. In 1944, with its coastal ship­yards under aerial bombardment, Germanywent to modular construction of its latest U­boats. A network of over 30 inland factoriesbuilt modular hull sections (photo, right), whichwere shipped by river barge to final assembly in three shipyards.

Aircraft assembly was even more modular. For example, 8-24 heavy bomber pro­duction at Ford's Willow Run, Mich., plant was bro­ken down into six subassemblies - center wing,nose, aft fuselage, engines, tail and outer wings, withtail sections built at the automaker's Rouge complexin Detroit. Control modules were assembled off-line.

~::l For the Martin B-26, Chrysler supplied center fuse­E lage modules, while washing machine-maker May­Ji tag built many others.~ Despite the lessons it

__irSl.~ learned during the war,the auto industry kept modularity dormant until the late1970s, when major makers in search of cost savings beganhatching modular plans. Fiat struck first in the mid-'80swhen it launched its pioneering Tipo model. It featured 14component modules, a new 1.0L modular engine, and anew assembly plant in Cassino, Italy, designed for the mod­ular production process. At that time, GM was designing itsoriginal Saturn cars and considering an entirely modularfront end unit (photo, right), which it did not employ. Ford'snovel 1991 Contour concept car pointed the way to today'smajor modules, including dueted cooling (by Siemens),front suspension/steering (TRW), rear suspension (Eaton)and modular brakes (In).

PLANES AND SHIPS LAUNCH MODULAR MANIA

aircraft and shipbuilding industries of the1940s (see sidebar, below), but it was Fiatthat first seriously applied modular meth­ods to automaking. In the mid 1980s, theItalian giant launched the Tipo, the Cassinoplant and the F1RE series engine for modu­lar assembly.

"It was easy for them to go modular inbig volume," recalls Bradley Bwnp, vicepresident of the Berkt Group, a technologyand management consulting finn. "Fiat wasvery vertically integrated then. They could

They're changing the face of automotive production,and more are on the way.

Students of 20th Century auto­making know the names of thegreat plants by heart. HighlandPark. The Rouge. Wolfsburg.Toyota City. In another 100

years, a new list of names may be equallyrevered - led by Campo Largo, Cassino,Bambach, Melfi and Resende. Like manypioneers in history, these places are virtualunknowns today.

But not for long. They're the modularpioneers.

While the locations may be thousands ofmiles apart - Campo Largo's in southernBrazil, Bambach is in northeast France ­the new breed of modular plants sharemany key elements. One is the ultimate goalof having suppliers either in the assemblyplant, as is being done at Micro CompactCar's Smart car plant in Banlbach, or rightnext to it in a supplier campus, as many inthe industry are now doing. Another goal is

designing a vehicle that can be assembledusing roughly a dozen pre-built modules.

With this set-up, the automaker isresponsible for less than 100!o of the value­added assembly operations carriedout at the plant. Even body and paintshops may be owned and !Un by sup­pliers.

A third key goal is ultra-short dis­

tances between module delivery, orbuild-up, and the end product. Thismakes a compact shop floor. In theSmartplant, ajoint-venture between Daimler­Benz and popular watchmaker Swatch, noincoming module or material is less than 30feet from the assembly line. But it also meansthat the just-in-time production system mustftmction like ....well, like a perfect Swisswatch. Just building the tiny Smart carrequires 100 truck deliveries to the plant eachshift. Logistics and materials managementareeven more critical than in a traditional plant

Modular production was proven in the

(l< •1-:".

PROCE ••. MAN I A (CONTINUED)

Fiat has taken what it learned at Cassino

and is spreading it globally. Its Punto and

Pallo small cars, built in Melfi, Italy, and Belo

Horizonte, Brazil, respectively, employ high

modularization. As a result, it takes 12 hours

of direct labor to produce a Punto at Melfi,

and each employee will build over 70 cars per

yem; a worid-daEs rate. The level ofbought-in

modules totals over 7006 ofthe cars value.

Automakers have made their South Amer­

ican operations a beacon for modular assem­bly. VW was first with its Cans6rcio Modular,

the grand strategy of former purchasing and

manufacturing czar Iiiaki Lopez to make the

traditional assembly line obsolete. Lopez

latmched Cans6rcio Modular nearly two

years ago at the automaker's Resende, Brazil,

heavy truck and bus plant But it's a blueprint

for worldwide modular manufacturing.

