PININFARNIA: THE NEW CUSTOMER

DECISION

Alfa Romeo (1930)

2uettottanta (2010)

Car of the year 2010,Geneva

TEAM MEMBERS:ABHISHEK GUPTAKALPESHSHEFALIHARMEETSIDDARTHARUMKA

CONTENTS:Company BackgroundPosition in 1990sOperations at PininfarinaImprovement Initiatives in 1990sDeal with MitsubishiQuestionsFuture Scope

PININFARNIA BACKGROUND:In 1930 Battista “Binin” Farina founded.Specialized in design and production of custom

and small series automobile.Greatest success- producing revered designs

such as Ferrari Berlinetta Dino and Alfa Romeo Spider Duetto.

In 1966 after death of Farina, name of business was changed to Pininfarina.

Throughout the 1960s and 1970s it continued to design and produce unique automobiles- Ferrari Berlinetta, the Lancia Flaminia, the Austin A 40 and Morris 1100.

THE NICHE MANUFACTURER:Pininfarnia was considered a niche manufacturer.Production volume ranged from only one or two

cars per day.For special “sedans” such as Fiat Coupe 50 or 60

cars per day.It had produced over 17000 Fiat Coupes in 1994.Volume producer bargaining power was high and

niche manufacturer margins were narrow.

ADVANTAGES OF NICHE PRODUCTION:

Niche manufacturer costs for small volume products were lower than those usually achieved by volume assemblers.

Twice less capital and fixed cost. General purpose equipments and fewer other

specialized tools needed. Fewer mechanically performed operations and

lower level of automation. Do not use continuously moving assembly line, had

“stop and go process”.

Flexibility as they were often given contracts on models that had higher then usual volume uncertainty and larger seasonal fluctuations in sales.

Products aimed at narrow market segments that were difficult to specify and had rapidly shifting tastes.

They coped by developing elaborate contingency plans as this allowed them to rapidly shift workers from one line to another as demand fluctuates.

This increases station time so that the line moved more slowly

Highly competent and renowned design skills in product and process.

Design services were an independent source of revenue for them.

In 1994 design and engineering revenue totaled nearly 90 billion pounds.

Close links and effective joint problem solving between design and manufacturing was a major advantage in success of a new car model.

Some designers such as Pininfarnia and Bertone had widely recognized brand names.

PININFARINA POSITION IN THE 1990S

Problems arises like:-•Capacity utilization•Global competition•Japanese firms enter

Manufacturing operations at Pininfarina

Pininfarina produced both bodies and fully assembled cars at two major production facilities:

1. Grugliasco2. Giorgio

Improvements in the 1990s

• Rapidly phased out the production of bodies and assembling

• Committed toward new models• Operational improvement in quality , cost and

deliverability• Manufacturing performance improve

Workforce and quality initiatives

• Two major changes 1.Introduced work team system model2.Training program specific operation and techniques training Interpersonal skills training

Supplier development• In 1991, pininfarina had about 650 supplier.

Typically, competitive bids were among supplier and volumes were split among several supplier.

• By 1993, the number of supplier had been reduced to 350

Advantages :- increase frequency of deliveries and increase quality

Disadvantages:-decreasing total amount of combined inspection

• By 1996, the number of supplier had been increased again to 450 driven by

Improved purchase price and inventory levels.

Used new production modelManage customer needsAssemble vehicles

Search for new customer

Pininfarina SpA, a renowned manufacturer and designer of niche vehicles for major automobile companies, has traditionally competed on flexibility using a highly skilled design and manufacturing workforce and low levels of automation.

Dream cars: visit all the unique models produced by Pininfarina for each customer…

The New customer decision • Design • A perfect blend of beauty and technological innovation...• Engineering • From definition of styling to release of the product...• Manufacturing• Pininfarina is a leader in the production of niche vehicles...• ARC • The Pininfarina Aeroacoustic and Aerodynamic Research Center..• Pininfarina Extra • Enter the Pininfarina world of the product and interior design...• Special Projects • Looking for the car of your dreams? Pininfarina will create it for you...• Consultancy• In this section you can find all the information about the services offered by Pininfarina

Consulting• Customers•  Alfa Romeo, Ferrari, Ford, Mitsubishi, Volvo and many other leading names on the world

automotive scene..

Services • car, automobiles, design, style,

history, heritage, collectors, dream car, engineering, production, Pinin, Farina, Pininfarina, vehicles, niche, creativity, prototypes, show car.

