Column: When a Supplier Is More Than a Supplier

Interesting | December 13th, 2009 by 3
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Floating below the surface of the news that Magna International is in negotiations to purchase Opel is Magna’s future relationship as a Tier 1 supplier …

Floating below the surface of the news that Magna International is in negotiations to purchase Opel is Magna’s future relationship as a Tier 1 supplier to other auto manufacturers.

If Magna was strictly a parts supplier that question would not illicit much concern. However, Magna is more than a parts supplier, it is, in cases like the current BMW X3 a development partner.

The notion of a ‘super’ supplier, one capable of engineering development and even manufacturing, has been around for a long time; Karmann with VW, Bertone with Fiat, Valmet with Porsche and Magna with BMW, Mercedes Benz and others.

Column: When a Supplier Is More Than a Supplier

Magna is a very capable company, with the engineering capacity to handle Opel (which already builds decent cars). So why would a company like BMW turn over development of a vehicle, like the X3 to Magna? Quite simply, to leverage its engineering resources on critical products while allowing a competent supplier to assist in developing other projects.

Case in point is BMW Motorrad’s reliance on Ricardo for development of the K 1300 bike. The motorrad engineering group was heavily engaged in the development of the S 1000 RR. Having a supplier with the capabilities and engineering reputation of Ricardo were instrumental in accomplishing both tasks.

According to an interview with BMW Motorrad’s executive vice president of development and model lines, Dr Christian Landerl, in the Q2 2009 issue of the Ricardo Quarterly, using an outside engineering firm to cover peak loads is common. He states that, “The obvious thing (to outsource) would be a technological revision of an existing concept, while core activities such as development of an engine would be carried out by BMW Motorrad itself.”

That BMW engages suppliers and engineering concerns such as Magna and Ricardo is not out of the ordinary. In fact engaging competent suppliers to aid in development work is one reason BMW can continue to astonish with new product and still remain lean. BMW is producing maximum results plus as a manufacturer of under 2 million vehicles a year.

  • Auday

    this is where I see BMW losing focus and gradually changing from a company that is defined by engineering state of the art cars that carry the BMW badge as a brand that represents that engineering essence, … to a brand management company that has a great well known brand which could sell anything and they themselves would do anything to capitalize on that brand to make more profit …

    The sad part is that most BMW customers these days wouldn’t be able to tell if you put a BMW interior, exterior and logo on a Honda and sell it to them as a BMW… all they care about is to social status that comes with the brand, and BMW knows that and is taking advantage of it.

  • X5 SoB

    It only becomes a problem if proprietary technology of BMW’s appears in on Opels. Then, conflict of interest comes into play.

  • shonguiz

    Actually BMW outsourcing some developpement is very usual, cf AVL.

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