Strategies for the 21st Century: Automotive

Oracles attempting to forecast the future of the automotive industry are many, and in such a dynamic industry, it’s still true that anything is possible. Looking squarely at the current status and recent developments, however, does lend a few educated guesses while steering clear of the outlandish ones.

For example, the proclivity toward consolidation among Tier One and Two suppliers will continue, though at a decelerated rate. That’s a conclusion reached by the University of Michigan Office for the Study of Automotive Transportation, which predicts that all of the automotive tiers should expect restructuring and realignment through 2005. Modular assembly, or the shift in responsibility for design, testing, and production of entire assemblies from OEM to molder/supplier, is another hot trend that appears to have staying power.

Automotive molders also live in a regulatory universe, one marked by safety, fuel efficiency, and recycling initiatives. Navigating these hurdles used to be the sole domain of OEMs, but as modular assembly accelerates, all of the tiers need to be more aware of these targets as set by national standards bodies and the OEMs themselves.

Overriding all of the twists and turns in Autoland are cost concerns. No surprises here. If products can’t be made less costly, OEMs really don’t care to deal with a supplier. Currently, the requested cost-downs, as they are called, run about 5 percent per year. That means the same part (or assembly) needs to come down 5 percent in price each year. “Gentlemen, start your engines” has now changed to “Let the cost-cutting begin.”

Key Word: Collaboration
Beyond the ever-present cost directive, what will automakers ask of their suppliers in the near future? It depends on which company is queried, but DaimlerChrysler’s answer is rooted firmly in the extended enterprise concept. As the most successful of the U.S. OEMs to date, it is setting trends, especially in the area of supplier management.

Born under former president Tom Stalkamp, the current DaimlerChrysler extended enterprise system revolves around several key points. According to its new president, Bill Holden, the concept relies on trust, community, and integrity. “As we build the supply chain, each member is responsible to the consumer for cost, technology, and innovation,” says Holden. “Every link needs to be strong. Our extended enterprise approach encourages suppliers to bring their expertise to the table early in a product program. Now, we’re asking suppliers to think beyond the next product cycle and to work with us on technologies that might not hit the road for another five to 10 years.”

Peter Rosenfeld, vp of supplier management for DaimlerChrysler, also wants to take the extended enterprise concept to the next level. “We need suppliers that can share their experience and vision for new vehicles with us, to think of the consumer, and adapt technology to meet consumer needs,” explains Rosenfeld. “In short, the supplier of the future will share what the future should be, and then bring the process experience needed to make it happen.”

To accomplish these goals, DaimlerChrysler plans to model its future work with suppliers on the newly dedicated Husky Technical Center. “Our recent initiative to invent technology for molding large exterior body panels with Husky and Decoma [“Hardtops Today, Entire Car Bodies to Come,” December 1999 IMM, pp. 89-92] is a working demonstration of this type of collaboration,” says Holden. “This concept will become a vital extension of our product creation process in the near future.”

Larry Rybacki, director of platform supply at DaimlerChrysler, helped put together the extended enterprise team at the HTC. He believes that business will belong to those suppliers that will provide OEMs with dedicated engineering research and development. “Our supplier of the future will not be far from our supplier of today,” he says. “They must be quality oriented, have technical expertise, participate in cost reductions, and be able to allocate R&D funding specifically for DaimlerChrysler.”

Create a Specialty
Consumers are definitely the ultimate audience for an automotive supplier, according to Paul Ballew, partner and chief economist for the light vehicle market at J.D. Power & Assoc. “Customers are expecting personal relationships in the sense that they are demanding cars designed specifically for their needs. How can this be done in mass production? Economies of scale matter, but this niche approach matters more in the long run.” Nissan’s Xterra SUV stands out as a case in point—many of its features are those requested by 20-something, active, athletic buyers.

Automotive suppliers are using several strategies to cope with the trend toward mass customization, says Ballew, including cost cutting, consolidation, productivity enhancements, innovation, and modular assembly. But none of these measures alone will be enough to withstand the increased shifting of responsibility from OEM to supplier. Instead, he believes suppliers need to develop proprietary capabilities. “Bringing value to the equation is no longer just about meeting OEM demands,” says Ballew, echoing the DaimlerChrysler mantra. “It is about exceeding them.”

Several Tier One and Two specialties are emerging, all aimed at taking cost out while keeping quality status quo. Visteon, for example, created the first thin-walled TPO fascia for the Windstar van, and continues in this vein with other applications. Jim Krebs, product development engineer for the project, explains that Visteon selected the Windstar platform for its initial thin-wall design attempt to prove that there would be no safety compromise. “Windstar has become synonymous with safety, and continues to receive the highest ratings. We wanted to carry that tradition forward.”

