IHS AUTOMOTIVE Issue 5 • July 2015 Supplierbusiness Analysis

IHS AUTOMOTIVE Issue 5 • July 2015 SupplierBusiness Analysis

supplierbusiness.com ihs.com

Megatrends The challenges for automotive OEMs and suppliers

> Seven trends affecting suppliers’ business > Other challenges to industry that affect suppliers > United States light vehicle production growth returns

FINANCIAL ADVISORS WITH DEEP AUTOMOTIVE INSIGHTS IHS Automotive Four-Year Engine and Transmission Forecasts

Rapidly changing market trends, powerful technology innovations and intense competition make keeping up with the global powertrain market no small challenge. IHS Automotive Four-Year Light Vehicle Engine and Transmission Forecasts provide the industry’s most comprehensive coverage of currently available and future powertrains. OEMs, suppliers, government agencies, financial institutions, and other industry- related organizations use the product for: • Competitive portfolio evaluation • Technology strategy development and deployment • Opportunity targeting • Volume and revenue planning • Supplier alignment Providing complete geographic coverage, our Four-Year Light Vehicle Engine and Transmission Forecasts are powerful tools for analyzing production by platform, program, design parent and manufacturer. Specifically, they include: • Standard forecast over 4-year horizon (current plus 3), with 2 years historical data • Forecasts by year and quarter over horizon • 17 engine and transmission technical attributes • Choice of global or regional coverage • Quarterly forecast updates

For samples and information on how to buy this forecast for instant download, visit www.supplierbusiness.com Shutterstock ANALYSIS

IHS Automotive SupplierBusiness Analysis contents

Editorial Managing Director: Stewart Pedder [email protected] Production Editor: Alex Boekestyn 8 [email protected]

Senior Content Editor: Gaby Leigh [email protected]

Who-Supplies-Whom: James Clark [email protected] Supplying the OEMs: Julian Buckley 18 30 [email protected]

Subscriptions: Sarah Graham Tel: +44 1733 520 066 4 NEWS 26 CAR CUTAWAY [email protected] The key news and events Details on 197 parts

Front Cover: Getty shaping the automotive supplied by 50 different This page: Getty, Shutterstock supply base in the last month suppliers to the new Ford S-Max. Includes a look 8 REGION at the CD4 Platform and production data Published by: IHS SupplierBusiness United States: Production

Copyright © 2015 IHS. All rights reserved. No part of this volumes soar and new 30 PURCHASING publication may be reproduced or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording market entrants promise or otherwise, or be stored in any retrieval system of any nature OEMs are increasingly without prior written permission of IHS Global Limited. Any views future opportunities to the or opinions expressed do not necessarily represent the views looking into help suppliers or opinions of IHS Global Limited. Disclaimer of liability: Whilst local supply base every effort has been made to ensure the quality and accuracy with costs in exchange for of the information contained in this publication at the time of going to press, IHS Global Limited and its affiliates assume no 18 MEGATRENDS new tech. But what will the responsibility as to the accuracy or completeness of and, to the extent permitted by law, shall not be liable for any errors or potential cost be? omissions or any loss, damage or expense incurred by reliance on information or any statement contained in this publication. We look at the seven trends Advertising: Advertisers are solely responsible for the content of the advertising material which they submit to us and for that are affecting the 32 ACTIVITY ensuring that the material complies with applicable laws. IHS Global Limited and its affliates are not responsible for any error, automotive supply base now, omission or inaccuracy in any advertisment and will not be liable for any damages arising from any use of products or services and the other challenges The latest supplier or any actions or omissions taken in reliance on information or any statement contained in advertising material. Inclusion of any affcting OEMs and suppliers investments, joint-ventures, advertisment is not intended to endorse any views expressed, nor products or services offered, nor the organisations in the years ahead and M&A activity sponsoring the advertisement.

