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. As automakers race to meet the government’s 54.5 mpg standard by 2025, they are asking suppliers to remove weight from their components without compromising performance.
“It’s a gram at a time,” said Jesse Ortega, chief engineer of the redesigned Chevrolet Malibu, which debuted at the New York International Auto Show. The new Malibu weighs 300 pounds less than its predecessor, a goal that GM achieved without downsizing the vehicle. “If you’re always talking in pounds that creates a mindset. We talk in grams.” Translation: weight has become a top priority, and every component will be scrutinized. Given the high cost of R&D, raw materials, and tooling needed, weight reduction has become the domain of big suppliers.
The redesigned Ford F-150 offers a glimpse of this dynamic. When Ford redesigned it, the company abandoned the auto industry’s usual strategy—step-by-step introduction of lighter components—in favor of an all-or-nothing conversion to an aluminum-bodied vehicle. The result: a truck that weighs up to 700 pounds less than the previous generation, depending on the body style.
The company eliminated 450 pounds by using more high-strength steel in the frame, and by switching to an aluminum bed and cab. Engineers saved an additional 250 pounds by designing lighter seats, bumpers, suspension, and other components. The pickup’s frame is 78 percent high-strength steel, up from 23 percent previously. The body is made from aluminum alloy, which is heat-treated to improve resistance to bending. The cab’s structural components are hydroformed, and the body panels are joined with rivets and adhesives.
Asked for details about suppliers’ contributions, Ford confirmed seven examples:
- The instrument panel is produced by Faurecia S.A., which reduced its weight by 2.5 pounds.
- Seats are assembled by Johnson Controls Inc., which eliminated up to 31.7 pounds from the front seats and 14.7 pounds from the rear bench.
- The magnesium transfer case is produced by BorgWarner Inc., which reduced its weight by up to 3.8 pounds, depending on the model.
- The aluminum steering knuckles are supplied by Diversified Machine Inc., which eliminated 16.3 pounds.
- The frame is supplied by Metalsa, which used high-strength steel. The frame and aluminum body reduced the vehicle’s weight by 450 pounds.
- The electronic parking brake is produced by TRW Automotive, which saved 26.9 pounds.
- The fenders, which are made of molded plastic, are supplied by Flex N Gate, which eliminated 13.7 pounds.
These companies have one trait in common. With the exception of Diversified Machine, each is a preferred supplier under Ford’s Aligned Business Framework, which offers close working relationships to 80 direct suppliers and 25 indirect vendors. Ford earmarks about 65 percent of its annual purchasing budget to these suppliers. Each supplier gets an early look at Ford’s product plans, and each gets access to Ford’s “matched pairs” program. This program creates two-man teams of key Ford engineers and purchasing executives that make decisions in tandem. This allows the supplier to get a unified message on pricing and product specs. To get preferential treatment as a vendor in Ford’s Aligned Business Framework, each of the suppliers listed above has global operations with well-financed R&D functions.
Ford’s cultivation of key suppliers is part of a wider industry trend. Automakers simply can’t afford to develop all the technology they need for new vehicles, so they rely increasingly on the expertise of suppliers. According to Planning Perspectives Inc. – a consulting firm based in suburban Detroit -- Toyota, BMW, and Honda are especially adept at including key vendors in long-term planning.
For suppliers trying to enter that charmed circle, here are 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.
For a smaller supplier, the up-front investment for components made from those materials can be daunting. Sometimes the best option may be to find a partner with deep pockets.
Consider the case of Plasan Carbon Composites Inc., the Wixom, Mich.-based maker of carbon fiber hoods and roofs for the Chevrolet Corvette Stingray. Plasan is the offspring of an Israeli firm that produces armor for military vehicles. After developing a proprietary process that reduced the cycle time needed to produce a part, Plasan won the Corvette contract and launched production in 2013. That same year, Toray Industries Inc.—the world’s largest producer of carbon fiber—acquired a 20-percent stake in Plasan. The alliance served Plasan well. That same year, Plasan launched a $29 million expansion of its factory in Walker, Mich., to meet rising demand. The company also enjoys ready access to Toray’s expertise and raw materials.
Given the cost of carbon fiber – ranging from $10 to $15 a pound—suppliers must expect heavy investments to speed production and cut raw material costs. Which is why the BMW i3 is such an interesting vehicle. With a starting price of $42,400, it is much less expensive than any vehicle that uses so much carbon fiber.
