1. The Automobile Industry: A Never-ending Competition Sector Giuseppe Volpato Ca’ Foscari University of Venice YICGG – 2008 - Rome

2. 2 Contents  Why Automobile Industry Is So Important ?  What’s the Shape of the Automobile Filière ?  Main Changes in the Automobile Demand  Main Changes in the Automobile Supply  How to compete effectively?

3. 3 Automobile Industry as Employment Generator in EU Metal Raw Materials and Machine Tools 1,540,000 Textiles, Glasses and Chemical Row Materials 300,000 Tires and Rubber Parts 660.000 Automobile Component Manufacturing 1,300,000 Automobile Industry (Final Assembly) 1,854,000 Services Connected with the Vehicle Use 890,000 Vehicle Distribution and Maintenance 3,150,000 Transportation Services 9,360,000 Automobile Market Employment of EU Automobile Industry No. 1,854,000 Employment of EU Automobile Filière (overall Supply Chain) No. 6,304,000 Employment of EU Automobile Industry & Related Activies as a whole No. 19,054,000

4. 4 The Automobile Industry is a Key Sector for:  New Technologies Development  New Process Organization ( Fordism, Lean Production, WCM )  Creating and Learning New Jobs  Industrial Practice Diffusion in all Industrial Activities  People and Goods Transportation

5. 5 Contents  Why Automobile Industry Is So Important ?  What’s the Shape of the Automobile Filière ?  Main Changes in the Automotive Demand  Main Changes in the Automotive Supply  How to compete effectively?

6. 6 Automobile Filière (whole supply chain) 2° T OES 3° T OEM Nat. Branch Dealer Customer Orders Service

7. 7 Cost Structure in Car Manufacturing and Assembly Total capacity Break-even Profit Loss Fix cost prevalence

8. 8 Cost Structure in Car Distribution (Dealer) Quantity Cash Prize given to Dealers by Manufacturers Profit Loss Break-even “sure” customers “doubtful” customers Maximum profit variable cost prevalence

9. 9 Contents  Why Automobile Industry Is So Important ?  What’s the Shape of the Automobile Filière ?  Main Changes in the Automotive Demand  Main Changes in the Automotive Supply  How to compete effectively  Why Automobile Industry Is So Important ?  What’s the Shape of the Automobile Filière ?

10. 10 The Motorization Process 2000199019601980 1970 Cars for 1.000 inhabitants in different countries 150 300 750 450 600 2010

11. 11 Affluent Families Poor Families 1960 The Pattern of Motorization – The Italy Case Distribution of families by income Families with a car

12. 12 Affluent Families Poor Families 1960 19701980 1990 2000 The Pattern of Motorization – The Italy Case In 2006, 95% of families has 1 car and 43% owns 2 or more cars

13. 13 Car Park Growth in W.Europe (Average growth ratio in the decades) ‘50-’59 ‘90-’98‘80-’89‘70-’79‘60-’69 ‘00-’07

14. 14 New Cars Registration in W.Europe (Average growth ratio in the decades) ‘50-’59 ‘90-’99‘80-’89‘70-’79‘60-’69 ‘00-’07

15. 15 Evolution of the Car Range in W.Europe No. of ModelsNo. Of Versions

16. 16 Model Car Cycle in W.Europe (1970-2006)

17. 17 N.A. Asia W.Europe New Car Registrations – Market Forecasting Million of cars

18. 18 E.Europe Africa and M.E. S.America New Car Registrations – Market Forecasting Million of cars

19. 19 Contents  Why Automobile Industry Is So Important ?  What’s the Shape of the Automobile Filière ?  Main Changes in the Automotive Demand  Main Changes in the Automotive Supply  How to compete effectively

20. 20 A Sector Characterized by a Very Strong Competion Process  Competion produces a concentration of makes  Competition reduces profit margins  New labor division between car manufacturers and suppliers  Competition spurs product and process innovation and cost reduction

21. 21 1960 = 511970 = 381980 = 331990 = 272007 = 16 Car Manufacturers – Concentration Process Acquisitions and Mergers Among Makes

22. 22 Component Suppliers – Concentration Process 30000 10000 4000 100 600 2000 0 5.000 10.000 15.000 20.000 25.000 30.000 35.000 199020002010 0 500 1.000 1.500 2.000 2.500 Total Suppliers1° Tier Suppliers

23. 23 Structural Overcapacity (milion units) 80 18 62 22,5% Capacity Production 20052015 87 15 72 17,2% Capacity Production

24. 24 Contents  Why Automobile Industry Is So Important ?  What’s the Shape of the Automobile Filière ?  Main Changes in the Automotive Demand  Main Changes in the Automotive Supply  How to compete effectively

25. 25 How to Compete effectively  Invest in Low-cost countries  Utilize Word Class Manufacturing Procedures  Smart Standardization and Differenziation: less architectures, less components, more models  Reduce Time-To-Market  Industrial agreements for commonalizations  Product and Process Innovation

26. 26 Labor Cost per Hour (2003-2009 values in US $) 0,00 5,00 10,00 15,00 20,00 25,00 30,00 35,00 40,00 Germany USA Japan UK France Italy Spain Korea Taiwan Czech R. Hungary Brazil Poland Russia India Cina Indonesia 2003 2009

27. 27 Average Number of Defects for Work Shift (Body Sealing Station) Application of WCM

28. 28 Average Number of Defects for Work Shift (Body Welding Station) 0 20 40 60 80 100 120 140 160 Application of WCM

29. 29 13 10 5 6 No. of Architectures 6 19 6 16 6 11 6 Architectures in 2002 New Architectures 20062008 E2010 E2012 E New models by each Architecture Production by each Architecture 1.72.73.7 150 K450 K270 K Cost Reduction through Common Architectures (The Fiat Case)

30. 30 Different Types of HVAC Modules (Heating, Ventilation & Air Conditioning) Cost Reduction by Component Standardization (The Fiat Case)

31. 31 Concept Definition Technical Concept Definition Technological Development Tooling Process Validation Pre-series Ramp-Up Kick Off Briefing Start of Development Technical Validation Job 1Launch - 26- 16,5- 4 2001 Stilo 2006 Bravo - 18- 9- 2,5 2008 Delta - 15- 9- 2,5 Cost Reduction by TTM Compression (The Fiat Case) Use of Simultaneos Engineering

32. 32 Investments in Innovations (R&D + Capex)

33. 33 What Next?  The return of the Great Empires: China, India, Russia are using the domestic market as levier for gaining new competitive position  The necessity to stop the global warming: New Technologies (electric car, ethanole of 2° generation, hydrogen, etc.)  The necessity to stop fuel guzzler cars: Substitute heavy car (SUV) with city car

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