Trade Marks: IHS Automotive and SupplierBusiness are trade marks of IHS Global Limited. IHS Global Limited, Registered in England under company number 00788737. ON THE WEB Registered office: Willoughby Road, Bracknell, Berkshire, RG12 8FB UK. Our daily Insight news service will keep you up to date with the IHS Automotive SupplierBusiness, Willoughby House, 2 Broad Street, Stamford, PE9 1PB. UK. latest developments from across the automotive supply base. Printed in the U.S. by IHS For more info, visit www.supplierbusiness.com/news

FINANCIAL ADVISORS WITH DEEP AUTOMOTIVE INSIGHTS

Bosch Mahle of sealing the openings of the with each other. This cosy Germany and Austria by supplies exhaust turbocharger. Therefore, the arrangement adversely affected harmonising their annual gas turbocharger low tolerances in terms of a major part of the European price lists and the discounts for BMW’s three- the size and quantity of dirt automotive industry and they would give to these particles can thus be more ultimately those who buy cars dealers. Auto-parts suppliers cylinder diesel easily observed and even the and trucks,” said Commissioner are increasingly coming under engine handling is greatly improved. Margrethe Vestager, in charge the microscope for their The three-cylinder BMW of competition policy. Since potential involvement in fixing diesel engine offers 1.5-litre Webasto revealed the existence prices of components sold to displacement and has a cylinder of the cartel, the supplier could automakers..  >>Bosch Mahle Turbo capacity of 500 cc. This new escape from a potential fine Systems (BMTS), a joint engine is installed both of EUR222 million (USD250 venture (JV) between Bosch lengthwise and transversely million). Eberspächer benefited Continental and Mahle, is supplying its – in two power output levels from a 10% reduction due develops road exhaust gas turbocharger with 70 and 85 kW – in to its co-operation with the with variable turbine different models. investigation and its agreement departure geometry (VTG) for BMW’s to settle with the Commission. protection system three-cylinder diesel engine, The investigation process for cars which is fit for use in the EU fines started when the Commission sports-oriented premium Eberspächer over surprisingly began an segment. BMTS produces the inspection at Eberspächer’s turbocharger at its St Michael cartel charges premises in July 2013. The >>Continental is plant in Austria. Due to high findings revealed that Webasto developing a “Road demand for acoustics in the and Eberspächer co-ordinated Departure Protection” system premium segment, the BMTS >>The European prices and allocated customers that will prevent accidents due VTG turbocharger is equipped Commission has fined in the European Economic to unintended road departures. with particularly low-noise, German auto-parts maker Area (EEA). Since Webasto and The system will avoid roadway weight-optimised actuating Eberspächer EUR68.2 million Eberspächer are the only two departure crashes, which elements with plastic bushings (USD76.8 million) over cartel suppliers of parking heaters in are not covered by currently in the coupling rod, a floating charges. The supplier was Europe, the cartel helped them available Advanced Driver bush bearing with acoustic charged with price-fixing of avoid competition, according to Assistance Systems (ADAS). package, and a milled impeller fuel-operated parking heaters a report by Automotive News The new technology will for less pulsation noise. (which heat parked cars and Europe. Both the companies automatically steer a vehicle Additionally, BMW and trucks) and auxiliary heaters fixed prices as and when they back into its lane when it BMTS have developed a new with Webasto. According to were asked to submit price begins to inadvertently leave packaging concept for the the Commission, both the auto quotations by OEMs. The the road or cross the centre line finished turbochargers. The component suppliers were companies discussed various into oncoming traffic. exhaust gas turbocharger co-ordinating prices over a aspects of price elements and Commenting on the is placed on a support and period of 10 years. “For over 10 decided which between the technology, Steffen completely enclosed with years, the only two suppliers two of them would submit the Linkenbach, head of Systems a plastic casing to protect it of parking heaters in Europe lower bid. They also colluded and Technology for the Chassis against contamination instead colluded to avoid competing when selling to dealers in & Safety Division, Continental

