Volkswagen de Mexico's Puebla plant has gone golbal with the introduction of the New Beetle.
Fritz Fruholz, purchasing director of Volkswagen de Mexico, was interviewed by Automotive News Europe Mexico Correspondent Guillermo Lira in Puebla.
How many Tier 1 suppliers are you dealing with now?
We have 885, of which 597 are not in Mexico. This includes suppliers to the new A4/Beetle platform, also the old Beetle and suppliers to the Golf and Jetta. It also includes our engine production. The number of Tier 1 suppliers will go down with the consolidation going on.
How do you classify your suppliers? You have 'A' suppliers, which is a VW classification. You also require QS-9000 certification, and also VDA 6.1.
We have the approach that is used in the VW organization worldwide. We check the performance of each supplier, and based on the evaluations we have an A, B or C categorization.
Of course, it is our goal to have every supplier in the A category. We have some B suppliers, and we are eliminating the C suppliers. Basically, C suppliers cannot supply us anymore. We have two or three at the moment, but it takes a while before you can phase them out.
Are these C suppliers Tier 1 companies?
Yes, if you consider that a Tier 1 supplier is someone supplying us directly. I don't mean they are supplying us a complete module or system. They might be supplying a small part.
If a supplier wants to sell to VW, which certification should it have?
It will now have to have VDA 6.1. This is the latest on which our plant has been certified. It is the only way they can export to Europe. With the New Beetle, VDA 6.1 is a requirement, since the car is going to be exported.
Do you already have a price goal when you approach a supplier?
When we source a new part, we obtain quotes from a big base of suppliers, not only in North America but around the world. A good price in Europe is not necessarily a good one in North America.
Our job is to get the best deal overall. It's not only price, it's price, service, quality - it's a package. You have to consider that to sell a car here is different from Europe. If you want to be competitive, you have to have a competitive price in every component.
Do you have an annual cost reduction goal?
We have a target, but it is confidential.
Our idea is that if the supplier has more freedom to develop the product, they will be more productive.
The New Beetle is one example. The suppliers have been involved from its conception. A supplier's technological capabilities and research make them specialists in their field. We would be stupid if we didn't take that into consideration.
Do you foresee suppliers selling you big systems in the future, such as a complete interior?
Initially, for the New Beetle, we attempted this. But an interior of a car has different technologies. One supplier doesn't have all the different technologies. One supplier simply can't do the job. So we break it into different parts. The carpet is completely different from the headliner, and the instrument panel from the seats. We didn't find a supplier that had all these technologies together that could sell us the best.
So how do you do the New Beetle's interior?
It's a difficult example. It's not a conventional car. The dash is really different. You can't supply the dash with the instrument clusters, the wire harnesses and the firewall from a single supplier simply because of the way it is designed. You can only supply the instrument panel. The other items have to be built into the car.
You mean it's a difficult car to buy parts for?
It's a difficult car to manufacture. You name it - the shape of the glass - it was a challenge to make it. The suppliers developed new technologies to manufacture it, technologies that have not been used in any other car.
Are there quality differences among Mexican, US and European suppliers? Do their levels of service vary?
It's important to remember that we had the highest quality standard ever for a start up for our Mexican, US and German suppliers.
In terms of service, yes, we had some concerns that we are currently ironing out. And there is room for improvement in Mexico, but also in Europe.
What's your view of the worldwide consolidation of suppliers?
It's good because the suppliers are becoming stronger. They have greater r&d capabilities to become system suppliers.
On the other hand, the bigger the organization becomes, usually the more inflexible it becomes. You lose some flexibility that you had before. Because of the mergers, more activity is in fewer hands. You have to fight to get what you want. It's more difficult to deal with them.
Do you see any disadvantage to being a German automaker here?
We have commercial disadvantages because we have a European design base. There are a lot of things we can't buy competitively in North America because of that.
In terms of our production volume, in some cases, we have a certain commercial disadvantage.
What's a typical day like for you?
The normal week consists of 80 hours at work, sometimes 100. We will stay up for a long time. I usually get to the office at 7 a.m. and leave by 10 p.m. I can't exercise at all, and that's a problem.
Sometimes you have to travel a lot. In the past four years, I've traveled to Europe 50 times. And you fly on the weekends so that you can work during the week.