What makes Resende such a pioneer is

that the buses produced are assembled as

four basic modules - cabin, chassis,

engineltransmission and suspension/­

axles/wheels. The modules are built by sup­

pliers inside the VW plant The modules arebuilt in cells, or "mini factolies: close to the

main assembly line. Suppliers have full

responsibility for their cells from purchasing

to inventory control, tool maintenance, quali­ty, worker safety, wages and even labor griev­

ances. VW provides only the plant's basic util­

ities such as water, heat and electricity.

THE MODULAR ASSEMBLY PLANT

Provided by Munro & Associates, Inc.

Automakers are moving from today's 14 to 15-module car, to 10 modules - or less, as shown inthis graphic of a modularized assembly plant. In some companies' future plans, the bodyshellitself is treated as a module and will be built in body shops run by suppliers. Wheels and tiresare being treated as a module today at Mercedes' U.S. plant, which receives wheel/tire ''mod­ules" in line sequence from T&WA, a local supplier that pioneered the concept.

The buses built at

Resende are obviously

simple body-on-frame

products with few ifany

options - perfect for

modularity. But VW be­

lieves it can spread the

gospel into unibody vehi­

cle manufacturing In this

level of modular assem­

bly, the automaker con­

trols the basic body fram­

ing, while suppliers take

the closure panels

(doors, hood, decklid,

etc.) and everything else.

Even the paint shops the

company envisions willbe owned and operated

by a supplier.

VW plans more modu­

largrowth in SouthAmeli-

GM M-Benz BMW VWU.S.A. Chrysler Ford U.S.A. U.S.A. Toyota H!lnda Mexico*

Dana (Blazer) Dana (Neon, Dana ZF-Lemforder ZF-LemforderJeep), Tower (Ranger)

Delphi-Saginaw TRW

JCt Prince, JCI Prince, Becker, Becker Lear Lear IrausaLear, Magna, Lear Lear (Accord,UTA, Delphi, (Sebring, (Mustang, Civic)Irausa T&C, Talon) Windstar)

Cockpit Lear, Becker, Textron, Lear (CDW27), Delphi SAL (Z3), Becker SALTextron, Delphi, Becker Becker VDO,SAL (Prowler! Becker

Lear (25 models) JCt, Lear Visteon, Lear Lear(Z3, M) JCI Lear JCI(Passport)

Door Module Becker JCI, Becker MeritorDoor Plug Delphi, Lear Becker, Lear Lear Brose

Front End Visteon Hella

Van Rear Hatch Lear Lear

Front Cooling Calsonic Hella

Rear Suspension Delphi ZF-Lemforder ZF-Lemforder ZF-Lemforder, TRW(Explorer), BentelerVisteon

SAL: Sommer A/libert; • New Beetle information; Sources: Berkt Group, AI (VW info); T&C: Town & Country

MA.JOR MODULE USE BY NORTH AMERICAN AUTOMAKERS

D Shifter/brake module(I Rear suspension modulen Powertrain module (includes front subframe, suspension, steering and brakes)[I Cooling module1111 Chassis module[I Door removen Front bulkhead[J IP moduleIl Glazing modules (includes windshield and backlite)rnI Front end/rear end modules (includes bumpers, lamps, fascias)

Headliner modulern Wheels and tiresm Front/rear seat modulesm Door inner module (joins painted door outer)rn Door install

have teamed up to build Dakota pickup

trucks featuring a completely modular

"rolling chassis." The chassis are built by

Dana at a plant five miles from Chrysler's

facility, and shipped by truck on the hour to

the final assembly line. Soon Durango BUYs

will join the program.

To build the rolling chassis, which is virtual­

ly ready for engine/transmission and body

installation when it arrives at Chrysler, Dana

manages 16 different suppliers. The project

allowed Chrysler entry into the Mercosur mar­

ket (Argentina, Brazil, Paraguayand Uruguay)

with verylowinvestment- theplantcostjust

$315 million, versus $1 billion or more for a

traditional assembly operation. It's a low-vol­

ume operation, geared to build 5,000 trucks

this year, rising to 36,000 a year by 200l.

Dana's $14 million chassis plant on the

other side of Campo Largo is also small. It's

under 77,000 square feet, compared to the 2.9million-square-foot Chrysler Warren, Mich.,

pickup truck plant. The Dana operation

employs only 100 people, who man 12

assembly stations.

