Modular supply is failing to deliver benefits for suppliers, according to industry experts SupplierBusiness.

Edmund Chew, editor of SupplierBusiness, said that the fact that ZF Lemförder Fahrwerktechnik, a subsidiary of ZF Friedrichshafen, saw a fall in profitability in 2005 despite a growth in sales of 18% is the latest signal that modular supply strategies are not bringing results.

The failure of Collins & Aikman and Lear to make a success of delivering complex interior modules is further evidence that modular assembly does not bring higher profitability.

In an editorial Chew said some of the more successful suppliers in recent years are those that have kept out of the modular supply business or limited their exposure. Modules were supposed to give suppliers an opportunity to make more money by controlling more of the value-added in the vehicle.

By better integration of functions and savings on assembly costs the first tier module integrators expected to be able to reduce costs significantly and enhance their own profits by efficiently managing second tiers while passing on some of the reduction to OEMs.

But it has not worked like that. Savings have been harder to achieve than expected and car makers have been unwilling to pay for the cost of integrating the modules. Modularisation has been largely an outsourcing operation that has often just added empty sales value to the supplier's top line - and in fact it has increased their vulnerability to cost inflation or product failures at the second tier level and cost down pressures from OEMs, said Chew.

Chew notes that there have been successful module suppliers - Brose and HBPO may be two examples - but the most successful first tiers' strategy appears to be to operate as a systems and technology leader, not a large integrator, at least on the evidence to date.

Chew is also the author of the Modules & Systems Report, published by AutoBusiness.