Operations & Supply Chain

Management

Contract Manufacturing of
Vehicles

Group 6 Sec-E
Salil Wadhawan
Vandana Rathore
Tanya Arora
Talha Ahsan
 Contract Manufacturing
• What is contract manufacturing? Eg:
Apple- Foxconn
Samsung- display panels for sony lcd’s

• Cause of contract mfg: co’s are most efficient in

producing better quality parts,
1. speciality products
2. Overfull production capacity of the plant
3. Less cost
4. Quick market entry
5. Concentrate on design r&d
 About The case
• BMW announced the launch of X3 a luxury
SUV
• After this the German automaker said that
contracting the manufacturing of the car to
Magna Steyr.
• In Austria for 7 yrs
 Reasons
• Market competitive pressures had forced it
to design a 2nd medium sized suv and fast
• BMW plants were running at full capacity
due to demand of X5 suv.
• BMW need for speed was ably handled by
Magna Steyr as the production took off the
same yr and the suv sales touched
114000 units in 2006.
 Contract Mfg in India
• Sub contracting vehicles assembly is
inconceivable, huge vacuum in the
country’s auto industry.
• Few players are there but re
inexperienced to handle it.
• When foreign OEM (original equipment
mfg seek to enter the indian market they
are not that much confident abt Indian
auto contract mfg.
 Challenges for CM
• Groundwork needed: CM must demonstrate
world class production practices in assembly
lines across multiple platforms.
• Must be able to win large deals from OEM’s
• Give them value propositions across volume of
commercial vehicles and passenger cars.
• Skilled and trained workforce
 Indian market
• Boom in yr 2007 car sales but
underutilization of the plants
• 8 out f 12 carmakers in India produce less
than 60,000 units
• Eg:Fiat India=1,715, Gm India=36,879,
honda=59,152
• Why these co’s require contract mfg
• Eg:ford had a loss of rs 640 cr till 2005 6
yrs after commencing in India
 About Magna in India
• Set up engineering centre in Pune in 1999
• Plans to open 2nd one in Delhi
• Talks with Indian OEMs tht wish to go
global eg: Tata Motors, Mahindra &
Mahindra.
• Help them with smaller volumes so that
tey don’t have to establish plants in
Western Europe or North America.
 Magnomics
• Magna’s vehicle assembly arm holds learning's for the Indian
auto industry which lacks a contract mfg system.
• Deals on wheels: bagged BMW mini contract, it alone translates
to annual production of 40,000 cars from 2010 onwards.
• It has other projects of GM & Chrysler also
• Lesson: Mfg efficiencies depend on the no. d deals, time frame
of the contract & volumes within.
• Workforce: developing a flexible workforce earlier it had 4500
employees now 12,000. Manage internal resources.
• Quality: Maintain control over quality standards. In India recently
they have focused on world class production & technology
standards.
• Risk Factors: Risk in long term contracts. What if a product
fails? Must asses the viability of contact mfg it may damage the
brand image of OEM
 Viable Contract Mfg
• Production of engines atleast 50,000 units
a yr
• Assembly: atleast 20,000 units a yr
• A plant to service “low-volume” models in
quick time
• Additional automated facilities such as
paint shop & weld shop
• Vehicle prototyping, Simulation & testing
 examples
• New Venture Ltd was established back in 1991 in Southern
California and has since been helping companies in the United
States manufacture overseas in China.
• Harley Davidson suppliers, official Porsche accessories suppliers.
• Electroplating - Process in which a layer of a metal is deposited on
metallic or non-metallic electrode by electrolysis in an electrolytic
cell. Most commonly used for chrome plating.

• Anodizing - An electrolytic passivation process used to increase the

thickness of the natural oxide layer on the surface of metal parts.
Anodizing increases corrosion resistance and wear resistance, and
provides better adhesion for paint primers and glues than bare
metal. Most commonly used on aluminum, not very useful on steel.
• Powder Coating - The coating is typically applied electrostatically and is then cured under heat.
It is usually used to create a hard finish on metals that is tougher than conventional paint. Popular
applications include aluminum extrusions, and automobile and bicycle parts.

Spray Coating - A painting technique where a device sprays a coating (paint, ink, varnish, etc.)
through the air onto a surface. It is typically used for covering large surfaces with an even coating
of liquid.

• LED Lights - A light-emitting diode (LED) is a

semiconductor light source. Advantages include
lower energy consumption, compact size, less
heat emission, shock resistance, color variability,
and longer lifetime.
 Indian CM
• Bharat Forge, Sundaram Fasteners,
Wheels India, Amtek Auto, Motherson
Sumi, Rico Auto and Subros.
• These companies are in the process of
making a mark on the global arena, and
some have already acquired assets
abroad.
 Bharat Forge
• Carl Dan –German
• Federal Forge –USA
• Scottish Stampings Ltd –scotland
• The company is based in Pune, India and has
nine manufacturing plants in India, Germany,
Sweden, United States [1], Scotland, United
Kingdom and mainland China.
• leading global 'Full Service Supplier' of forged
and machined - engine & chassis components. It
is the largest exporter of auto components from
India and leading chassis component
manufacturer in the world.
• . Every second heavy truck manufactured in
USA runs on a "Made by Bharat Forge, India"
front axle beam.
• Crankshafts
Connecting Rods
Camshafts
Front Axles
STR Knuckles
• OEMs-renault,chrysler,BMW,VW,AUDI
 The Samvardhana Motherson
Group
• The Group has invested in technologies that provide manufacturing support,
including compressors, paint coating equipment, auxiliary equipment for
injection molding machines, sales, installation and servicing of industrial
robots and automotive manufacturing engineering services.

• SMR is one of the largest manufacturers

of external rearview mirrors for passenger
cars in the world. Sunroofs
• Sunroofs for Chrysler Maybach
 Karmann
• till 2009 the largest independent motor vehicle
manufacturing company in Germany.
• design to production and assembly of components, for
various automobile manufacturers; including Chrysler,
Porsche, and Volkswagen Group.
• Karmann is best known today for its work on
convertibles / cabriolets. It provides roof-
components for many current cabriolet
automobiles, such as the Mercedes-Benz CLK,
the Renault Mégane CC, and the Volkswagen
New Beetle Cabriolet.
 Gruppo Bertone
• Gruppo Bertone is an Italian automobile
company, which has specialized in car
styling, coachbuilding and manufacturing.
• Bertone has styled cars for Abarth,
Alfa Romeo, Citroën, Ferrari, Fiat, Iso
Rivolta, Lancia, Lamborghini, Mercedes
Benz and Volvo Cars.
• producing special windscreens