It's a slow, steady start. Many other plants,

and the new vehicle programs slated for them

in North America and Europe, are being con­figured for modular assembly. Clearly, modu­

lar auto production is here to stay. The next

question is, will it go as far as Ford's mass pro­duction did over 80 years ago?

* SOA: Supplier quality assurance measures each supplier's quality levels(1) Four torques to vertically install the module up and into the vehicleSources: TRW; GM, Chrysler

The traditional way to build up afront suspension systemwas to do it part by part, right in the automaker's assemblyplant. Now, receiving the complete suspension system asa ready-to-install module offers the following advantagesto automakers:

WithModule

1141a2aoa

'I I' I I I

Number of suppliersNumber of components/part numbersNumber of fastener torques neededSQAvisits/certificatio.ns per year*Production area required (ft2, xl,OOO)Direct asiemb'IY.labor (people needed)Indirect assembly labor (ditto)Engineering change coordination headsModule assembly supervision

Chrysler, Dana Modular PickupsLike VW's Resende bus plant, Chrysler's

new light truck plant in Campo Largo, Brazil,utilizes the potential of body-on-frame for

modular assembly. The automaker and Dana

ca Its new Brazilian plant will build Golfs and

Audi ASs, which share the same platform. It

will also make small trucks using modular

assembly inanew Skodaplant in Aratu, Brazil.Not to be outdone, GM and Ford are

bringing big modular plants, with code­

names right out of an old Tarzan or Bogart

movie. GM's so-called "Blue Macaw" project,

starting with a $600 million plant in Gravatai,

Brazil, will build up to 120,000 modularly

assembled cars when it launches next year.Ford's recently announced "Amazon" pro­

ject, in the southern Brazil town ofGuaiba, isa $1 billion investment aimed at producing

the B226-code small van in 2001, followed by

a modular Fiesta a year later.

~~PROCESS "\ MAN I A (CONTINUED)

The Downside of ModularWarning to the mod squad: Like every fad that sweeps theauto industry, modularity doesn't live up to its billing withthe experts.

Some speculate that soon afterthe turn of the rnillenniwn,modular mania will push theauto industry back to its roots ­to when automakers were

coachbuilders, assembling big chunks ofthe vehicle from suppliers' stores. But holdyour horses (and buggies). Poten­tially high costs, questionable qualityand severe labor relations problemscould put a burr under modulariza­tion's saddle.

"The modular theory is danger­ous," warns Sandy Munro, president

of consultancy group Munro & Asso­ciates. "It's fine to think of modules,

but each one has to make its ownbusiness case and many don't. Theworst thing you could do is sub­scribe to the idea that modular is theanswer. Then you all run cheering off

the edge of a cliff, like a bunch of lem­mings." The problem is, there are no con­

crete facts that prove the modularapproach is inherently cheaper, says Jim

Harbour, president of Harbour and Assoc.,a manufacturing consultancy. "1 was justtold by one of the top guys at GeneralMotors that everybody is proposing mod­ules now, but the cost is out of sight," heexplains. "Chrysler and Ford say the samethings to me."

"Either you want to get rid of labor oryou are already so inefficient you can'thurt yourself. That's the only two reasonsyou'd consider going all-modular in vol­ume build. Efficient companies like Toy­ota, Honda, Ford and others could onlygo backwards."

Strikes, sabotage and rampant unemploymentcould negate any of the positive aspects ofmodular assembly. Suppliers can count on adrive to organize their employees.

Michael Tracy, virtual partner, Munro &

Associates, also a consultancy, claims thesenew "Tier 0.5" suppliers will unwittinglybecome responsible for the once-confiden­tial safety, warranty and liability issuesthe automakers try to hide, forcing them to

WHAT'S WRONG WITH MODULAR

raise prices or risk going out of business."The OEM can amortize problems over anentire car when something comes up," hesays. "If you've got one tenth of the car andlO00!o of a safety problem, you're dead."

Labor problems, both salaried andhourly, are even more difficult to resolve.Modularization means fewer jobs for engi­

neers and autoworkers in the auto compa­nies. While some believe suppliers willhire engineers laid off by the automaker inthe wake of a move to modular, Harbourdisagrees. "Anybody that believes that isnuts," he says. "Modular means you don'treinvent things. The foundation for a mod­ular part is the same for all customers.And suppliers already have all the peoplethey need to do that." (see p. 79.)