FINANCIAL ADVISORS WITH DEEP AUTOMOTIVE INSIGHTS

North America, said, “The intention recognition feature, 2015, Google began on-road an unspecified period of time system serves as a virtual guard which works in case the driver testing of its prototype self- to enable a complete rethink, rail, protecting the vehicle and chooses to go off road. driving car. Google has built as it is planned to support both its occupants from accidentally 25 vehicles that it will take to a new Grand Cherokee and a leaving the road, ultimately the streets around its offices three-row Grand Wagoneer. minimizing the risk of a Fully autonomous in California, United States. However, the Grand Wagoneer potentially fatal accident due car technology For now, Denso seems to be could also miss a planned to driver error, distractions or focusing on semi-autonomous introduction in autumn 2018. drowsiness.” unlikely to be car technologies. According to A replacement for the Besides the Road Departure established until Toyota, the “Safety Sense P” Jeep Compass and Patriot is Protection system, which at least 2030, says system, which Denso helped reported to have slipped by at uses a mono camera and Denso – report develop, will alert drivers of least six months from planned Electronic Stability Control imminent collision with a car beginning of production in (ESC), Continental is also or pedestrian. spring 2016. In May 2014, FCA working on an “Enhanced provided a five-year plan for System” which uses a stereo >>The technology to reaching total global sales of camera and long-range radar for make cars fully autonomous Fiat Chr ysler (FCA) seven million units in 2018, detection of road boundaries, is unlikely to be established delays key model which involved reviving according to the press release. at least until 2030. The report the Alfa Romeo brand. At This integration generates quoted Koji Arima, president programmes in that time, Fiat CEO Sergio an occupancy map which of the company, as saying, North America Marchionne said the plans contains the information about “Ultimately we will probably could be put back. Delaying the occupancy of area in the see the world with fully products may help FCA vehicle’s field of view. autonomous driving systems, >>Fiat Chrysler conserve cash in the short The Road Departure but I think it will take a long Automobiles (FCA) term, as well as possibly enable Protection system works by time before we can adopt has delayed several key easier integration with any judging and analysing the the technology. We have so programmes over the past year. future partner. However, such environment perception many types of roads that are Vehicles in the North American delays also put the company like road edge detection, or totally different from each market affected by the delays at risk of facing a highly road course preview. Its base other.” According to Arima, the include the Ram 1500 and Jeep competitive market with version uses a mono camera automotive industry will first Wrangler, both high-margin an ageing product line-up. to detect roadway boundaries, take steps toward integrating products currently in high- Marchionne has been looking analyse the steering angle safety systems that can prevent sales cycles. to find a partner, after making a and vehicle path with the or mitigate crashes. FCA has reportedly delayed well-documented presentation Electronic Stability Control While companies such programmes affecting the on why consolidation across (ESC) sensors. It then applies as Google and Ford have Jeep, Ram, Dodge, Chrysler the industry is necessary, the individual wheel brakes, envisaged self-driving cars and Maserati. According to including approaching General to steer the vehicle back on to hit roads by 2020, Denso’s the report, a new-generation Motors and Ford. Media reports the road while warning the is relatively less optimistic Wrangler has been delayed citing comments from those driver and reducing the speed about fully autonomous from early 2017 to July 2017. automakers’ executives have of the vehicle. The system technologies hitting the mass A redesign of the Grand indicated neither is currently is equipped with a driver market in this decade. In May Cherokee has been delayed for interested in such a proposal. 

