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OM in the News: The Promise and Perils of Modular Design

March 29, 2012

If you are an auto aficionado ( and who isn’t), you will enjoy the Wall Street Journal (March 10-11, 2012) article sizing up the recent Geneva auto show, which highlights all the new vehicles and concept cars. Although half the article lambasted the new Bentley SUV (photo shown here) as “graceless, frightening, cynical, and terrible attempt to translate Bentley’s sleek styling” into a Range Rover, the heart of the piece was really on how OM plays a major role in design today through modularity (see Ch.5).  Indeed, Bentley and Lamborghini  are just 2 of 11 brands to share VW’s SUV architecture. VW will soon be building all its cars under only 4 modular “toolboxes”; one for city cars, one for mid-size cars, one for midengine sports cars, and one for large vehicles such as the Bentley SUV, Audi 8, and Porsche Panamera.

Eleven brands, scores of different models– from tiny to enormous and slow to fast–all with 4 toolboxes. The new Audi A3, for example, shares a platform with the VW Polo/Golf/Passat/ Tiguan, as well as the Seat Leon and Skoda Octavia. Up to 44 vehicles will be built on the platform, resulting in material savings of 20% and facility savings of 30%. This is because vehicles built in the modular system allow production to be modularized. VW will be able to rapidly shift production from one factory to another to anticipate regional demand and capacity. Similarly, Fiat/Chrysler is building its new Maserati SUV on a shared Jeep Cherokee platform.

The prevailing wisdom is that successful companies will have to reach a critical mass–6-8 million vehicles/year– to achieve economies of scale, most-favored status among suppliers, and to avoid fatal exposure in any one market. Only Pagani’s Huayra hypercar–all 700 HP and $1.5 million price tag–will have 4,700 custom-made parts ; it does not share a single switch, light bulb, or horn with any other car on the planet.

Discussion questions:

1. Why is modular design so important in the auto industry?

2. Which auto manufacturers have already obtained “critical mass”?

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