On the unionized plant floor level, thepicture is even more ominous since some

experts predict half the assembly plantworkforce could be eliminated. "Clearly thenwnber of people in an assembly plantgoes down, but it doesn't necessarily saythat the plant where the modules are com­ing from has a reduction," says ChryslerChairman Bob Eaton. "Overall it's a redistri­bution of employment, but not necessarilya reduction," he says.

Harbour speculates that GM's movetoward modularization is influenced by therecent UAW strikes. "It's an effort to bustthe union," he reasons. "GM only knowshow to play hardball. They lost money andnow it's payback time."

High CostTo date, highly modular plants trail con­

ventional facilities in efficiency, output andquality.

Modules only make sense when thesupplier isn't outsoUrcing a lot of compo­nents, Harbour cautions. Otherwise theyare far more expensive and tend to usesuppliers not approved by the automaker."Don't believe anybody that brags aboutlower cost and higher quality," he adds.

Disadvantage ReasonCost Higher freight cost, increased damage, double or triple handling, uncon­

trolled outsourcing, reduced competition, supplier less efficient than OE,less throughput.

Quality OE doesn't oversee testing/supplier selection, promotes blame shifting,problems are buried in module, poor engineering integration, eliminationof competition.

Labor Layoffs of efficient manufacturing force, strikes, work slowdowns, lostknowledge, massive unemployment, retaliation/sabotage.

Serviceability Modules more difficult to replace, repair loops in plants ineffective, moredisassembly required, cost of module much higher than single parts.

Knowledge OE loses competitive advantage, suppliers can become competitor,inability'to differentiate product, dependence on supplier for innovation.

Source: Harbour and Assoc., Munro & Assoc., The Agile Group

\!<

PROCESS MAN I A (CONTINUEDI

Suppliers Primed To PounceChassis and suspension systems are ripe for the nextmanufacturing revolution. Interiors are already there.

Suppliers that can't producemodules will lose control oftheir destiny, and, perhaps,even their companies. There'sno way around it.

"There's no other option, modules arethe way forward," says Frank Boccabella,a TRW vice president. "If we don't get intothe modular business then we're going tobe relegated to a Tier Two status, whichmeans we will not be supplying directly tothe OEM (Original Equipment Manufac­turers). And it gives that Tier One supplierthe option to control (which Tier Two andTier Three companies) it wants to supplythe components."

Many industry experts expect themove to modular manufacturing will dra­matically shrink the number of Tier Onesuppliers. AB suppliers merge with oracquire each other to increase their capa­bility to make modules, there will simplybe fewer suppliers left. Experts predictthe number of Tier Ones will shrink fromapproximately 3,000 today to just 150within the next decade. And the 50largest are likely to emerge as the domi­nant players.

So the race is on. Interior megasuppli­ers began the rush to modularization a fewyears ago, and continue to lead the way.The next breakthroughs will probablycome from suppliers of suspensions andstructural parts. For example, Ford's nextredesign of the Explorer, which will debutin 2001, will feature a modular multilinkindependent rear suspension developedcompletely by the supplier.

New Modules"We've just done a 'black box' design

proposal for a rear suspension modulethat includes brakes, shocks, differential­everything except the four bolts to attachit to the vehicle at the assembly plant,"

says Tower Automotive's Marv Hyma.TRW claims its suspension and steeringmodule, which it already supplies inEurope, triples productivity, reducesrejects 98%, cuts inventory 95% andreduces manufacturing floorspace 60%.

Dana pioneered the rolling chassis withits Brazilian Dodge Dakota plant. Nowother chassis systems suppliers want a

Siemens' induction module. aimed at a 2003­model V-B, combines air-intake. engine-con­trol and fuel-delivery systems.

piece of the action. Visteon will beginbuilding a rolling chassis for rear-wheel­drive trucks. For cars that use front-wheel­drive, TRW has offered to attach engineaccessories and transmissions, frontcrossmembers and comers. If that ideasells, the next step would be to install thecoolant and fan system.

"Automakers are used to working withbillion-dollar program budgets. We're not,so we inlprovise and are forced to dothings more cost-effectively," explainsClive Spaclanan, TRW vice president oflinkage and suspension systems.

Plans are also in place to implement theonce-unimaginable concept of a supplierproviding the entire interior of a car. "We'll

see complete interiors soon," predictsMatt Ospeck, executive director of mar­keting and planning for Magna's Symatecsystem-integration unit. "We're close tothe idea of an interior as a single part num­ber." Visteon, for example, showed a sin­gle-module cockpit at the recent ParisAuto Show.