FINANCIAL ADVISORS WITH DEEP AUTOMOTIVE INSIGHTS

Mahle opens two for its customers in Mexico. The to increase to 4.87 million units partner or buyer.” new plants in plant is expected to employ 450 by end of this decade from 3.21 Bosch’s Starter Motors and Mexico people by 2019. million units in 2014.  Generators division is part With the two new of the company’s Mobility plants, Mahle will have 12 Solutions sector, which caters manufacturing plants in Bosch explores to the automotive industry. >>Mahle has increased Mexico, employing more than options for The division operates 13 its presence in Mexico with 6,000 people. The country manufacturing sites across two new manufacturing plants has attracted significant Starter Motors key automotive markets and this week. The Germany- investment from European, and Generators employs 6,500 people. Bosch based supplier held opening Asian as well as US automakers business does not provide details of ceremony for a new plant over the past three years, financial performance of in Ramos Arizpe. Mahle thanks to its strategic certain divisions within a invested USD59 million in the location, low-cost, high- business sector. 367,000-square foot plant, quality production and access >>Bosch is exploring However, the company which is part of its Thermal to key automotive markets options for its Starter Motors has cited tough competition Management business unit. through several bilateral and and Generators division and cost pressure as key The plant, located near multilateral trade agreements. that produces starters and reasons for exploring options the company’s two other According to Bloomberg, alternators for passenger and for the division. The Starter plants, will start producing citing the Mexican government commercial vehicles. The Motors and Generators heating, ventilation and as source, automakers including German supplier is seeking division supplies fuel saving air-conditioning (HVAC) Toyota and Daimler have a partner for a joint-venture technologies including modules and heat exchangers invested or promised to invest (JV) or a buyer for the business start-stop system, advanced for passenger cars from next USD22.6 billion in vehicle and unit. Bosch believes this generators and motors which month. The plant will supply to auto parts plants in Mexico. move will help the division have strong growth potential GM, Fiat Chrysler, BMW, Audi, This year, Toyota has announced improve its competitiveness given increasingly stringent Daimler Truck North America USD1 billion investment in new and growth prospects. “The regulations in fuel economy. and Navistar. Mahle expects production plant in Guanajuato, Starter Motors and Generators However, Bosch believes employment at the new plant while Volkswagen has agreed to division has successfully that the business faces tough to increase to 500 by 2018 from invest USD1 billion expanding managed to transform itself competition and cost pressure around 140 this year. capacity at its plant in Puebla. over the past few years and is and therefore needs a partner Additionally, Mahle opened Ford has also confirmed USD2.5 posting positive results,” said or buyer to deal with both another manufacturing plant in billion investment in engine Dr. Rolf Bulander, member opportunities and challenges. Celaya. The company invested and transmission facilities of board of management at The company hopes the USD19 million in the 193,000 in the country. These OEM Bosch responsible for the prospective partner or buyer square foot plant, which is part investments are expected Mobility Solutions business. will help the business expand of its Filtration and Engine to present huge growth “Nonetheless, in a market its international presence and Peripherals business unit. The opportunities for auto parts characterised by tough tap into additional growth plant will produce air cleaner suppliers in the country. IHS competition and cost pressure, opportunities in those regions systems, air ducts, air intake Automotive forecasts light the division has better growth in which it does not yet have manifolds and carbon canisters vehicle production in Mexico prospects together with a significance presence

FINANCIAL ADVISORS WITH DEEP AUTOMOTIVE INSIGHTS

in doubling the plant total has already informed the staff of the plant will cover 80,000 in brief area to 6,300 square metres representatives regarding the square metres. Ralf Cramer, and ramping up of driveshaft closure decision. member of the executive production capacity to 1.8 Although Faurecia has board of Continental and Infineon, Google million units per annum sought to right-size this president and chief executive to jointly develop (upa). GKN added that it has facility in relation to demand of Continental China, said radar technology for increased its production line through temporary layoffs the plant would allow the automotive applications and expanded warehousing and transferring staff to other company to “go west with our >>Infineon Technologies facilities. It will also add around Faurecia sites in France, it customers”. has partnered with Google’s 70 jobs over the next five has finally had to resort to its Advanced Technology and years to its existing 130 staff closure. It is unlikely to have Projects group (ATAP) to headcount. been helped by a reduction in A123 Systems plans develop sensing solution GKN Driveline started light-vehicle production locally, to double global for applications including operations at the Eskişehir with its parent company PSA manufacturing capacity automotive, Infineon plant in 2010. The plant Peugeot-Citroën and Renault To accomplish this, the announced in a press release supplies driveline components having seen output from their company said it will expand a last week. The offering will be to automakers such as Ford, French facilities having fallen previously announced USD100 based on Infineon’s advanced Renault, Honda, Fiat and Toyota, to around 1.5 million units, million capital investment 60GHz transceiver technology; which have a manufacturing around half the levels a decade programme by an additional it will integrate RF transceiver, presence in Turkey. Turkey ago. The site will also have come USD200 million, installed in antenna and control electronics has become a key vehicle under pressure from companies phases through 2018. A123 says in a single package. manufacturing hub, thanks in lower-cost parts of the world the new capacity will support Radar technology is used in to its strategic location, which which will be able to produce applications and new customer vehicles to make them safer. makes it an ideal place to cater these components for a far programmes, including low- Such technology is capable of Europe, Middle East and Africa more competitive cost. voltage hybrids, passenger detecting obstacles nearby and (EMEA) markets. According to plug-in hybrid electric vehicles even controlling the brakes IHS Automotive, light vehicle (PHEVs), and commercial or accelerator in response. production in Turkey increased Continental to invest vehicle programmes. A123 Infineon has developed several to 1.12 million units in 2014 USD97.8 mil. to build currently forecasts its radar sensors; for instance, in from 1.06 million units in 2010. brake-systems factory 2015 growth at 50%. The February 2015, the company IHS forecasts light vehicle in China announcement did not give developed radio-frequency production to continue growing Continental and Chinese specific details of investment components for Hella’s radar in coming years and reach 1.33 joint-venture partner Huayu phases or implementation of the sensors, which monitors million by 2019. Automotive Systems are to programme at its manufacturing the blind spot in the car’s invest a total of CNY600 hubs in Michigan, United States, rear. The company already million (USD97 million) in and Hangzhou and Changzhou offers solutions for wireless Faurecia to close seat building a new hydraulic- in China. However, Automotive communications of the future frame plant in France braking-systems factory, News reports that battery- to other divisions at Google. this year according to Dow Jones cell production at A123’s two >>Faurecia is planning to close Newswires. The plant will be Michigan plants will increase a seat frame manufacturing based in the western Chinese from 3.3 million units to 4.3 GKN Driveline to facility in Nompatelize (France) municipality of Chongqing and million units, citing Forcier. increase driveshaft by the end of 2015,. The closure production is expected to begin The funding for the expansion production in Turkey will result in a loss of 78 jobs. in the third quarter of 2016. is coming from A123 Systems’ >>GKN Driveline has invested The component supplier said The plant will produce brake parent, Wanxiang Group. EUR4.5 million (USD4.9 in a statement, “The current calipers, vacuum boosters, and Wanxiang also owns automaker million) to expand driveshaft levels of activity and forecasts electric parking brakes, the US Fisker and is working to production capacity at its are not sufficient to maintain company said in a statement. reintroduce the Karma plug-in Eskişehir (Turkey) plant. operations in the face of The initial phase is expected to hybrid, renaming it the Elux The expansion has resulted ongoing losses.” The company create 600 jobs. The first phase Karma 

