Market Snapshot: Automotive Underhood

While sales aren’t predicted to climb significantly, future platform activity is up.

As of this writing, the North American International Automotive Show has just ended, leaving in its wake a host of 2007 models and concept vehicles designed to entice buyers (see “Industry Buzz: Auto Show Goes for the Green,”). Industry analysts, however, don’t seem to share the exuberance of the OEMs that exhibited in Detroit. They expect a slowdown or flat sales picture for the year.

On the other hand, there are signs that future platform projects are ramping up significantly, which translates into a healthier year for automotive suppliers. Think those Ford commercials that feature Bill Ford expounding on innovation are just hype? Not so, says the Time magazine cover story (Jan. 30, 2006) that features Ford’s answer to putting the “mojo” back in Motown. If innovation is the way out of the doldrums that Ford and GM (and to a lesser extent, Chrysler) are in, suppliers should benefit.

That said, cost is still a factor, especially in underhood applications, where higher temperatures require material grades with slightly higher price tags. Lest we forget, resin costs have remained relatively high, so meeting the cost demands of automotive applications may prove challenging. In addition, Ford has announced it will cut the number of suppliers it works with by 50% or more.

On the whole, however, it appears the supplier segment of the industry will benefit from the effort to lure buyers with new technology.

Activity indicators

Husky’s Jeff MacDonald, VP, automotive, notes an increase in first quarter activity at the moldmaker level, one of the indicators Husky uses to gauge the market. “When we see a rise in the tools being built through our Detroit Hot Runner Design Center, it generally means new programs are coming to molders as well. There’s a significant uptick in activity, a result of new programs being launched to combat stagnation in the domestic auto industry,” he says.

Of all the drivers that affect the use of plastics under the hood, including component consolidation to reduce cost or eliminate assembly steps, the strongest driver for underhood applications is lightweighting for fuel efficiency and balance, according to MacDonald. “Under the hood is where the majority of weight is found, so if designers can take weight out, they can improve balance, which also improves fuel efficiency.”

Three materials trends that we find in the current automotive underhood market are the use of Thixomolded (TXM; molded magnesium, trademarked by Thixomat Inc.) parts, inline compounding, and thermoset polyester, or bulk molding compounds (BMC) that are injection molded. According to BMC Inc., its thermoset materials have recently been approved for automotive throttle bodies by a major OEM. In addition, a BMC material is in production for the cover of the Dodge 5.4-liter Hemi engine, and is also found on Ford and Chrysler engines. Compared to glass-filled nylon, the material has higher impact strength and heat deflection temperatures, and can cost up to 60% less, according to BMCI’s Len Nunnery, sales and marketing director.

Inline compounding is also making inroads in the automotive underhood market, explains MacDonald. These systems allow long glass fiber to be compounded at the press with high-temperature polyamide for better structural reinforcement, longer fiber lengths, and lower material cost. “A Tier One can save up to 40% in material costs,” MacDonald says.

“One of the most interesting inline compounding applications we’ve seen is front-end modules, where you can have an integrated molding shot in a single piece for the front end of the engine compartment,” he adds. Nine million of these modules are produced in Europe, and less than 1 million in North America, with an estimate that this figure will grow significantly in the near term.

“As vehicle platforms start to come together more closely in European and North American operations, we’ll see more common global vehicle platforms. We believe that vehicle architecture will change to support use of integrated front-end modules.”

TXM is another underhood star since parts that are not possible in diecasting—because of precision tolerances for mating surfaces with the engine block—are net-shape ready with this process. “Thixomolding allows our customers to mold to those tolerances,” says MacDonald.

Material trends

GE Plastics’ Keith DuPont, global market director, automotive underhood, weighs in on the material trends question with two major factors—higher heats and tighter tolerances. “As OEMs put more and more content underhood, the proximity to heat sources and the lack of air gaps has increased the temperature requirements for many applications. We’ve extended the temperature performance of many of our grades in response,” he says.

Tighter tolerances are the result of automotive’s push for additional cost reductions, targeting diecast and machined aluminum parts underhood. “In many cases, converting these parts to plastic requires tighter tolerances than are typical for molded parts. These, in turn, require advanced predictive engineering techniques and molding processes capable of meeting the demanding tolerances.”

Industry stats

Prior to January auto sales tallies, industry observers weren’t betting on the domestic auto industry to rebound with any fervor in 2006. Then the numbers hit with a surprising upward trend. Action Economics’ Mike Englund said in a Feb. 1 report, “Most manufacturers revealed surprising strength in January, with even persistent laggards Ford and GM showing gains of 1.2% and 6% respectively. This strength underscores solid consumer fundamentals and bucks the seasonal pattern in recent years where we’ve see a big ‘payback’ following end-of-year strength.”

Kenneth Kremar, a market analyst at Global Insight, agrees that the employee-pricing scheme pulled some sales forward, but does not expect light-vehicle sales to exhibit much strength in 2006. “We expect that consumers will become more cautious, having felt the sting of higher energy costs, increasing debt, and decreasing savings over the past year. Sales should total 16.51 million units in 2006, down 2.3% from 2005.”

What about the automotive tier suppliers? Although Delphi and Lear are having much-published difficulties, Faurecia recently announced that it will open six new facilities in Michigan, Ohio, and South Carolina, adding to the 17 plants currently operating in North America. JCI and Bosch have announced interesting new technologies, and Magna posted increased profits in 2005.

“They’re sending a mixed message,” says MacDonald. “Even troubled Visteon is investing in new technology, despite its problems. For all of them, the common message is that technology will be the differentiator. There’s no letup in cost pressure, but there is an increasing imperative to explore innovation and new technology that helps reduce cost.”