The Frankfurt auto show is a huge deal for German car makers. it’s a once a year chance to showcase new styles, discover new trends, and be in the spotlight for the world’s automotive press. All the corporate bigwigs are in attendance – Dieter Zetsche of Mercedes, Martin Winterkorn of Volkswagen, and Harald Krueger of BMW. But the names on everyone’s lips at the show this week were Apple and Google, two companies that weren’t even at the show, at least not officially.
Why? Because the automobile business is changing rapidly. People don’t talk very much about horsepower and camshafts any more. Instead, they talk about connectivity, self parking and autonomous driving. Digital technology is the future; internal combustion engines are the past. Volkswagen’s CEO, Martin Winterkorn, says, “By the end of this decade we will have transformed all of our new cars into smart phones on wheels.”
Volkswagen, Mercedes and BMW are very, very good at building automobiles, but they are not known for their prowess in the digital world. That’s where Apple and Google shine, and today’s car makers are clearly nervous about whether those high tech companies will do to them what Apple did to Nokia when it introduced the iPhone. Almost overnight, Nokia went from being the world’s largest manufacturer of cell phones to nothing more than an afterthought.
Once, Yahoo was the world’s search engine of choice. Then Google came along and knocked Yahoo completely out of the race. Apple and Google are both known to be working on making cars of their own design. Could they do to Mercedes, BMW and Volkswagen what they did to Nokia and Yahoo?
That’s something that is clearly on the mind of Mercedes boss Dieter Zetsche, who told reporters in Frankfurt. “What is important for us is that the brain of the car, the operating system, is not iOS or Android or someone else, but it’s our brain. “We do not plan to become the Foxconn of Apple,” he said, referring to the Chinese company that manufactures iPhones for Apple.
Is that a real possibility? German manufacturer ZF made its reputation building automobile transmissions, but has gone on to become a major supplier of sub-systems for many auto makers. In May, it bought TRW, a Michigan company that provides auto electronics such as airbag systems. TRW has been working on sensors and other hardware for self driving cars.
Stefan Sommer, the chief executive of ZF, said the company would be able to produce a Google-branded car if it worked with two or three other companies to supply components ZF cannot, such as body stampings “We would be a partner in that, for sure,” Mr. Sommer said in an interview. But he said ZF could not work with Apple under the conditions it imposes on suppliers.
ZF sees itself as an innovator, not just a supplier. In Frankfurt, it displayed a car with electrically powered wheels that allow the car to turn 360 degrees almost on its own axis. ZF could not agree to demands by Apple for exclusive rights to such inventions, Mr. Sommer said.
To remain competitive, the world’s automakers must teach themselves how to nimble in a business where change has been almost a glacial process in the past. For example, Mercedes reorganized many of its factories last year, eliminating plant managers and giving control over production to the executives in charge of different model lines. That change made it possible for Mercedes to introduce a new variation of its popular C Class at four factories on four continents in only six months.
That’s about twice as fast as those changes could have been made before. said Markus Schäfer, head of production at Mercedes. “This enables us to be more competitive in a world where new competitors come to the table,” Mr. Schäfer said. “We created the automobile,” he said. “We will not be a hardware provider to somebody else.”
Hardware provider or car company? That is the question being asked most often in Frankfurt this week.