Volkswagen has been the slowest car maker to outsource component manufacturing operations, but the change in the ‘Volkswagen Law’ could change that, according to component industry analyst SupplierBusiness.
Volkswagen employees have had a strong voice in the strategic decision-making of the company, resulting in the fact that it is almost a decade behind most of its direct competitors in outsourcing. It still has in-house operations assembling transmissions, shock absorbers and seats, for example.
Volkswagen unions will have just three of the 12 members on the new Porsche Holding SE supervisory board. If and when Porsche raises its stake in the company from 31% to over 50%, Porsche CEO Wendelin Wiedeking will, in theory, and probably in practice, have a lot more freedom to reshape the group’s strategy than any manager at Volkswagen has enjoyed for decades, SupplierBusiness said.
Volkswagen is unlikely to jump to Porsche levels of outsourcing (the sports car company is the most outsourced of all European car makers, with a level of vertical integration estimated to be about half of that of Volkswagen) if only because VW’s size means that it is probably more efficient to make more things in-house than is the case at a relative minnow like Porsche.
And Volkswagen’s level of outsourcing is programmed to drop if the company manages to achieve its ambitious growth targets, with their emphasis on volume from expanded facilities in emerging markets.
But the company could make real progress in cutting costs in Germany if it accelerated the re-sourcing of components to external suppliers, preferably those based in nearby low labour cost central and east European economies.