Cooperation makes eastern German auto suppliers fit for globalisation

The development of the auto and auto supplier industry in eastern Germany is a success story: In 2011, 730,000 cars were produced in the Volkswagen, Porsche, BMW, Opel and Mercedes Benz plants. The big increase of 8.4 percent in comparison with the previous year also had a positive impact on the companies which supply parts and components, or work as service providers for the manufacturers. In Saxony-Anhalt alone this branch accounts for around 250 companies with 18,500 employees.

At this year's Annual Conference of the Automotive Cluster eastern Germany (Automotive Cluster Ostdeutschland, ACOD) at the beginning of March in Leipzig the focus was primarily on one topic: the auto industry is responding to the especially strong dynamism of the markets in developing countries with an ever stronger internationalisation of production and purchasing. New factories are currently opening and expanding at numerous locations in China, Brazil and India.

The question is, how can companies which are predominantly small and medium sized, and which have so far predominated in central Germany, rise to this challenge? "In all of these companies it is important to ask the question of how it will be possible to gain a presence in these markets. And even if it is not possible for every small supplier to be represented in the different countries with their own branch, then at the least, the first three levels of supplier will follow in our footsteps," explains Manfred Erlacher.

In view of protectionism, the high import duties and security of delivery, the newly elected Chairman of the ACOD and Works Director of BMW in Leipzig sees no alternative to a local presence but also suggests a way around it at the same time: developing networks and models of cooperation provides ample opportunities for small companies in Saxony-Anhalt, Thuringia and Saxony to be able to offer additional market presence. At the same time, being open to cooperation is also a proven way of being able to advance technological developments more quickly and to be able to rise to the next hierarchy level of the supplier pyramid. "This advancement of eastern German suppliers is a key part of the ACOD's agenda," highlights Erlacher.

Today, not only are the major German manufacturers represented in all of the important sales markets with their own production locations, with 1,600 locations abroad, parts manufacturers now account for an important part of the competitive advantage that German firms have gained in the world market, explains Klaus Bräunig, Director of the German Association of the Auto Industry (Verband der Automobilindustrie, VDA). Around three quarters of German brands of motor vehicle are now sold abroad and they are frequently assembled on location.
Last year, together with the supplier initiatives of the federal states of eastern Germany, the ACOD completed a survey of 415 German companies and ascertained that roughly 70 percent were expecting an increased internationalisation of their business, with 80 percent of firms also stating that this was a process they wanted to manage themselves. Manfred Erlacher warns against an overestimation of the firms’ own abilities, however: "Without the will and the confidence to cooperate with other firms, not all of the companies will succeed," he explains. He goes on to highlight the obligation of the successful and large scale suppliers as well as the manufacturers to actively accompany and support small firms along their road to the international markets.

Jürgen Ude of the Innovation and Start-up Centre, Magdeburg (Innovations- und Gründerzentrum Magdeburg), member of the executive board of the ACOD, also views cooperation by suppliers as being indispensable. "The auto industry is becoming more and more technically sophisticated and the logistics chains more and more international. To be able to respond to the requirements of the manufacturers over the long term, effective networks are required such as those that we have developed both in Saxony-Anhalt as well as in other German states," highlights Ude. There are also positive examples of how cooperating on projects and exchanging experiences can bring benefits to all of the participants.

In this context, for instance, several alloy foundries such as Trimet in Harzgerode and Nemak KSM in Wernigerode now create the basis for a strong cluster of expertise for this sector within the entire ACOD, which is enabling the development of processes and products. This means that along with both the newly constructed Institute for Competence in Auto-mobility (IKAM) in Magdeburg and the network of the MAHREG supplier initiative, a scientifically supported centre for focusing innovative technologies and developments now exists. "In recent years, and in spite of the 2009 crisis, the supply sector in Saxony-Anhalt has developed well and the performance of the companies has clearly increased," explains Ude. At the same time, the companies cannot reduce their own efforts in the area of research and development or ignore the need to improve their international focus.

The ACOD intends to drive this process forwards as effectively as it can, with regular workshops now covering the key areas of aluminium, innovative electrical systems, floor assemblies for electrically powered vehicles, lightweight constructions, range extenders and fine particulate emissions. The association also attributes considerable importance to the new cluster of expertise for markets and cooperation, which is able to further assist the companies with detailed studies on the corresponding framework conditions abroad as well as on legal questions and investment conditions.

Author/Photo: Manfred Schulze

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Automotive Cluster Ostdeutschland GmbH
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Director: Dietmar Bacher (Dipl.-Ing.)