CAR

German car manufacturer

German car manufacturer

Introduction

The objective of this paper is to examine the changes in the German car industry and in particular the impact these changes are having on the car makers and their relationships with their suppliers. Germany's car market has become saturated with demand on a replacement basis only (Simonian, 1996a). With excess production capacity and the poor outlook for car sales, the German car industry requires structural changes to balance supply and demand.

Studies of the international competitiveness of the German car industry have shown some cause for concern. For example, in relation to quality the differential between Germany and Japan and the US is quite substantial with German defect rates seven times higher than Japan's and five times more than those found in the US (Oliver et al., 1996). The globalisation of the car industry is affecting the German car makers.

In the past, the Germanyan-based companies have concentrated on having a regional presence whereas the major global players such as GM, Ford and Toyota have a “global” presence in the car industry. This has led to the German companies being trapped in a high cost base, coupled with the fact that they have been protected from the full rigours of competition by operating in a protectionist region (Payne et al., 1996).

In an effort to address these issues, the car makers are re-appraising their relations with their suppliers. There is a strong need for the automobile assemblers to collaborate with suppliers since they procure significant portions of the parts from outside companies. The German vehicle assemblers are restructuring their supplier relationship management by reducing the complexity of their supply and designating suppliers for whole components (Hyun, 1994).

The trend towards increased outsourcing has led the car makers to become more dependent on their supplier network. They are now pursuing more intensive and interactive relationships with their suppliers, collaborating in areas such as new product development, supplier development, and information sharing on a range of issues. With suppliers being given greater responsibility they are also sharing more of the risks in the development of new models.

For example, when moving plants to regions such as Eastern Europe or China the car makers are inviting their components suppliers to follow them into these markets (Simonian, 1996b). However, there is evidence to illustrate that there is a lack of trust between the car makers and their suppliers (Sako et al., 1994).

The German car industry

Structural changes in the German car industry

Faced with issues such as lower growth, new competitive pressures, changing demand patterns and increasingly hostile legislation, the world automotive industry faces an uncertain environment over the next decade. These new pressures are structural in nature with the potential to radically change the competitive landscape. They are already fundamentally changing the way vehicles are designed and built. This is having a profound effect on the car makers' relationship with their suppliers (Anonymous, 1995).

The demand for both cars and commercial vehicles in the major markets of North America, Japan and ...