Method to evaluate the profitability and risk structure of projects in the automotive industry

As automotive companies are concentrating on their core competencies, the number and importance of buyer-supplier-relationships is growing. Furthermore, projects in the automotive industry are characterized by runtimes up to ten or more years and the environment can be described as turbulent. Therefore, decisions of companies are subject to a decreasing predictability of future cost and risk factors concerning not only their own value creation, but also the collaboration with suppliers and buyers. Hence, today's evaluation of profitability by calculating one deterministic Net Present Value (NPV) for a single project is not sufficient. The paper describes a method, which allows the evaluation of projects profitability under detailed consideration of occurring costs and risks in the company-wide value creation process over the project runtime.