Customer • Ferrari, Maserati, Fiat , Lancia, Alfa

Romeo, Peugeot, Citroen, Rolls-Royce, Daewoo, Honda, Hyundai, General Motors, Brilliance, AviChina – Hafei, Chery, JAC, Ford, Jaguar, Volvo, Mitsubishi

Capital Investment:

• New production facilities would have to be acquired and equipped for Mitsubishi production.

• Additional expenses related to the paint shop which would have to run for additional shift.

• The Pajero would offer a two tone painting option, and this also posed some problem for the paint shop.

• Space is required to dry and store vehicles in between painting stages.

Quality• Bertrandi knew that Mitsubishi consider its own

quality standards to be very high and that it focus differ from Pininfarina’s existing customers.

• Some in the company believed the Mitsubishi might demand the defect level to be ¼th of Pininfarina.

• Experience shows that different customers considered different things in deciding what was the defect.

• Some customers specified the quality as harness of enine compartment, while other manufacturer only functionality was considered.

Parts and Logistics:

• Major mechanical parts like engines would be supplied by the production in Japan either from Mitsubushi itself or from one of its suppliers.

• Other parts are sourced from Europe.• Mitsubushi agreed to own the inventory until

it arrived at Pininfarina.• Pininfarina has some experience in long

distance supply chain.• Pininfarina calculated that 13 days shipping

would be required.

Work-Force

• 600 additional Direct Workers• 200-240 Indirect Workers• Full Utilization of present Resources

Possible• Ramped Down existing Contracts

business

Questions???• 1. Pininfarina Accept the Mitsubishi Business or

Not ?Favorable Points:

Learning OpportunityChance to improve Operation system and make compatible

with global competition Promises Utilization of extra facilities available due to

retirement of old models Chance to be a GLOBAL LEADER in Niche manufacturer Easily Adaptable Japanese Model with Pininfarina’s Operation.

Unfavorable Points: Doubt on Mitsubishi’s CapabilitiesLow Profit margins

• 2. Pininfarina: Possible Strategies for future Competition– Should Adopt the Japanese Operation

system as Japanese manufacturers are the big threat in European Auto market at that time

–May Identify Itself as Global Niche Manufacturer by getting order from almost all Volume manufacturers.

– Same time may made Joint Venture for designing with big players of Auto market

THE DEAL

The agreement between Mitsubishi Motors and Pininfarina was signed in January 1997. Pininfarina then purchased an industrial site at Bairo Canavese in Turin, Italy, in April 1997, as a production facility dedicated to the production of the new Mitsubishi PAJERO PININ. Initial production will consist of the three-door model unveiled at this year's Geneva Motor Show, followed by production of a five-door model from autumn 2000.The Bairo Canavese plant carries out the assembly and finishing operations, as well as the final check-up and testing on the track adjacent to the plant. The body assembly and paint shop are located at the Industrie Pininfarina factory in Grugliasco.For Pininfarina, this agreement with Mitsubishi Motors means not only a significant increase in its manufacturing operations, but also opens the door on an extremely promising market sector. The compact SUV segment (small size Sport Utility Vehicles) have been one of the fastest growing segments in the European automotive market. Sales volume of compact SUVs are expected to reach approximately 440,000 units by the year 2000.

Cont……It is a great satisfaction for Pininfarina to have been chosen by a Company like Mitsubishi Motors for the manufacture of the new vehicle from its celebrated Pajero range aimed at the European market. It rewards in fact the commitment of the Company to be in the automotive world both a global partner for carmakers, and flexible supplier of expertise and specific services at every stage of the development of a new product, from design to technological development and industrialization, and production.The role that Pininfarina is to play under the terms of the industrial agreement with Mitsubishi Motors confirms that the Group has reached a level of excellence in the quality/cost/service ratio, also in its manufacturing activities, like the ones of design and creativity, and represents a particularly significant event in the current automotive scenario, both from the industrial point of view and as regards employment.

Cont….

Both partners in the venture made huge investments in the Shogun Pinin project. Pininfarina spent approximately $40 million US (£27 million, 70 billion lire, 36 million euro) on buying and equipping the Bairo Canavese factory, as well as on expanding its Grugliasco assembly and painting facilities. Mitsubishi Motors' investment has totaled almost $100 million US (£66 million, 180 billion lire, 93 million euro).The plant will provide the local economy with a substantial boost. It will employ 450 people, creating 200 new jobs and transferring 250 jobs from other Pininfarina plants. In addition, a further 150 employees at Grugliasco will be working exclusively on the Shogun Pinin lines. This means that out of Pininfarina's total workforce of 2,500, almost a quarter (600) will be working on the Shogun Pinin.

THE DE

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