What's InsideSommer Allibert will assemble com­

plete doors, including all trim, inside anOE plant by 2002. "All our mod­ules are designed so you canreplace any single part," saysGeorg Laukart, SAL vice presi­dent for orth American salesand marketing. "It must be easi­er and less expensive to repair,so that the customer sees thebenefits as well as the manufac­turer." A supplier providingeither chassis or interior mod­ules should be able to reduceboth cost and weight by 30%,says Mark Glasson, LucaslVarityBody Systems director of busi­ness development. He predicts

by 2003, 26% of instrument panels and33% of steering systems will be suppliedas modules.

Similarly, Siemens has developed anengine module that incorporates every­thing above the intake ports into a singleoutsourced unit. Developed for a 2002­model V-8, it includes engine control, fueldelivery, air intake and filtration. Siemensdesigned the reinforced nylon-6,6 moduleto minimize noise and maximize torque.

There's no telling how far automakersand suppliers may push the idea of modu­larization on vehicles bowing after 2003.We won't have a real handle on the strate­gy until after the shakeout in the supplierconununity is completed, probably shortlyafter the turn of the century. After that,look for the suppliers to not only control,but create their own destinies.

PROCESS ~ MODULAR MAN I A (CONTINUED)

The Mod Squad Takes OverThe final path to modular mania is not set in stone. But onething is clear - it is the future of the industry.

Picture this. You walk into adealership, point out the vehi­cle you want, sign the papersand three days later it's sittingin your driveway. Miracle of

miracles? No, that's the future, thanks totoday's push to build vehicles out of mod­ules. No more waiting 40 days for your carortruck.

Automakers that can get cars into thehands of impatient buyers in less than aweek are the winners in tomorrow's mar­ketplace. That means a better bottom lineand stronger margins, but it also means anentirely new auto industry. Manufacturingtechniques will change along with employ­ment levels, supplier input and labor rela­tions. There are caveats, too, includingengineering turf wars, lack of global stan­dardization and battles with the unions.

Even so, several modular plants will beon strean1 in the 2001 to 2002 timeframe.By 2005 to 2010 modular production couldexplode and become the most efficient,and profitable, way to make cars andtrucks, predicts Dan Jannette, president ofLear's technology division.

Automakers that need to be more effi­cient at assembly are pushing modularity."That's one of the reasons why you don'tsee the Japanese leading the charge here,"says Lance Ealey, an automotive specialistwith consultant McKinsey and Co. "Whatyou do see is a lot of Europeans leadingthe charge, with the Americans kind offalling in between." Fiat and Volkswagen,for example, are heavily into modular pro­duction in South America and are, today,the industry's leaders. Similar ideas are onthe drawing board at General Motors,Ford and DaimlerCluysler.

"The industry is saying, 'Okay, this isabout as far as we can go using convention­al technology,''' says Dave Cole, director ofthe Office for the Study of Automotive

'fransportation. "What's the next step?'"

Future FactoriesExperts suggest the factory of the

future will likely be packed with suppliersmaking modules with employees who arevirtually indistinguishable from auto com­pany workers, except they may be paidless. One option is known as the "straightgut" factory where suppliers would makemodules in what are essentially roped-offareas along one long line in the assembleplant. Suppliers would build their modulesand drop them straight into the car. "Whenwe did the financials, it was unbelievable,"says Sandy Munro, president of Munroand Assoc., an automotive consulting firm."Everybody wins, in theory." However, hepoints out, each module must make itsown business case. "When a modulemakes sense I am pro-module; when itdoesn't, I am anti-module."

With the automaker owning the build­ing and suppliers basically renting space,costs for heating, cooling and shipping goaway. "Suppliers would look after theirown little part, and whoever is in charge ofthat is going to micro-manage it to themax," Munro says. Suppliers will also havea stronger voice in designing the plant, arole traditionally left to the automakers.

That is crucial to interior suppliersbecause they want to supply completeinterior modules. That is a problem thatcould hold up modularity. "Every one ofthe big interior guys can show up with anentire package," says Munro. "The bigproblem is getting that package into thevehicle in one big lump." One solutioncould come from an experimental plantthat Mercedes considered years ago. In itscurrent incarnation, the top of the carcomes off. Known as a "clamshell car," theinterior is dropped vertic3.ny and followedby the roof, which could be attached using

structural adhesive."You can get a whole car made out of

plastic now, so making the roof out of acomposite and gluing it in after the interioris in place isn't anymore unlikely than tak­ing a lot of black goop and swapping out awindshield. They do that everyday," he says.

