It’s been called an industry in rebirth, an industry that’s rebuilding, and an industry in transformation. It may be all of the above, but it’s pretty clear that the U.S. automotive industry is undergoing some profound changes. Driven by tougher fuel emissions requirements, the American auto industry is on a path to producing greater numbers of fuel-efficient vehicles, including hybrid gas-electrics, followed in succession by increasing numbers of plug-in hybrid electric vehicles and, eventually, all-electric (battery electric) vehicles.
This progression toward increased production of hybrids and electric vehicles is affecting the automotive production supply chain in various ways. Part of what’s happening is a reflection of the different parts and components required by the newer, more fuel-efficient hybrid, plug-in hybrid, and battery electric vehicles that have started to come off the assembly line. The greater use of electronics and high-voltage components in these vehicles creates higher demand for the manufacturing services needed to produce them, as well as for the heat management or thermal transfer components needed to keep heat away from them. Most parts under the hood will not only need to be lighter for fuel efficiency, but also stronger and more heat resistant because, as one contract manufacturing executive recently told a reporter, “Heat is a serious enemy to electronics.”
Also, some manufacturing technologies that produce parts using advanced materials, and which have already been proven in one or more other industries, are now being applied to the automotive industry. Processes for manufacturing high-strength, low-weight composite parts, for example, are now being increasingly used in the automotive industry to help meet requirements for fuel efficiency and safety. These parts include lightweight composite structural panels that can save weight while providing high impact resistance. And while new materials and methods for manufacturing composite automobile panels and components are being explored, contract manufacturers throughout the U.S. are applying capabilities honed on aerospace and defense work to meet the needs of companies looking to bring cutting edge products to market.
Depending on the capabilities offered by their suppliers, automakers may need to adjust their sourcing strategies in different ways. It may mean finding a supplier that can work with a different material—a lighter, stronger, more heat-resistant engineering plastic, for example—to produce the part. In other cases, it might mean shifting more work to companies that make electronic parts and associated components and assemblies. It also might just be a matter of requesting different parts from a supplier that’s already providing services to your company.
In a statement last fall announcing the appointment of Nancy Gioia to the position of director of Ford Global Electrification, Sue Cischke, Ford’s group vice president of Sustainability, Environment and Safety Engineering, acknowledged the importance of supplier partnerships when commenting on the company’s pursuit of a vehicle electrification strategy. “We recognize that pursuing electrification as one of our technology paths presents unique challenges for commercialization of the vehicles,” said Cischke. “It requires us to collaborate with new partners, define new business models, connect to a new infrastructure for the vehicles, and meet new customer expectations around the globe.”
Lots of New Development Programs Are Being Launched
It’s clear that U.S. suppliers have a key role to play in helping automakers bring new hybrid and electric vehicles to market, largely because the “New Automotive Industry” is creating increased demand for new product development and prototyping services. Because the industry is moving toward increased production of what some would call “revolutionary” types of vehicles (hybrids, plug-in hybrids, and all-electric vehicles), there’s a lot of room and a lot of need for the testing, prototyping, and validation of new concepts and technologies. Established players and emerging startups alike are focused on developing innovative new products, and they’ll continue to need the services of design and contract manufacturing companies that can help them bring their ideas to market.
As one president of a contract manufacturing company recently told Design-2-Part, “The OEMs are truly looking for those technical partners that can be extensions of their engineering groups. We have the capabilities and the ability to speak with data, to do testing so that their engineers can review the test data and review our recommendations, and then simply make decisions about whether the project is a go or no-go.”
If recent news of facility expansions and construction of new U.S. automotive manufacturing plants is any indication, automakers are showing great confidence in the skills and abilities of U.S. suppliers. Fisker Automotive, for example, is applying the first $169.3 million of a $528.7 million Advanced Technology Vehicle Manufacturing Loan from the U.S. Department of Energy toward engineering integration costs as it works with primarily U.S. suppliers to complete the company’s first vehicle, the Fisker Karma. Although the final assembly of the Karma will be done overseas, more than 65 percent (based on cost) of the parts required for the Karma are reported to be coming from U.S. suppliers.
The second stage of the loan includes $359.36 million for Fisker’s manufacture of a plug-in hybrid in Wilmington, Delaware. The combined projects are anticipated to create thousands of jobs in the U.S. and provide “substantial support for domestic parts suppliers,” according to a statement from the DOE.