Dirk Grosse-Loheide
Vice President North America Purchasing
Volkswagen
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View from the Top

Suppliers Rewarded for Commitment and Innovation

Mon, 09/01/2014 - 10:43

Q: How would you rate Mexico’s capacity to meet the manufacturing and procurement needs of European OEMs?

A: Mexico has a very privileged position as it neighbors the biggest market in the world, while its range of FTAs allows for great exportation possibilities. Our competitors are aware of this and take full advantage of it as we do, which is why there is so much investment coming to Mexico. Most OEMs are present in Mexico, and the ones that are not present are publicly or privately contemplating it. Q: How are global automotive purchasing tendencies affecting regions like Mexico? A: On the global level, the boom of three years ago is no longer present. China is growing but not at the same rate, the US is also growing but faces competitiveness issues, and Europe is in a recession. The growth potential is mainly found in the North American region, specifically Mexico. As a company, we are consolidating our supplier base here in Mexico and installing high technologies. Along with Audi, we are pioneers in bringing luxury vehicles to the Mexican market, including very complex technologies that are not present here but that must be made available immediately.

Q: What are the main criteria based on which you choose your suppliers?

A: Suppliers must be prepared to deliver the quality and high technology that we require at a competitive price and in line with the Volkswagen mentality. Our principal suppliers work in conjunction with us to develop new technologies, and ultimately new cars, through a healthy competitive mindset. Volkswagen produces 25% of the material for its models and purchases 75% from providers. It is very important for us to have a good relationship with our suppliers to ensure that everyone benefits. Many companies fulfill all of our requirements, but these are not necessarily big multinationals. Last year, one of Volkswagen’s annual excellence awards was given to a Mexican company, A&P Solutions in Puebla. We give out 25 of these awards worldwide and they are highly competitive. This speaks highly as to the quality of local suppliers who can compete with the world’s best standards. 90% of our suppliers for our Mexican plants are from the North American region and 80% are from Mexico. This is further proof of Mexico’s competitive position. We only turn to suppliers and providers in the US to source technologies that we cannot find here in Mexico. If neither of those options is open to us, then we have to look to import from overseas. We keep all our suppliers aware of our production plans, and they all have the capacity to keep up with production. A problem would only arise if we decided to abruptly change our pace of growth. We also have an enormous network of 12 companies that could all be considered OEMs. Within those OEMs, we count with 40,000 engineers on a global level. Because of this, Volkswagen does not need to collaborate with its competitors as we have enough resources to handle all our projects through our own supply chain.

Q: What have been Volkswagen’s main contributions to the development of the Mexican automotive supply chain?

A: Mexico is not a low-tech manufacturing country. Although there is a difference between Mexico and some parts of Europe, the difference is not that large. We have brought the excellence and technology of Volkswagen to Mexico, and our Audi technology has also become very well integrated. We are very concerned with reducing waste and energy consumption in our production plants. In the same manner, we encourage all of our providers to adopt the same philosophy. In fact, ten to 15 of the companies in our supply chain have formally committed to follow suit. We also work on R&D with our suppliers at different levels. There is room for growth in local sourcing, especially in finding suppliers of raw materials.

Q: How have Volkswagen’s procurement priorities in Mexico evolved?

A: When I arrived in Mexico two years ago, our main task was to prepare our providers to ensure that they were capable of meeting our future production levels. This was a necessary process after Volkswagen launched two production plants back-to-back. Our second challenge was to get these same providers ready for the launch of the new Golf, the production of which was announced in January 2014 at the Puebla plant. Now, the growth in the market has led us to reveal the Audi plant, which is our biggest project at the moment. We are completely committed to Mexico, and we have put all our chips on the table to prove it.