Daron Gifford, Partner in Plante Moran's Strategy Practice and leader of Strategy and Automotive Industry Consulting Practices, gave the attendees a glimpse of the megatrends in the automotive industry. The most pressing trend is mass/weight reduction. Currently, steel, high-strength steel (HSS) and advanced high-strength steel (AHSS) make up a total of 67% of a vehicle's weight (52% steel and 15% HSS and AHSS). By 2030, it is projected that the total weight of a vehicle will be comprised of 13% steel and 38% HSS and AHSS for a total of 51%.

With materials technology rapidly evolving away from steel and high-strength steel to carbon fiber and composites/plastics, Gifford said that the percentage of vehicle weight comprised of these materials will go from the current 10% to 16.5% by 2030. I think nearly every presenter at the conference mentioned carbon-fiber-reinforced plastics (CFRP) at least once in their talks.

Gifford noted that while carbon fiber's high cost has kept it from mass production, the cost is expected to decline by up to 70% over the next 10 to 15 years, "driven by the development of cheaper precursor materials and labor processing efficiencies." Additionally, "new entrants will promote competition and innovation to drive down prices," Gifford stated.

Another megatrend that Gifford cites is fewer and combined vehicle architectures. "Three-fourths of the variable costs can be leveraged across other vehicle models," stated Gifford. He noted that currently eight platforms support 80% of Ford Motor Company's models; GM has six platforms; Honda has four platforms; and Chrysler has six platforms.

Targeted emerging market growth is another megatrend that Gifford sees. While China, Brazil and India are the top three emerging markets for automotive, respectively, Mexico comes in a strong fourth. "As Mexico becomes a more industrialized nation, it's estimated that operations in Mexico will be more important," he said.

Gifford noted that the plastics industry segment serving the automotive market has done "extremely well over the past two years." Profitability among automotive processors is averaging 9.4% EBITDA. However, he noted that there are three types of automotive plastics processors. There are the "passive" suppliers, those that follow and tend to be defensive in their strategies, which Gifford called the Blackberry group. "They will be more focused on efficient operations and will not adapt to innovation until proven, and then only after being pressured by customers and the market," he said.

There are those who are proactive and actively looking ahead, staying aware of the changes taking place in the industry, a style that he terms the Samsungs of the group. "They are prepared to respond quickly and adapt in their markets," Gifford said. "Although more risk averse than innovative or visionary organizations, they may be considered fast followers."

Lastly, there are the innovative, visionary processors that supply the automotive industry, and are the industry leaders always staying ahead of the game by using technology and research to gain a "first mover" advantage. "Innovation can be profitable and, in fact, this is where the profit is," Gifford remarked. "These organizations utilize a broad range of data and creative thinking while assessing the level of risk in their investments."

To be a successful processor to the automotive industry, Gifford advises that these companies must develop "effective commercial relationships," permit "pricing and costing transparency" and provide "engineering and technical support and warranty responsibility."

OEMs are seeking greater manufacturing launch efficiencies, and they are making "huge monetary demands" on their suppliers with their need for support on a global basis. "Processors need to ask themselves ‘where do we go to invest to meet that demand for global support,' " he said.

While many processors are doing the best they can to keep up, it's doubtful that these demands will back off. "The plastics industry will continue to be challenged," Gifford concluded.