Magna's niche?

Mark Hogan, president of Magna International (Troy, Ml; www.magnasteyr.com) thinks Detroit's automakers are coming his way. Beset by declining volumes, rising costs, and shrinking market share, they must concentrate on keeping their high-volume vehicles competitive, and yet also produce niche vehicles that maintain a presence in important markets. "As the market continues to fragment," he says, "the OEMs will come to Magna to design, engineer, develop, and build these vehicles because the average lifecycle of a specialty vehicle is just one-third to one-half that of a high-volume vehicle. The OEMs can't manage the costs involved."

This is one reason why most niche concepts never make it to the showroom floor. Another is that small-volume production doesn't fit into a paradigm built around high-volume production in a time of shrinking resources. "OEMs can't afford the 'distraction' of niche production and development," Hogan contends, "because they have to keep that plant rolling with high-volume, mass-market vehicles that carry the overhead costs and don't add to shrinking manufacturing, design, procurement, and engineering budgets." That means these costs would have to be borne by Magna. "Our cost structure is lean and nimble," he says, "which allows us to get a niche vehicle to market faster and less expensively with the caveat that we are able to leverage their parts bin to do so."

How Magna would supply a low-volume specialty vehicle depends on the vehicle type, the OEM's relationship style, and how many projects are going simultaneously. "In essence," says August Hofbauer, president of Magna Steyr North America Engineering (Rochester Hills, MI), "we could pull an up-to-date copy of our Graz, Austria, facility from a desk drawer today, but that would require a number of concurrent projects to support." (The Graz facility produces specialty modes on a scale comparable to an OEM, and includes production of Chrysler's non-NAFTA Jeep Commander and Grand Cherokee, Chrysler 300 and Grand Voyager; Saab's 9-3 convertible; BMW's X3; and a number of Mercedes models.) "Our approach," says Hofbauer, "also depends on the needs of the OEM--whether they want a derivative or a unique vehicle--and how quickly we are involved." Typically, Magna is invited to bid after a decision has been made to produce a particular vehicle. "Ideally," clarifies Hogan, "they would involve us very early in the process--preferably during the development of the vehicle it would be pulled from, in the case of a derivative, or just after the decision is made to go in a particular direction--and we would then be able to offer suggestions as to how that platform could be modified to simplify the process, or audit their parts bin to make suggestions as to what type of vehicle could be built."

That vehicle, oddly enough, need not be unique. "If we can build the non-NAFTA vehicles for Chrysler that are sold in Europe," asks Hogan, "what prevents us from doing the reverse--building Europe- or Asia-only vehicles--for sale here?" It is a question that is under increased scrutiny in Detroit.--CAS

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