Production risk

Volatile developments in the global automotive markets, accidents at suppliers and disruption in the supply chain caused production volumes of individual vehicle models to fluctuate at some plants. In specific markets, we also recorded a change in incoming orders: the number of orders for diesel vehicles fell, while orders for petrol engines rose. We address such fluctuations using tried-and-tested tools, such as flexible working time models. The design of the production network enables us to respond dynamically to varying changes in demand at the sites. “Turntable concepts” even out capacity utilization between production facilities. At multibrand sites, volatile demand can also be smoothed across brands.

Legal changes, for instance in the context of the changeover to the WLTP test procedure, may impact production. For one thing, a temporary reduction in the range causes demand to focus on the available variants. Moreover, gaps in production can occur if model variants have not been approved. These fluctuations necessitate measures to stabilize production, such as the temporary storage of vehicles until official approval.

Short-term changes in customer demand for specific equipment features in our products, and the decreasing predictability of demand, may lead to supply bottlenecks. We minimize this risk, for example, by continuously comparing our available resources against future demand scenarios. If we identify bottlenecks in the supply of materials, we can introduce countermeasures far enough in advance.

Production capacity is planned several years in advance for each vehicle project on the basis of expected sales trends. These are subject to market changes and generally entail a degree of uncertainty. If forecasts are too optimistic, there is a risk that capacity will not be fully utilized. However, forecasts that are too pessimistic pose a risk of undercapacity, as a result of which it may not be possible to meet customer demand.

The range of our models is growing, while at the same time product life cycles are becoming shorter; the number of new vehicle start-ups at our sites worldwide is therefore increasing. The processes and technical systems we use for this are complex and there is thus a risk that vehicle deliveries may be delayed. We address this risk by drawing on experience of past start-ups and identifying weaknesses at an early stage so as to ensure that production volumes and quality standards are met during our new vehicle start-ups throughout the Group.

In order to prevent downtime, lost output, rejects and reworking in general, we use the TPM (Total Productive Maintenance) method at our production facilities. TPM is a continuous process, that involves the entire workforce. Round-the-clock maintenance of the technical facilities means that they are always operational and guaranteed to function reliably.

Particular events beyond our control such as natural disasters or other events such as fires, explosions or the leakage of substances hazardous to health and/or the environment, may adversely affect production to a significant extent. As a consequence, bottlenecks or even outages may occur, thus preventing the planned volume of production from being achieved. We address such risks with, among other things, fire protection measures and hazardous goods management, and, where financially viable, ensure that they are covered by insurance policies.

Risks arising from long-term production

In the case of large projects, risks may arise that are often only identified in the course of the project. They may result in particular from contract drafting errors, miscosting, post-contract changes in economic and technical conditions, weaknesses in project management, or poor performance by subcontractors. In particular, omissions or errors made at the start of a project are usually difficult to compensate for or correct, and often entail substantial additional expenses.

We endeavor to identify these risks at an even earlier stage and to take appropriate measures to eliminate or minimize them before they occur by constantly optimizing the project control process across all project phases and by using a lessons-learned process and regular project reviews. We can thus further reduce risk, particularly during the bidding and planning phase for large upcoming projects.