The Modularity QuestionAre suppliers ready for bigger modules?

It's easy to understand why automakers find modularity intriguing. The concept lets suppliers build entire chunks of the vehicle and allows automaker plants to serve merely as points of final assembly where the big modules are installed.

The OEM provides overall vehicle engineering, but suppliers design and test their respective modules. Suppliers assume most of the grunt work - which they can do far more efficiently - while OEMs cut costly assembly plant labor.

The concept has been successful in instrument panels, doors and numerous other suspension and underhood components. But now many modules that are being proposed are even bigger and more complex. News that General Motors Corp. is serious about building small cars using only about 15 major modules as part of its Yellowstone project has suppliers clamoring for more of the action (see WAW - Feb. '99, p.40).

The advantage to automakers is obvious, but why are so many suppliers in love with the concept? If suppliers struggle to hit profit targets now, how will modularity solve that problem? If OEMs are reluctant to pay suppliers for extra engineering work required now for even simple parts, why will they pay for engineering modules?

Robert Bosch Corp. had 25 modular assembly contracts in the past five years and made money on only a handful for a variety of reasons. "The rest of them we had to call learning experiences," says Robert Oswald, CEO and chairman.

Suppliers say they will assume responsibility for warranty claims, but are they truly prepared for a massive recall? Do suppliers want to tie their futures much more directly to the success of a particular vehicle or platform? Do suppliers truly believe in the concept or do they see this as a strategy to win price increases and better hide their true costs from the prying eyes of OEM purchasing agents?

Despite all the hype, the move to modules - at least really big ones - is coming in moderation. GM, Ford Motor Co. and Volkswagen AG certainly are embracing it with major programs in Brazil, but DaimlerChrysler Corp., Toyota Motor Corp. and Honda Motor Co. Ltd. seem to be less enamored with taking modularity to extremes.

TRW Automotive will open a new plant early next year near DaimlerChrysler's Jeep plant in Toledo to supply front and rear suspension modules for the '01 Cherokee. The plant will provide final assembly of suspension components produced elsewhere.

TRW has supplied suspension modules for customers in the U.K. and Mexico, and it wouldn't open the plant if it were losing money on modules, says James Remick, acting general manager of TRW Automotive.

"Full service suppliers have to provide the engineering whether you're doing components or modules," he says. "And in terms of paying for it, they (customers) pay for it in the piece price."

French supplier Faurecia is, like others, building its identity around modules. The $4.1-billion supplier wants to provide full cockpit modules and has shown concepts to European customers. By 2007, the company expects 70% of European models to have single-source IP modules.

Despite cost concerns, the move to modularity holds great potential for innovative suppliers, especially in cockpits, says Donald Runkle, president of Delphi Automotive Systems' Energy and Engine Management. Delphi's assemblies include both front ends and cockpits.

"I think everyone is more or less scratching the surface (in cockpit modules)," he says. "I'm hopeful that if this is the right way to do cockpits ... that somehow OEMs and suppliers will get together and see where the waste is and chase the waste out, and overall the industry's cost to do cockpits will go down."