Niche-vehicle Producers Face Uncertain Future
April 18, 2008

By Pal Negyesi

Magna Steyr will build the forthcoming new Aston Martin Rapide; Bertone skips the Geneva Motor Show for the first time in 50 years amid financial woes; Pininfarina fights for survival  just some of the recent headlines that reveal a mostly gloomy picture for contract manufacturers.

Long gone are the heydays of these companies. Back in the 1990s, major automobile manufacturers including Opel, Volkswagen and Mercedes-Benz were looking for cost-effective ways to produce relatively smaller runs of special versions of their models. Design and engineering companies, including Bertone and Karmann were competing with each other for new business. As an example, in the early 2000s Austria-based Magna Steyr — which developed Mercedes-Benz's acclaimed 4Matic all-wheel-drive system — was manufacturing the 4WD versions of the E-class; Karmann was making a little more than 10,000 CLK convertibles a year in Germany; Bertone was churning out the Opel Astra convertible; and Pininfarina was happy with a lot of different models, including the Peugeot 406 coupe and the Mitsubishi Pajero Pinin mini off-roader.

Today only Magna Steyr has a somewhat clear future, thanks to deals such as the forthcoming new BMW Mini off-roader and the Aston Martin Rapide. All other companies had to scale back their activities and revert to their original functions. These changes are painful.

A little history lesson is needed to understand the present situation. Coachbuilders before World War II, which built one-off, custom bodies for selected clientele, made a nice living everywhere. In the U.S. there was Derham, Brewster, Fleetwood, et. al.; in Europe Castagna, Figoni&Falaschi, Saoutchik, Mulliner and a lot of other companies fulfilling the wishes of the rich and famous. Pininfarina, Bertone and Karmann can trace their roots to these epic times.

After WWII the advent of unibody construction and changing social patterns meant the business model had to change.

It is interesting to note that lately the time of coachbuilders is on the rise again: Henrik Fisker, ex-chief designer of Aston Martin has set up Fisker Coachbuild, which offers rebodied Mercedes-Benz SL and BMW 6-series for the filthy rich. Even Pininfarina has returned to its roots and created stunning Ferrari-based one-off sports cars for wealthy clients.

But mostly from the 1950s coachbuilders became design studios, which provided consultancy and engineering services to major carmakers. Karmann got lucky with the Volkswagen Karmann Ghia, whose two-decade life span ran from 1955 to 1974. It was the prototype of today's contract manufacturing efforts. Later on Bertone built 40,000 Alfa Romeo Guiletta Sprints; 140,000 units of the Fiat 850 Spider and 180,000 Fiat X1/9 sporty coupes.

In the early 1980s the emergence of new soft-top convertibles proved to be a manufacturing challenge for carmakers: Volkswagen sourced out production of the open-top Golf to Karmann, and Fiat asked Bertone to build the Ritmo convertible. For two decades, convertibles — be it soft-top or hard-top — provided lucrative business: Karmann later assembled over more than 150,000 units of the Mercedes-Benz CLK, Bertone hit gold with the Opel Astra coupe and convertible, and so on. Carmakers saw contract manufacturing as cost-effective.

In the 1990s a new movement gave a boost to contract manufacturing: Japanese and Korean carmakers noticed a loophole in European regulations and decided to enter Europe with the help of local assemblers. Karmann helped Kia with the first-generation Sportage and built about 26,000 units between 1995 and 1998, and Pininfarina was happy to allocate some of its capacities to put together the Mitsubishi Pajero Pinin mini-SUV. Similar logic prompted DaimlerChrysler to turn to its old partner, Austrian Magna Steyr, to assemble various Chrysler (300C, Grand Voyager) and Jeep (Grand Cherokee) models for the European market.

Capacity constraints also played a role in this business. The ultimate irony is of all reasons, this last one of the only one which still holds water. Cost-cutting programs of carmakers, changing production methods and quality problems all resulted in inevitable consequences: Deals were not renewed or were abruptly halted. Pininfarina is building only niche vehicles, Bertone does not have a single manufacturing contract; both Karmann and French Heuliez reverted to supplying roof systems.

But damage has been done: All of these companies are now streamlining their operations. Some are fighting for their survival. Only Graz, Austria-based Magna Steyr was able to secure juicy deals: 60,000 units of the new Mini mini-SUV from 2010, topped by image-boosting deals from Aston Martin (2,000 Rapide sedans a year from 2009) and fellow Austrian motorcycle manufacturer KTM (about 1,000 units of the X-Bow minimalist sports car a year).

Bertone was put into the Italian equivalent of Chapter 11 in late 2007. Lilli Bertone, widow of Nuccio Bertone, who ran the company until his death in 1997, announced in January she'd sold the business to fellow Italian company Gruppo Prototipo, which prompted a family feud. Today the fate of Bertone is unclear.

Pininfarina is seeking new capital to the tune of €100 million, after losing €22 million in 2006 and €115 million in 2007. It seems Pininfarina took on too much work and was not able to control costs and quality properly. Some of its models, such as the Alfa Romeo Brera and Mitsubishi Colt CZC, have sold badly. Pininfarina officials already hinted at a “more selective approach to contract vehicle manufacturing,” according to an article in Financial Times.•

Photos:
1 — Aston Martin Rapide
2 — Fisker Tramonto
3 — Karmann Ghia
4 — Pininfarina

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