As the auto industry retrenches in Europe and North America with job cuts, downsizing and plant closings, the supplier parks question also hangs in the balance. Supplier parks are clusters of suppliers located close to assembly plants to provide just-in-time supply and in-line sequence of parts and subassemblies directly to the automaker production line. The question is whether there is growth or are the industrial parks in maintenance mode, given market conditions in mature economies such as Germany and the US?

“Growth only comes when additional capacity is added, and that’s mainly in eastern Europe now, especially Russia,” says Pieter Donck, director of Agoria Automotive, a 240-member supplier trade association in Belgium. Agoria is part of CLEPA, a 1400-member European supplier association.


Supplier investment in the Belgian automotive sector was estimated at €503m in 2006, falling 10.2% compared to 2005, according to Jean-Benoît Charles, economist at Agoria Automotive in Brussels. Initial forecasts indicate a further decrease for this year of about 3%, he notes.

Employment of the sector was 52,843 in 2006 (up 1.2% on 2005). “Due to the important downsizing of car assembly, employment is expected to drop by 10% in 2007,” says Mr Charles.

Still, movement of suppliers into industrial parks in Europe has not stopped. According to Mr Donck: “The assembly industry is not going away.”

The assembly-intensive Flanders region of Belgium is a macrocosm of global supplier park activity and concerns. The region turns out about one million cars a year. There are Ford, General Motors, Volvo and Volkswagen plants within a 40-mile radius. In Belgium, reorganisation is taking place as new vehicle programmes enter or leave assembly plants.

Automated plant

Volvo Car Corporation’s highly automated plant in Ghent, Belgium, produces 50% of Volvos manufactured worldwide. The plant has the capacity to produce nearly 270,000 vehicles a year. About 4800 employees and 725 colour-coded robots work side by side there. The total plant investment is already €128m for 2007 and current turnover is €4bn, according to Volvo reports.

Operators dressed in crisp blue Volvo uniforms and coveralls work in teams and make major decisions on when to stop the line to make a repair or on holding team meetings and quality reviews.

In 2006 there were concerns among plant managers at Volvo Cars that capacity numbers would not be reached, despite high quality achievements and numerous industry awards. That should change with the addition of the new Volvo C30 hatchback to the assembly line. Volvo’s S40, S60, V50 and V70 also are built here. The company invested about €40m into C30 production between 2005-2006, plant managers say. C30 production began last September, with export to lucrative markets in North America planned for this autumn. A ramp-up to about 65,000 total units is expected this year.

In an uncertain European car economy, the Volvo plant built only 244,000 cars last year. About 66% are shipped to European countries, 27% to North America and the rest to Asia and elsewhere, according to plant reports.

The company faces steep challenges to be cost-competitive due to the area’s high wage costs, according to Peter Leyman, Volvo plant managing director. “We have a high level of quality and efficiency but are confronted with high wages in Belgium,” he says.

Volvo, like other automakers, must also deal with high raw material prices and a low US dollar exchange rate, because nearly 30% of its production goes to North America, he says.

Volvo suppliers

Volvo, which has been part of Ford Motor’s Premier Automotive Group since 1999, has about 20 sequential suppliers and a supply-in-line sequence (SILS) centre nearby. Most suppliers are situated 2.5 kilometres from the Ghent factory. Some are housed in a SILS centre run by Katoen Natie in nearby Antwerp, which provides SILS and logistics services for 17 suppliers based in its facility.

“From a plant point of view, we see a still-growing trend to an increased role for sequential suppliers, due to space and cost reasons for Volvo,” says Mark De Mey, Volvo Gent spokesperson.

Suppliers that have their own buildings include Plastal (bumpers), Volvo Cars Engine Center Gent (engine dressing), Brose (door modules), Frans Maas, now part of DSV Automotive (cold warehouse and pick-to-order parts) and MCS (tire/rim combinations). Johnson Controls (seats) is in Assenede and TI Automotive Group (fuel tanks) is in nearby Lokeren.

In late March, Volvo and logistics supplier DSV, a Danish company, announced DSV would invest in a new supplier park next to the Volvo plant. “The new logistics centre will decrease traffic along the main artery (Kennedylaan) considerably,” says Mr De Mey.

Along with Volvo, parent company Ford Motor Company is one of the largest operators of supplier parks in Europe. Ford Genk created the first supplier park in Genk, Belgium, in 2000. General Motors’ subsidiary Opel in Antwerp and Volkswagen Brussels are served by supplier parks in their regions. GM’s Opel plant produces the Astra five-door and station wagon models and added the first Astra GTC (Gran Turismo Compact) to its production line in 2005 and the Astra Coupé Cabrio last year.

Ford Genk invested €715m in changeovers to the Galaxy, S-Max and Mondeo platforms last year for more flexible manufacturing and shared componentry, according to Fonny Anthonissen, chief of Ford Genk finance. The changes also streamline the parts-delivery process. “The parks’ benefits to Ford include better logistics, distance reduction, just-in-time delivery to the point of assembly or production, and reduction of parts traffic on the road,” says Mr Anthonissen.

Ford’s top-tier suppliers in Belgium include ASG (plastic parts), SML (engine finishing, sequencing, material management), Decoma (bumpers) and Rieter (trunk trim). Ford operates three other parks to supply its manufacturing facilities in Cologne and Saarlouis in Germany, and Valencia in Spain.

The basic idea is that suppliers are connected to Ford Genk by separate delivery systems. An enclosed overhead conveyor system links supplies to individual ‘drop’ stations in the final assembly lines of the plant, or a tunnel system that delivers parts directly into the plant press and body shops. In some cases, drop-trailers or trolleys are used for transportation.

