ID.3
Volkswagen wants to produce the electric car CO2-neutral.
(Photo: AFP)
Wolfsburg Volkswagen Increases pressure on suppliers when switching to electromobility, “Of course, we can only achieve CO2 neutrality with the electric car ID.3, even if the suppliers produce balance sheets CO2 neutral,” said the purchasing director of the VolkswagenGroup, Stefan Sommer, Handelsblatt.
The Volkswagen Group is the largest carmaker in Europe, making Sommer one of the world’s leading buyers. The Wolfburger want to control it in the future stricter. “We are now starting with the suppliers and have introduced a sustainability rating analogous to the quality or cost rating. Every supplier must be certified in order to continue to receive orders from us in the future, “emphasized Sommer.
The VW purchasing boss sees it however rather a chance for the German Autozulieferer. Low transport costs and complete documentation could pay off for domestic suppliers to producers from low-wage countries, if the CO2 prices rise and the transport becomes more expensive. “Ideally, the CO2 ticket is more expensive than the additional costs of domestic production,” Sommer said.
Suppliers should seize the opportunity now. “Reducing CO2 is not rocket science,” Sommer emphasized. A high proportion of suppliers have already been certified. Suppliers will in future be randomly inspected.
In the transition to electromobility, Sommer sees difficulties in general, especially for suppliers, who so far only build parts for combustion engines. Summer did not want to exclude that VW must support one or the other supplier in the conversion. But also the VW group must “with its resources household.”
Stefan summer
The purchasing board of VW sees the reduction of CO2 as an opportunity for German suppliers.
Those who react too late will be among the losers. In 20 years VW will hardly need more parts for internal combustion engines. “If a supplier does not start to change its business model now, then the order volume for Volkswagen will one day disappear,” Sommer clarified.
Read the entire interview here:
Mr Sommer, VW has pledged neutrality for the ID.3, how do you want to implement this and what does that mean for suppliers? Of course, we can only achieve this if the suppliers also produce CO2-neutral balance sheets. We have about direct contracts with the suppliers of the battery cells that they use only green electricity. The more CO2 we save, the easier it gets. The priority is clearly to avoid CO2, Only when there is no other way, we buy as compensation compensation.
What about avoidance? For example, we try to replace energy-intensive aluminum whenever possible.
Does the German government’s CO2 package help? Yes, of course, if the price of CO2 rises, then the savings made by avoiding CO2 emissions will increase – even if the CO2 price could have been more ambitious. We now start with the suppliers and have introduced a sustainability rating analogous to the quality or cost rating. Every supplier must be certified in order to continue to receive orders from us in the future.
But for many of your suppliers, this is hard to afford. I see a great opportunity for German automotive suppliers. Now it is time to seize them. Because the CO2 prices will rise. And there is no alternative,
Will that happen? We are looking for open dialogue with our suppliers on CO2. The old well-established system changes. So far, everything was just “best cost”. This leads to advantages of production in low-wage countries, mostly overseas. CO2 is priced, but then the transport is more expensive. In addition, it is difficult for suppliers in some of these countries to purchase green electricity at all. In comparison, short distances and complete documentation can be a great advantage for German suppliers on site. At least one or the other will become more competitive again through the CO2 pricing. Ideally, the CO2 ticket is more expensive than the additional costs of domestic production.
And who does not make it from the suppliers, who is away from the window? We do not want that at all. So far, we also have a rating that is now supplemented by the topic of CO2,
That sounds like a hard course. It is already the case today that we do not take a supplier directly out of the delivery process in the case of quality problems and do not buy any more parts from him. Our purchasing management then goes to the supplier and sets up a program on how to fix the problems and get the rating. And only when that fails will it be serious. This also applies to the topic of sustainability.
But when it comes to sustainability, it’s much more complex. Smaller suppliers with a margin of one to two percent do not make it at all? The current CO2 prices are not that high, you do not feel it that much yet. It will be a long way and must also be in an economic balance,
That’s easy to say. Yes, but reducing CO2 is not rocket science. Carbon dioxide emissions are easy to see as a cost factor. One can say exactly how much effort is associated with a component and what it may cost us. There are special programs with parameters that also determine the CO2 footprint. So we know exactly that a component costs, for example, 40 euros, and that in the production, for example, 500 grams of CO2. This is how we identify the big issues, such as the melting of iron. In this way, we want to develop our suppliers so that they comply with our sustainability issues.