customer base following Chapter 11 processes. The United States’ In the post-crisis years North American suppliers are now battling a different set improving automotive of issues; for example, having enough capacity and the right in-house capabilities to support the significant launch activity market conditions of the OEMs or attempt to align their own investment plans with those of the carmakers, who are increasingly requesting them to support them in other production locations. Production volumes soar and new market entrants While it might be a relatively thriving promise future opportunities to the local supply base market for suppliers competing in the automotive sector, few North American companies are keeping pace with top >>North America remains a major of securing good relations with their supply automotive supplier players. This becomes bright spot among mature markets for base to get access to suppliers’ best product evident when comparing the ranking of automotive suppliers. Local production technology and capacity. Financials of top automotive suppliers in 2013 and 2003. volumes have surpassed pre-crisis levels OEMs and suppliers are strong both at the Six of the top-ten suppliers globally were and are at an all-time record with 17 million top and bottom line. An analysis of North headquartered in North America back in units expected to be produced in 2015. New American supplier financials for 2013 and 2003: Delphi, at the time being the world’s OEMs are investing in the region and those 2014 shows that on average they have largest supplier, Visteon (4th), Lear (5th), already present are expanding or devising achieved a 7.7% pre-tax margin, one of the Magna (6th), Johnson Controls (6th), and their plans to expand their production highest recorded among all the regions and TRW (10th). Only three North American footprint in the region. Audi is building certainly among mature economies. headquartered companies were listed a new facility in Mexico and Japanese Long gone are the days when credit among the top-10 automotive suppliers carmakers have just opened, or are in the availability was a core issue of the supply globally in 2013: Magna, headquartered process of building, plants in Mexico. base and the US supply base had to turn in Canada, can boast a diversified set of BMW has allocated a USD1 billion to the government to get loans, or when business lines ranging from interior to investment to the expansion of its facility suppliers were gripped with operating powertrain, exterior and electronics as well in South Carolina. Jaguar Land Rover is in survival mode as they implemented as a substantial presence in Europe, which rumoured to be considering its first plant capacity rationalization plans which accounts for about 40% of its revenues in North America. Domestic customers included substantial lay-offs, under the in 2013. The company carried out some have greater awareness of the importance constant fear of losing a chunk of their 13 acquisitions between 2010 and 2014,