Another example of specialization comes from Visteon’s Utica plant, where a low-pressure molding process is taking the time, weight, and cost out of producing interior door trim panels. Technicians combine a vinyl skin/olefin foam laminate and PP substrate in one shot by inserting precut skin/foam material, and then backmolding the PP onto it. Called LPM, the technology originated in Japan, and is being embraced in the U.S. by several Tier Ones.

Long Live Plastics
Predictions for the amount of plastics, and specifically, injection molded parts, look promising from our industry’s standpoint. Jim Best, principal at Market Search (Toledo, OH) sees a total of 312 lb of plastics per vehicle by 2009, with 167 lb coming from injection molded plastics. Less conservative estimates, such as those from Tom Bouchard, gm at GE Plastics Automotive, place the amount of plastics at 600 lb by 2007. Behind these projections is the fact that plastics help meet weight goals for compliance to CAFE standards and cost goals overall.

Norm Kakarala, a researcher for Delphi Automotive Systems, reports that as a major Tier One supplier, the company is making an equally major commitment to injection molded plastics. “Mass savings are out,” he says, “and styling, comfort, and function are in. These trends spell IM plastics to us. In fact, molds are much less expensive than stamping dies, and the lead times are shorter as well, often by months. We also gain parts and function consolidation, design freedom, and rust resistance.”

OEMs Go Internet
Suppliers are facing other challenges in the way they work with OEMs. Ford and GM both recently announced their respective e-supply chains aimed at coordinating purchasing activities both internally and among their suppliers. Essentially, GM and Ford will move all of their purchasing (goods and services, including contract manufacturing) to giant websites, and expect their suppliers to use the virtual marketplace for purchasing as well.

Unlike DaimlerChrysler’s approach toward the extended enterprise, however, GM’s decision to go digital appears to be motivated more by cost-cutting than by the desire to stimulate supplier involvement. The automaker hopes to cut the $100 per order cost of traditional purchasing by changing to a Net environment. Ford, on the other hand, says it will also use its website to communicate details to its supply base on what car buyers want.

Aside from these developments, scores of additional changes in the way molders do business are tied to the Internet, even though many in the plastics industry are not currently part of the wired realm. In other words, the possibilities for business-to-business uses for the Internet are growing exponentially as this channel for commerce expands.

Proving this fact is as easy as logging onto the digital world, where users will find online purchasing of everything from resins to molding machines, as well as new and time-saving avenues for design collaboration.

Time to marketWhat is driving industrial designers out of their loft offices and onto the manufacturing floor, symbolically speaking? The answer can be found in the push to get products to the marketplace faster. “The only way to speed up the product development cycle,” says Malcolm Smith, vp of Palo Alto Products International, “is to start integrating the functions of industrial design, design engineering, and manufacturing. As these separate disciplines begin to work together at the beginning of product development, we’ll see significant time savings.”

Helping to accelerate the trend are 3-D CAD packages and Web-based collaboration, which together allow quicker translation of concepts. As a result, industrial designers and design engineers are getting involved earlier to find out if a part is manufacturable. “We’re working on a couple of projects now,” Smith says, “where industrial designers can send a file to designers for suggestions about technical content while a concept design is still being formulated.”

Industrial and other designers increasingly rely on CAD software as a communication tool to allow more concurrent engineering, putting them in a position where the product can be released to manufacturing faster. Without such upfront collaboration, results can be disastrous. “When designers can’t change the concept, they need to spend an inordinate amount of time having to make the plastic parts work,” explains Smith, “and the cost and length of time required to make the resulting mold are also affected.”

At Palo Alto Products, which specializes in product design and development, projects that used to have a 12-month cycle are now six-month programs. In this environment, developers must understand how the tooling design will affect the schedule.

For example, if an industrial designer interjects elements in the design that push out the tooling schedule, the client won’t allow it. “Stakes are so big that if you miss a market window by four weeks, it costs millions of dollars,” explains Smith. “Large OEMs are starting to understand that it’s important to get it right the first time, and hit the manufacturing date with clean documentation.”

With tooling lead times budgeted at six to eight weeks, making a tool that can be manufactured in that time becomes critical. Smith suggests identifying whether a part will need a sophisticated design element early on, so that toolmakers are ready for it. “Our mantra is to prep everyone along the way,” he says. “No more surprises.”

Reality is hitting at the OEM level as well. In addition to industrial design services, Palo Alto Products has its own tool shop now. Smith finds that OEMs are starting to source tooling vendors earlier than ever before. The prevailing feeling is not to wait to shop a project around, because the pressure to get a product to market is unrelenting.

Still, Smith sees a big need for industrial designers to do more concepting. “Although we’ll find more collaboration between industrial design, part design, moldmaking, and molding itself, most industrial designers won’t necessarily go too far into manufacturing. Their job is still to get people’s juices flowing, open a market to differentiation, and find out what that breakthrough product is.”