And by when is the ID.3 really CO2-neutral along the entire value chain? We are proud of that. Of course, we still need to develop many areas of CO2 avoidance. It will take a while. But we are already going. We paid particular attention to the powertrain that we build ourselves.
But you can – even if it is contractually fixed – but not every supplier to check in detail.No, but we do it with random samples. We have already certified a high proportion of suppliers.
Is it then, as with some development partnerships, that VW suppliers have to provide financial support for the changeover? I do not want to exclude that we will also support one or the other. But that is not our goal. There are immense costs and transactions on Volkswagen. We also have to manage with our resources.
Will all subcontractors be able to create the transformation? Difficulties may arise, above all, for subcontractors, who so far only build parts for combustion engines. You have to develop imagination for new products.
What do you tell them? We sit down together and look together for opportunities to open up business areas in the field of sustainability and electrification.
But someone who builds piston rings today can not suddenly make batteries for batteries, why not? Batteries also require air conditioning and intelligent packaging or perhaps a high-strength steel part with similar value chains to piston rings.
Can you change your mind about suppliers who do not want to change anything? Anyone who reacts too late will be one of the losers. In 20 years, VW will hardly need more parts for combustion engines. If a supplier does not start to change its business model now, the order volume for Volkswagen will one day disappear.
As a purchasing manager you are under tremendous pressure to push prices at the suppliers. That makes you compulsively unpopular, is not it? Of course, that’s easier with price negotiations if you can promise the suppliers bigger orders and thus growth. This is not possible in the current economic situation. This is a difficult field.
Why? We have all experienced disproportionate growth over the past 30 years due to three macroeconomic factors. Only the reunification of the auto industry brought a special boom, then China provided for a gigantic demand with two-digit growth rates and not least the euro introduction brought the German industry with a tendency to undervalued currency large advantages in the export. There are companies that are spoiled by constant growth, can not brake now and also do not have a reverse gear.
Your company has the hype but strongly fueled. It is important to exploit the opportunities in the market. Even now. The transformation to the electric drive offers great opportunities. The task that connects with this is, of course, huge, without other macro factors being able to compensate.
But then, if you tell the supplier, you have to invest in the conversion, but we do not know how much we will buy you. Yes, this situation is difficult. But Volkswagen can not pay for the transformation alone. That does not work either.
For which suppliers does it look very bad? Often the company has between 150 and 800 million euros in sales, which depend entirely on the internal combustion engine. Often, clients have forced them into globalization. These high investments, for example in China, are now on fire, if the associated sales expectations in the next 24 months fail to materialize. These companies now lack the resources to invest in new fields.
Where are these businesses located? In certain rural areas in Germany, Some of these companies have a very high supply share with us. If this VW component of a supplier is eliminated as a result of our transformation, then other manufacturers can not help either. Because that’s where the transformation is just around the corner.
But they also do not make it easy for the suppliers. In the future, VW wants to increase its own share of software from ten to 60 percent. Digitalisation offers rapid growth. You have to use that. The software complexity in the vehicle is steadily increasing. New areas are added: it is important to control the vehicle cloud or updates “over the air”.
And how does this work? We are transforming ourselves into a complete provider of hardware, software and services, offering our customers everything from one source. The right software is the key. But we should not think functional anymore. If you want an app that can do this or that, you can not hire someone to develop this app and then find that you have neither the iPad nor the operating system to use the app.
Which sectors can the automotive industry learn from? In the world of smartphones, things are different. The smartphone manufacturers determine in advance what the smartphone must be able to do, how many apps fit on it and how much storage capacity is needed. That’s what we align ourselves with. These are things that we will implement in our own department in the future.
So it’s at the expense of the suppliers? I see it differently. The suppliers get a broader and more stable base for which they can supply us with software. This offers new opportunities for companies.
Mr. Sommer, thank you for the interview.
More: Not all automotive suppliers will survive the consequences of climate protection goals. These bankruptcies are factored in. Employees should be helped. Stefan Menzel comments.
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