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Four technological challenges the auto industry faces today

Who cares about all the high-tech gadgets proliferating vehicles today? Lots of people care, according to Brendan Cahill, director of Dykema's Automotive Industry Group. Dykema, a national business law firm serving a variety of industries, has offices throughout the U.S. including three in Michigan.

Vehicle buyers today are less interested in the "performance" such as going 0-60 in less than a minute, and more excited about the "space-age" stuff—the bells and whistles that make a vehicle more than just a car or truck. But even as the idea of a Jetsons-like future dominated by robotic cars enthralls the media, that potential reality is at least a decade away, said Dykema in its recent commentary on Four Tech Challenges the Auto Industry Faces Today. Meanwhile, the auto industry has undergone a less whimsical but far more sweeping shift, from the business of metal bending to the business of chips and sensors, Dykema commented.

While the technological revolution has been a boon to the auto industry—the market for smart vehicle systems is expected to reach $22 billion by 2020 as consumers increasingly demand that their cars be sophisticated tech hubs—vehicle makers are focused on the next level of material technology for structural safety purposes, noted Cahill.

"One thing we didn't cover in the commentary," said Cahill, "and the thing we see becoming more common, is steel replacement with composites for structural components."

Recalls in 2014 haven't done a lot to endear consumers or give them confidence that their cars are of high quality in addition to being high-tech. Cahill quoted a GM executive he heard speaking once, to the effect that "if my car failed to work as often as my personal computer crashes, I wouldn't be a happy consumer."

The point is, said Cahill, "It all has to work all the time, not have bugs, crashes and reboots and recalls which means that the vehicle makers can't lose sight of the fundamentals."

As technology seeps into every facet of a vehicle's makeup and production, the industry faces new and unprecedented challenges. Today's auto-industry executives must bridge the divide between Silicon Valley and Detroit. They must address entirely new dimensions of safety concerns, such as how to protect their customers' privacy and data.

"About 55 percent of people won't buy a car if it doesn't have the technology they want in it," said the Dykema commentary quoting Scott McCormick, president of the Connected Vehicle Trade Association. "That's a big change."

That means that automakers will have new supply chain members such as applications developers and software companies, noted Cahill. "They need people will these skills sets, and in some cases the automakers say they don't really know what they'll need down the road," Cahill commented. "They are just looking for smart people who can come up with ideas that the automakers haven't thought of yet; ask the questions that they haven't thought of."

Cahill adds that the automakers have evolved away from telling their suppliers what they want. Now they push their suppliers to come up with new ideas based on what customers want. "The customers tell the OEMs what they want and the OEMs in turn tell suppliers 'impress me, surprise me' with something exciting."

That brings up another topic: Who owns the technology? On the tech side, the traditional model of the OEM throwing requirements over the wall to the supplier with the OEM owning the technology isn't going to fly. "When you're working under supply agreements that's how it worked," Cahill said. "Now they have all kinds of different suppliers that sell into all types of industries. That's where the cultures are meeting and that's where they have to figure out how to do business together. 'I want your technology because it will make my product better,' says the OEM, and the suppliers are looking at the massive number of dollars that a supply agreement with the automotive industry can bring in. It behooves them do business together, but the big question is—how do they do it? The old way with non-competes and exclusivity agreements for new processes and products won't fly in the new high technology game." 

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