Parts suppliers' acquisitions bring confusion to multinational companies

According to recent reports from foreign media, Volkswagen is entering the quagmire in which Ford Motor Co. and General Motors are all deeply involved, and stripped off its own parts factories.

When this news came out, it was exactly when GM was getting burned by Delphi's bankruptcy. At the same time, mergers and acquisitions between the non-mainstream business units of multinational suppliers of Auto Parts are in full swing.

The most talked about is that in the face of the past, the reason why the public do so, in the end why? What will the result be? Will you repeat the mistakes of GM and Ford? Some people also said that in the face of current trends, in the new situation of mergers and acquisitions, the public's actions may have unexpected results. Because, people have already seen successful cases of mutual acquisition and reorganization in the mass supplier system.

In fact, for auto executives, it is a good strategy to sell or separate the parts and components sector, which will bring them praise from shareholders, investment funds and banks. This strategy has too many reasons to explain, first of all, the cost reduction, the company can purchase lower-priced parts from the market; secondly, the company can devote more energy to the higher profitability of brand promotion and vehicle design; Finally, when it comes to the level of division of labor and the use of global advantages, this strategy is more in line with the international image of a big car company. Multinational corporations are no longer all-powerful makers, but all-round integrators.

Not so long ago, Volkswagen AG announced the auction of Gedas, an IT service subsidiary. This move is considered to be a step in the mass cost reduction plan. Volkswagen has also become the second of the top 10 automakers in the world, outsourcing the IT business to IT service providers.

However, in the automotive industry, outsourcing is always faced with many positive and negative examples. At present, Ford of the United States, Toyota and Honda of Japan, and Peugeot of France still retain considerable IT departments. BMW of Germany also recently acquired an IT service company to strengthen its own subsidiary.

This time, Volkswagen also saw the opposite in the outsourcing of parts and components. The experience of Ford and GM fully reflects the danger of outsourcing strategy. In the automotive industry, the smallest possible vertical integration, that is, the ability to outsource processing to others as much as possible according to the production process, was once considered a magic weapon to solve any problems. They think that the many elements in the supply chain should be handed over to third-party vendors, and they can concentrate on core R&D and marketing.

But things don't seem to be so simple.

Delphi and Visteon used to be GM's and Ford's parts supply departments, respectively, and they have been disconnected from the parent company since the date of the divestiture. Now Ford and GM have had to pay a huge price for their restructuring. When Delphi announced its bankruptcy protection, General Motors, which is associated with it, could not find a second path other than bankruptcy protection. Opel, the European unit of General Motors, could not find a buyer for its parts factory in Kaiserslautern, Germany.

Let's look at successful examples. Porsche is undoubtedly the successful outsourcing executor, with less than 20% vertical integration (ie 80% of the components are provided externally). Toyota is another example of success. It personally manufactures the vast majority of parts rather than buying them. Toyota Prius, a hybrid car, makes 70% of its parts. This not only ensures that the company's core technology is not obtained by competitors but also ensures continuous high quality.

Why is this so? Obviously, outsourcing is not a panacea. For profit markets, such as the market in which Porsche is located, the strategy for product effectiveness does not necessarily apply to large-scale manufacturers.

One thing is right. A well-run car company should not make those simple parts such as exhaust equipment, model products, axles, and those that require high investment, such as brake systems and engine control.

But what about the seat? Each part on the car will not be closer to the user than the seat. A comfortable seat may decide to buy once. When the outsourcing trend reaches its limit, all cars use the same seat, steering wheel and transmission system, and all cars lose their own characteristics.

For the automotive industry, while undergoing nearly a hundred years of development and achieving high standardization, many manufacturers may have forgotten the ability to differentiate themselves by making high profits, such as advanced technology and unique design. More and more manufacturers have chosen to develop different models of vehicles on the same platform. When their parts suppliers tend to be consistent, they can only swallow the bitter profits.

Outsourcing is not a wrong strategy, but a correct strategy should first be based on the analysis of its own technologies, products and markets. Moreover, the first priority of strategy is differentiation. The strategy for Toyota will certainly not bring good luck to GM.

Returning to the public's example, no matter what, selling spare parts factories would not solve the core problem of the public: its factories have not been fully utilized, but they have paid workers excessively high salaries. If the public is still out of the dream of outsourcing to solve all these problems, they will not be able to solve these problems quickly, and its days will soon become difficult.

Similarly, those Chinese auto companies that plan to absorb global wisdom should also think about which way they should go.

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