Volkswagen (VW) and its Modular Transverse Matrix strategy for part commonality

An article in Fortune (July 23, 2012) describes VW’s plan to standardize the 60 % of a car model’s cost – the front axle, heating, air conditioning etc across 40 car models and thus seven million units. The projected savings in development costs is 20 %, part costs saved is estimated to be 20 % and production time saved is estimated to be 30 %, thus suggesting a “$ 3 billion in annual savings or $ 500 a car”. But worries about the flip side of standardization is that these models become commodities, potentially losing their brand premiums. Will the current growth in sales and profitability be fleeting, and be followed by a longer term loss in market positioning as consumers become unwilling to pay the premiums associated with some models ? Will the supplier benefit to standardization drop margins for spare parts ? Will such standardization increase the flexibility for VW to expand globally or become its Achilles heel ?

About aviyer2010

Professor
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