The car has two main units: the so-called life module and the drive module. The life module, or passenger cell, is made of carbon fiber reinforced plastic. The passenger cell, which sits atop the drive module, weighs about half as much as a steel structure and has 150 parts, about one-third as many as a comparable metal structure.
Despite its 500-pound battery pack, the i3 weighs only 2,630 pounds, with a low center of gravity that permits sportier handling.
To produce carbon fiber for the car, BMW formed a 49-51 joint venture with SGL Group, based in Wiesbaden, Germany. The partners spent $100 million to build a factory in Moses Lake, Wash. That plant produces carbon fiber fabric and ships it to a plant in Leipzig, Germany, where it is cut and molded into components. Over the past decade, BMW says it has reduced the manufacturing cost of carbon fiber by 50 percent.
That has set the stage for BMW to expand its use of carbon fiber. Last year, company spokesman Mathias Schmidt told Bloomberg that BMW was “preparing the rollout of carbon fiber material in models beyond the i-model range.” BMW and SGL subsequently announced plans to spend $200 million to triple the capacity of their Moses Lake plant, which supported daily output of 100 vehicles. That expansion will be completed late this year.
As a sign of BMW’s commitment to this technology, the automaker recently confirmed that the next-generation 7 series sedan will feature a carbon fiber passenger cell, which will help reduce the vehicle’s overall weight by nearly 290 pounds.
The i3 has generated a wonderful showcase for BMW’s suppliers, but a technology showcase is not for dilettantes. If an automaker switches to new materials, suppliers should consider the following tips:
- Capital is precious – and scarce. If you allocate R&D for a new component, it should be a core competency. Make sure you’re in it for the long haul.
- A new material should give you a competitive edge in design or manufacturing. Otherwise, it’s just another commodity.
- Aim to be one of the top three vendors in your segment. If you’re sixth or seventh, your customer is using your bid to set a lower price.
Bull market for aluminum
While the cost of carbon fiber is declining, automakers will continue to rely on aluminum and high-strength steel to slash weight in mass-market vehicles. Ford has said it wants to eliminate 250 to 750 pounds from each model as it is redesigned, and General Motors has aimed for a 15 percent reduction of weight in its new models through 2016. Alcoa and Novelis, North America’s two top producers of automotive aluminum, are expanding to meet demand. Both supply aluminum for the F-150, and both have a long list of other automakers that plan to boost their aluminum usage.
The big growth in aluminum usage will come from automakers that choose a step-by-step transition. In a recent presentation to investors, Alcoa predicted that usage of aluminum body panels will grow from 42 pounds per vehicle this year to 150 pounds in 2025. Hoods, doors, liftgates, and fenders will increasingly switch to aluminum.
Since aluminum weighs one-third as much as steel – and costs about $1 per pound – automakers are more willing to switch materials to meet their CAFE targets. “The game has changed,” said Mike Murphy, Alcoa’s director of marketing and sales. “You can see how bullish we are on aluminum sheet.”
Indeed, Alcoa has made big investments to meet rising demand. In 2011, the company announced a $300 million expansion of its plant in Davenport, Iowa, and followed up last year with a $275 million plan to boost production of its rolling mill in Alcoa, Tenn. Most of that added production is already spoken for. “Davenport is fully sold out, and Tennessee is nearly sold out,” Murphy said.
To be sure, Alcoa enjoys a dominant position in the aluminum market. But component suppliers would do well to emulate the company’s long-term approach to factory expansions. A couple of tips:
- Harmonize your capacity plans with that of your key customers. Automakers look a decade ahead to weigh production needs. So should you.
- Don’t grab new contracts simply to keep existing plants running at full capacity. If you do, you may miss out on long-term growth when a key customer boosts production.
The Center for Automotive Research (CAR) in Ann Arbor, Mich., is analyzing potential weight reduction strategies for a report to be released this spring by the National Academy of Sciences. The government will scrutinize that report to see whether automakers can meet the 54-mpg CAFE target by 2025. CAR President Jay Baron doesn’t expect the EPA to back away from its standard, but it will be under heavy pressure to delay the deadline.
Automakers will make vehicles a bit lighter year by year, but Baron doesn’t expect major breakthroughs. If so, automakers will pay increasingly generous premiums to vendors who have the know-how to make use of aluminum, carbon fiber, magnesium, and high-strength steel. “They’ve already gotten all the low-hanging fruit,” Baron said. And it will take a lot more than just weight reduction to get there.