VW cuts

German automaker Volkswagen (VW), meanwhile, is undergoing a company-wide restructuring, which began last year. It aims to cut European capacity by 20%, according to VW reports.

VW Brussels had been expanding its combined park and logistics centre since 2005. VW Brussels sank about €35m in a three-phase supplier park project last year. VW has invested €377m in the total facilities since 2000.

Now the spoils go to VW group’s premium Audi brand, which has plant control with a coming small car product, code-named A1. The Brussels plant was making 194,000 Golfs and 10,000 Polos a year until product consolidations throughout Europe occurred (see box below). Massive job cuts and worker protests erupted last year, causing turmoil in Belgium.

Ultimately, the fate of supplier parks lies with the original equipment manufacturers (OEMs). Supplier parks are still growing in Europe, says Andreas Kikulski, director, advanced launch management for Johnson Controls, Germany, which supplies seats and other systems to Europe’s automakers. “The automakers are still very interested in having the suppliers located close to them.”

Advantages to automakers include shorter transport routes, improved communication channels and closely co-ordinated production processes, says Mr Kikulski. For example, Johnson Controls in Rastatt, Germany, provides DaimlerChrysler with a direct connection to its transport system. In Rastatt, JCI supplies seating systems for Mercedes-Benz A and B classes, directly connecting with DaimlerChrysler’s system, he says. This eliminates transport by HGVs and eases traffic congestion and road repair.

Tom Paemeleire, Katoen Natie’s director of sales, marketing and business in Antwerp, says supplier parks and SILS operations overall are growing at a “more moderate rate than a couple of years ago”, in Europe, depending on specific regions. “We are very integrated with OEMs, hence we are dependent on their volumes and decisions. In some cases, restructuring and other rentability efforts create opportunities for us. A lot depends on the specific strategy of the OEM,” he says.

For now, Katoen Natie is diversified enough that it is growing its auto operations significantly, he says. In Belgium and Europe, for example, it supplies SILS services to Volvo, Ford, VW, Opel, GM, Saab and Renault.


Some automakers are experimenting with handing turnkey assembly of niche vehicles to select Tier 1 suppliers. One example is Magna Steyr, the Austrian business operation of Canada’s Magna International, which builds niche vehicles in Graz, Austria, for the Chrysler group, Mercedes-Benz and Saab.

This practice is also seen at other European supply companies. Examples include Valmet Automotive in Finland, which builds the Porsche Boxster and Cayman cars; and Karmann GmbH of Germany, which assembles the Chrysler Crossfire car and Audi A4 Cabriolet, according to Automotive News.

Ironically, the volatile issue of global warming could produce a side benefit to supplier parks. Mr Donck says: “Manufacturers need to stay close to their markets. Intelligent logistics and traffic management will be even more necessary. Nowadays the warehouses are on the road, so to speak. Just-in-time and in-sequence has led to huge quantities of transport on our congested roads.”

The effects of global warming could potentially change such transport patterns and “this may prove to be a win-win for our traditional automotive countries”, he says.

Some assembly parts are still being produced in Asia, Mr Donck points out. But even these need to be pre-assembled in plants in Europe. For example, Ford Genk uses parts produced in India but has Belgian and European suppliers making the modules. “The situation is so that every investment is being closely scrutinised,” he says.

OEMs and suppliers continue to experiment with methods to avoid installing a pre-assembly plant near every manufacturer, he says. Costs – and investment risks – are becoming more obvious.


Nowhere is the supplier parks question more dicey than at the former Volkswagen (VW) Brussels plant in Belgium.

The plant has been plagued by strikes of workers and union members since last November, when VW announced it would halt production of its top-selling Golf model at the plant and cut the workforce from about 5000 to 1500.

VW Brussels became Audi Brussels earlier this year. The adjustment is ongoing. Supplier sources say that it is a leaner operation now, affecting suppliers globally. Audi will build the A3 there until 2009. VW, Europe’s largest carmaker and the world’s fourth largest, said it would build more than 100,000 Audi small cars at the factory, saving up to 3000 jobs.

“Once Audi is entrenched, it will choose other suppliers than VW’s since it is a premium brand. New ones (suppliers and parks) will definitely enter the picture,” says Pieter Donck, director of Agoria Automotive, a Belgian supplier trade association.

Production transfer

VW transferred production of its top-selling Golf model from Brussels to its German plants in Mosel and Wolfsburg, hampered by overcapacity.

Why the disruptions at VW Brussels? “Audi needs capacity and VW Brussels was already the only plant to produce VWs and Audis. The workforce is capable and flexible [enough] to cope with this,” says Mr Donck.

However, it took government, union and VW-Audi management action to negotiate worker disputes that erupted in the volatile manufacturing-dominated Flanders region. Workers have since agreed to less pay and a longer working week, 38 hours as opposed to 35 hours, to preserve jobs, according to news reports. VW, meanwhile, reported a 52% gain in operating profit before special items for 2006.

The irony is that VW Brussels had vastly upgraded its combined industrial park and logistics centre. It had invested about €35m in a three-phase supplier park building project over two years. By October 2006, it had constructed a modern two-storey production warehouse, 3000 square metres of office space and a transportation bridge linking the entire industrial park to plant production lines.

Capacity issues

As part of the product shifts, VW was seeking to resolve its European capacity issues. A company-wide restructuring plan meant cutting its European capacity by 20%, according to VW reports. Workforce reduction and product shifts between German plants and the Belgium plant underpinned the restructuring.

Under VW, the Brussels plant had produced 194,000 Golfs and 10,000 Polos a year.

One bright light, supplier groups say, is that in the long term the Brussels plant – and the community – has a future again.

“It has the disadvantages of being so close to the capital [Brussels] but the investment of a supplier park [inside a building] will be an advantage,” says Mr Donck.