Blog: Dave LeggettIt's a sharing thing

Dave Leggett | 10 October 2007

Developing new car models is an expensive business - if you need a new platform, even more so. Sharing costs is a proven strategy to enhance profitability.

The volume makers getting together on selective vehicle projects, especially where margins are small and scale economies are crucial, is nothing new. There are plenty of engine collaborations around, too.

Just lately the sharing philosophy appears to have gathered some momentum. Firms renowned for doing things their own way seem to be recognising the potential for taking out cost in a manner which need not undermine core brand values.

Even archrivals can see the sense in coming together on selective projects. So long as everything in the product development/manufacturing collaboration is neatly contained, responsibilities crystal clear to the participants, subsequent competition in the marketplace can continue to be as intense as ever.

While the industrial rationale may be irrefutable, it’s still quite something to hear that people at BMW and Mercedes-Benz may be getting together for exploratory chats on selective collaborations. Those two firms are notable independent technology advocates with brand values closely attuned to their proprietary high-tech prowess.

But even they have to live in the real world and face competitive challenges. If, as a premium maker, you have to do small cars (partly on EU CO2/CAFÉ grounds), a pure go-it-alone approach comes with more cost and likely lower profitability. It might be wiser to make cost savings and invest valuable product development energies and resources elsewhere.

Shareholders should see the willingness to investigate collaborative solutions as a welcome development.

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