US light-vehicle production: US light-vehicle production plants by size (2014) Top 30 plants in 2014

Production Plant Manufacturer 2014

Smyrna #2 Renault/Nissan 648,154 Marysville Honda 442,135 Montgomery Hyundai 398,851 Louisville Ford 391,722 Kentucky Truck Ford 372,253 Chicago Ford 366,672 West Point Hyundai 365,510 Jefferson North FCA 361,124 Belvidere FCA 348,552 Fort Wayne General Motors 333,421 Kansas City #2 Ford 324,757 Warren Truck FCA 316,897 Lordstown General Motors 289,930 Arlington General Motors 281,056 Dearborn Truck Ford 275,951 Toledo North FCA 275,508 Lansing Delta General Motors 273,677 Township Fairfax General Motors 263,942 Michigan Ford 262,760 Assembly Greensburg Honda 242,061 San Antonio Toyota 236,675 Toledo Supplier FCA 235,949 Park Georgetown #1 Toyota 235,076 Georgetown #2 Toyota 230,635 East Liberty Honda 221,289 Lincoln #2 Honda 208,604 Manufacturer: BMW General Motors Honda Princeton West Toyota 205,607 Renault/Nissan Toyota Fiat Chrysler Tuscaloosa #2 Daimler 192,398 Ford Hyundai Others Tupelo Toyota 189,314 Lafayette #1 SIA 189,222

three of which targeted assets in North to decline as a function of the company’s the automotive industry, which is expected America; most recently hinge manufacturer strategic shift to build up its presence to add USD0.9 billion to its 2015 sales. It Techform Group back in October 2014. It is in China. It can now boast the second is interesting to note that Lear’s revenue now ranked as the largest North American largest revenue base in North America barely increased between 2003 and 2013 automotive supplier and the third largest for automotive products and the eighth from USD15.7 billion to USD16.2 billion, globally after Bosch and Denso. Milwaukee, position globally. Seat and electrical meaning that the company has fallen from Winsconsin,-headquartered Johnson distribution system supplier Lear is hanging the 5th position in the global ranking to the Controls has an automotive product on to the 10th spot in the global ranking, current 10th. portfolio consisting of two business lines: with strong positioning in two component A more general trend has seen the interior and batteries. It is the leader in areas which are characterized by a relatively accelerated decline of major US suppliers complete seating systems and receives consolidated supply base. Lear has been like Visteon and Delphi, who now have a 47% of its automotive revenues from strengthening itself with the acquisition of much smaller revenue base than a decade North America, a share which is expected Eagle Ottawa, the largest leather supplier to ago, having gone through bankruptcies and

gradually restructuring their businesses derive about a quarter of their respective 2012 from EUR750 million to EUR1.5 by focusing on only certain segments automotive sales from this region. Such billion and is poised to achieve further compared to what they were accustomed acquisition puts in even greater evidence growth following its acquisition of former to in past glory days. Back in 2001, Delphi the decline that top US suppliers have Automotive Component Holdings’ plant and Visteon were dominating the supplier witnessed over the last ten years or their in Romulus, Michigan. It also took over ranking with over USD18.8 billion and inability to grow as quickly as their main Osram’s stake in a joint-venture with USD12.8 billion respectively in sales at competitors from Europe and Asia. the Siemens-owned lighting supplier, the regional level. Ten years later Delphi ZF’s acquisition of TRW is more further strengthening its position in makes only 27% of the sales it did in 2001, evidence of the rise of European suppliers the North American region for this while Visteon, with its USD1.38 billion in North America as a consequence of component area. Japanese companies in North American sales for 2011 made a shrewd acquisition strategies and of witnessed a resurgence of sales in the mere 11% of its 2001 revenues. the growing importance of European region between 2011 and 2013. Denso, Consolidation at the top-level in the automakers in the region. Faurecia, for example, increased its sales in the supplier arena has also removed another Continental and Valeo increased their region by 43% between 2011 and 2013, major US-headquartered automotive automotive sales in the region by 43%, while Aisin increased its sales by 45%. Both suppliers are confident about the prospects of the region and are therefore eager to invest in order to capitalize on the expected growth. In January 2013 Denso announced a USD1 billion plan for North America, 75% of which is for facilities in the United States. This investment would expand not only manufacturing, but also the Japanese supplier’s R&D facilities in the region. Aisin has invested in a new regional headquarters and the expansion of capacity at two facilities.