Some have even conjectured that oneday there may be only three vehicle mod­ules - chassis, interior and exterior. "Idon't think we're talking about anythingthat extreme yet," says Cole. At least forawhile it will be more like 15 to 20 mod­ules, and that will happen very soon, pre­dicts Hans Schardt, global manufacturingchief for Ford's new Focus, which isalready very modular.

Supplier InvolvementAs that happens, the Tier One suppliers

will be the major suppliers of all the sub­systems, says Sheila Ronis, president ofThe University Group, a management con­sulting firm. Meanwhile, the automakerswill be responsible for some of the designcharacteristics, or listening to the voice ofthe customer. But they're not really goingto be designing and engineering modules,she says.

"There's no escaping the big changethat's upon us," Ronis says. ''The challengeis going to be the OEMs' ability to createthe kind of partnerships they're going toneed with their suppliers. For Americancompanies that's not their strength - it'sone of their strategic weaknesses."

For their part, suppliers are hoping tocreate modules that could be used by sev­eral automakers. That cuts costs, savestime and boosts profit. That potentialalways exists, says Roman Krygier, vicepresident of advance manufacturing engi­neering at Ford. "There's probably going tobe some degree of standardization," hepredicts, "but I'm not exactly sure wherethat will fall. We all still want to have ourdifferentiation in the key areas for compet­itive advantage." Each module is unique to

a vehicle, adds Chrysler President TomStallkamp. "(Daimler and Chrysler are) try­

ing to find component commonality, butwe're not really looking for the door mod­ule that goes across Chrysler products, letalone Daimler's." Still, there are some nich­es that could be broad-based, though, suchas ABS systems. Other top contenders,Stallkamp suggests, might be navigationand entertainment systems.

Employment CutsNo matter how it shakes out one thing

is for certain. There will be fewer peopleworking in the automakers' assemblyplants and on their engineering and pur­chasing staffs because more of thoseduties will be handed over to the suppli-

ers. That means turf wars and, possibly, aslower move to modularity while that'ssorted out. "You're talking about their jobsnow," says Bradley Bump, vice presidentof the Berkt Group, a research firm."When you talk about outsourcing engi­neering or purchasing responsibility to amegasupplier, (the automakers) don'twant that. They'll try to find a way to keepthose jobs in-house."

The same is true for the UAW, whichwill fight vehemently to stop workforcecuts in the plants, unless it can reach anagreement with the automakers. It's pos­sible that as an enticement the auto com­panies could pressure the suppliers to letthe union organize their operations. Itwould seem a small price to pay for labor

peace and a more efficient way of build­ing vehicles.

"The only way to get through this is to sitdown and think it through together," saysone UAW official. "You must figure this outbefore the 60 days of bargaining." That'snext Jtme for Ford, GM and Chrysler.Because of that, labor experts predict thisnext round of bargaining will be extremelydifficult and will determine the future ofmodular production in the United States.

Whether or not American unions sup­port it, Modular Mania will certainly flour­ish wherever automakers can use its fullpotential. Those companies that do willown the future, while their customersenjoy new, built-to-order cars and trucksdelivered in a week - or less.•

THE FIVE-MODULE CAR They'll be assembled like the scale-model kits you bUIlt as a kid, and may even include a drop-m "pod" interior.

CHASSIS: Light trucks with body-an-frame constructionwill be built on rolling-chassis modules, such as Dana andChrysler are now pioneering in Brazil.

r---"-:;;;ijiiiiiiiiiiiiiiiii;;;;:-i

ELECTRONICS/WIRING: A sin­gle module. integrating the con­trol electronics, wiring and allhardware. will service the entirevehicle.

INTERIOR: The concept of the total interiormodule - a "pod" that can be virtuallydropped iota the body - will move closer toreality. '

FRONT-END/POWERTRAIN: A com­mon subframe will mount the engine(itself wearing a modular inductionsystem) and front-drive. with suspen­sion. brakes and cooling module.

FRONT CLIP: Complete front-end mod­ules. including lamps. fascia. bumper andperhaps cooling module will be bolt-onaffairs. Saturn considered such a unit inits early phase (see sidebar. p.38).

Reprinted from AUTOMOTIVE INDUSTRIES November 1998©1998 by CAHNERS BUSINESS INFORMATION

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