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Weight-loss mandate looms for automotive suppliers

The Corporate Average Fuel Economy (CAFE) standards for the automotive industry are fast approaching, and some suppliers, notably those who are smaller and not as well financed, might be caught short. That's according to an article by Daron Gifford, Partner, who leads automotive industry strategy consulting for Plante & Moran (Southfield, MI).

Clare Goldsberry

May 28, 2015

4 Min Read
Weight-loss mandate looms for automotive suppliers

The Corporate Average Fuel Economy (CAFE) standards for the automotive industry are fast approaching, and some suppliers, notably those who are smaller and not as well financed, might be caught short. That's according to an article by Daron Gifford, Partner, who leads automotive industry strategy consulting for Plante & Moran (Southfield, MI). Gifford notes that "weight has become a top priority" for the automotive industry in his piece titled, "Weight-loss mandate: Ticking clock pushes suppliers to make daunting and expensive moves."

"For automotive suppliers, CAFE is becoming a game for the bold and wealthy," writes Gifford. "As automakers race to meet the government's 54.5-miles-per-gallon standard by 2015, they are asking suppliers to remove weight from their components without compromising performance."

In a phone conversation, Gifford told PlasticsToday that while "wealth does help, you still need a return on your investment." That's key, obviously, and working with OEMs or even Tier 1 suppliers can be a tough row to hoe for smaller Tier 2 suppliers, such as molders and moldmakers, who often have less access to capital and find it more difficult to squeeze out a profit given the constant pressure from OEMs to reduce cost to manufacture. Still, even the smaller suppliers need to come up with new ideas and develop expertise in new technologies so that they can remain a desirable player.

Gifford suggests "getting a partner with deep pockets." That partner might already have an in as a Tier 1 supplier, and with a partner you share the benefits and the risks. "Get tied in closely with the OEM or Tier 1 customer—find a good tech partner. At least, if you need to borrow money, you've got something to give you backing. With a partner that wants to use your technology, you have more opportunity in the supply chain," Gifford notes. "It takes some work to find the right partner, however. You're still going to play the dating game."

Gifford points to Ford's Aligned Business Framework as an example: Ford "offers close working relationships to 80 direct suppliers and 25 indirect vendors," to which it "earmarks about 65% of its annual purchasing budget."

The strategy behind this, as I've written in a number of blog posts, is to tap into the technology that suppliers can offer. The big OEMs know they can't know it all, nor can they "afford to develop all the technology they need for new vehicles, so they increasingly rely on the expertise of suppliers," writes Gifford.

"For suppliers trying to enter that charmed circle," Gifford offers a few recommendations:

  • Get involved early in your customer's design process, so you can optimize your component for the vehicle. If you do, your customer will be less likely to switch suppliers for the next-generation model.

  • Align yourself with your customer's technology cadence. Does the automaker plan to switch to aluminum or high-strength steel? Will that switch occur for the next redesign, or the one after that?

  • Cultivate ties with your customer's engineers, who will be key decision makers in their company's long-term technology needs.

Some new material technologies that are being implemented in vehicle manufacturing include high-strength structural steel frames and lightweight aluminum bodies, as seen in the new F-150 Ford pick-up trucks. There's the BMW i3 with a carbon-fiber-reinforced plastic passenger cell, adds Gifford.

Automotive suppliers with the financial and engineering wherewithal can develop technologies and patent them, as Magna has done with its international patent for "water-assist injection molded structural members." This patent, which was issued in both Canada and the United States, is for a method of forming fiber-reinforced thermoplastic members via molding.

While this type of development can be time consuming and costly, even small to mid-sized suppliers, such as moldmakers and Tier 2 molders, can provide expertise to their customers. One major technology that is in demand in automotive manufacturing is metal-to-plastic conversions in under-the-hood or fuel-system applications as a means to reduce weight. Combining various smaller parts that have to be assembled or welded, thus increasing costs, into a single injection molded component can offer greater strength, performance and quality at a reduced cost.

Some final recommendations from Plante & Moran's Gifford:

  • Seek partnerships with raw materials suppliers that have the expertise to help design a product. For components made from high-tech materials, a consortium may be your best bet.

  • Make sure that each component contract is profitable. Loss leaders are a risky strategy, even if the automaker links them to the promise of more business.

  • Don't focus solely on your current business—you should also consider the next generation of contracts that come after it. Look ahead to 2020, and beyond.

About the Author(s)

Clare Goldsberry

Until she retired in September 2021, Clare Goldsberry reported on the plastics industry for more than 30 years. In addition to the 10,000+ articles she has written, by her own estimation, she is the author of several books, including The Business of Injection Molding: How to succeed as a custom molder and Purchasing Injection Molds: A buyers guide. Goldsberry is a member of the Plastics Pioneers Association. She reflected on her long career in "Time to Say Good-Bye."

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