Why Ford Is Worried About VWhttp://www.fool.com/investing/general/2013/02/11/why-ford-is-worried-about-vw.aspx John Rosevear
February 11, 2013
Which automaker is the biggest in the world?
For years, there have been only two answers to that question: Detroit's General Motors (NYSE: GM), which held the title for a long time, and Japan's Toyota (NYSE: TM), 2012's reigning champ, which has swapped the crown back and forth with GM in recent years.
Soon, though, there could be a third contender: Germany's Volkswagen (NASDAQOTH: VLKAY), which is in the early stages of riding a radical new approach to designing and building cars to increasing success in markets around the world.
And that radical new approach has many automakers worried, starting with Ford (NYSE: F).
Platforms and the success of Ford's turnaround
Cars built on the same platform may be -- and often are -- quite different from one another, but because of what they have in common, they cost less to design and produce. For example, Ford's global "C" platform is the basis of the Focus compact, the Escape SUV, and the C-MAX hybrid.
Those are three very different vehicles, but they increase Ford's economies of scale -- and, thus, its profits per vehicle sold -- because of what they have in common. The commonality also makes it simpler and more cost-effective to bring them into emerging markets, leveraging Ford's existing production bases in places like Russia and China, where the Focus has become a top seller.
In recent years, Ford has drastically consolidated the number of platforms (and models) that it uses globally. This move, a key part of the "One Ford" plan that has transformed the company, has resulted in a huge reduction in Ford's global fixed costs. It has also resulted in a significant improvement in quality, as Ford is now able to give each new platform and each new vehicle more design and engineering attention.
That was a huge step forward for Ford. But VW's new approach takes that concept one big step further.
From platforms to Lego bricks at VW