OBERWALTERSDORF, Austria -- Europe's dominant contract vehicle manufacturer is preparing to grow some more.
Magna Steyr, which likes to describe itself as the world's biggest carmaker without a brand of its own, wants to expand by:
After tripling vehicle production in Graz to 227,000 units in three years, Magna Steyr sees Austria offering continued prosperity, but no room for growth.
"Graz is our home," Magna Steyr CEO Manfred Remmel says. "But for further expansion we are looking to central Europe, [North America] and Southeast Asia."
In an interview at company headquarters in Oberwaltersdorf, 30km south of Vienna, Remmel said Graz's capacity is limited to about 260,000 units a year because that's all its two paint shops can handle.
Magna Steyr expects to build 230,000 units in Graz this year for its five customers. Capacity at the paint shops will be tested later this year or in early 2006 when Jeep Commander production starts.
Filling a niche
Remmel is confident his company will continue to grow because of rising demand for what Magna Steyr does best: building niche vehicles for other carmakers. Consumers are looking for more distinctive models, forcing manufacturers to offer more low-volume variants -- a specialty of contract manufacturers.
"We have seen an acceleration in market fragmentation" Remmel says. The result, he says, will be "a fourfold increase in the volume of niche models built worldwide between 2002 and 2015."
He cites a Mercer Management Consulting report that predicts that suppliers will handle 4 percent of global vehicle assembly by 2015, up from 1 percent in 2002. That would expand the contract manufacturing business to 2 million vehicles in the next decade. Mercer expects contract manufacturers to make 76 models in 2015, up from 57 models in 2002.
Magna Steyr sees other potential for its flexible manufacturing system. Remmel says his company could be a cost-effective production source for automakers during peak-demand periods and phaseouts of models built in their own factories.
It already has a history of doing this kind of work. From 1999 to 2002, Magna Steyr built 77,000 units of the Mercedes M class in Graz to meet huge demand for the first generation of the premium SUV, which Mercedes only built in Vance, Alabama, USA. And while Mercedes was installing the lines for the current E class in its plant in Sindelfingen, Germany, Magna built the final 15,000 units of the previous E class in Graz.
"We are convinced that the increasing volatility of demand will give us further chances to help carmakers during peak and phaseout times," Remmel says.
Industry sources say Magna Steyr will help Mercedes on the next E class changeover, expected in 2010. Graz currently does the painting and final assembly of the 4MATIC four-wheel-drive variants of the E class. When Mercedes begins preparing the lines for the next-generation E class, Graz also will assemble the final rear-drive units of the current E class.
Magna Steyr's body shops make the bodies-in-white for six of seven Graz-built models. (Mercedes ships the basic E class body structure to Graz from Sindelfingen.)
Magna Steyr manages this level of complexity by highly automating body shop welding. Up to 93 percent of the BMW X3 body shell welds and 97 percent of the Saab 9-3 convertible welds are automated.