>>Positive factors for suppliers’ financials The North American supply base can boast a good state of financial health as production volumes gradually recovered and regional production inches towards the 20-million mark per year. The supplier like TRW, which was acquired by 74%, and 35% respectively between 2011 potential customer base has become more ZF of Germany, creating a mega-supplier and 2013, having announced significant diverse over the last few years, when with combined revenues of USD40 billion investments in new production facilities previously up to two-thirds of the overall in 2013. Michigan-based TRW would and acquisition. For example, Faurecia regional production output was linked to contribute about 42% of the total revenue. opened three new facilities between the Detroit Three. Over time the share The acquisition will mean that the 2010 and 2014 and expanded two of production allocated to Ford, GM and decision making power over a key player existing ones, while also completing Chrysler should become less than 50% in the North American supply base is being the acquisition of US emission control of the regional volumes, as transplant shifted to Europe. Such a behemoth would systems supplier EMCON Technologies OEMs ramp up their production plants in be in the position to challenge Bosch as well as three interior plants sold by Mexico and the United States. Improved for the global leadership thanks to its Visteon, Ford, and Johnson Controls. It transaction prices for OEMs compared to presence in a variety of component areas also signed contracts with Volkswagen the pre-crisis years continue to support and diverse expertise, although it cannot (emission technologies) and Daimler OEM revenue growth in the region, which boast the same exposure to more vibrant (seating). Valeo already doubled its North will also continue to provide benefits markets in Asia; Bosch and Continental American business between 2009 and for suppliers on the profitability side,

however, only to a limited extent. CAFE regulations will force increased vehicle RECENT UNITED STATES INVESTMENTS content which will be difficult for the July 2015 – Valeo North America to operating new injection moulding and OEMs to pass on to US consumers, who build new facility in US’ Ohio state assembly machines. benefit from seeing increased vehicle Valeo North America plans to open a June 2015 – Michelin to expand content at flat retail prices. Even OEMs new facility in Lagan County, the United manufacturing plant in US who had become less demanding on States, with an investment of USD20 Michelin North America plans to invest annual productivity savings such as the million. The plant’s construction will USD22 million in its Dothan facility in Detroit Three, will inevitably become more begin next month and facility will Alabama (United States) to expand the become operational by 2016. The exacting on suppliers to provide them with production of its high-performance light company will have 85 full-time truck and SUV passenger tires. The requests of some form of price concession or employees at the plant, which will have investment will include significant productivity saving in order to balance the an area of 75,000 square foot. equipment upgrades that will result in a 10% increase in production capacity. The increased cost burden linked to emission July 2015 – Magna Seating plans to Dothan plant manufactures the Premier compliance. Suppliers will therefore find build new facility in US’ Michigan state LTX tires, among other brands. The ways to increase their internal productivity Magna Seating of America, a subsidiary Industrial Development Board of Dothan, to meet OEMs’ demands for price of Magna International, plans to build a Alabama, has supported the Michelin new 180,000 square foot facility in Novi, concessions in the future. investment. Michigan (United States). Magna Seating In the short term, the profitability of plans to consolidate its operations into a June 2015 – Ford pledges to invest suppliers in North America should also single facility, which will include its USD3.1 billion in Michigan through be helped to some extent by the easing headquarters, engineering, research and 2025 development (R&D), and sales and pressure of raw material costs and the fact Ford has pledged to invest USD3.1 billion marketing teams. The project, which will into Michigan, United States, facilities, that OEMs have agreed to index prices for see USD48 million in total capital according to a Detroit News report. The more commodities, reducing the burden on investment, is expected to create 164 agreement will enable Ford to keep tax suppliers. Currency exchange swings are, for jobs. breaks, capped at USD2.3 billion. . The state’s governor has been working to once, of help to some North America-based June 2015 – VW and Gestamp confirm keep the state’s long-term liability from USD180 million Chattanooga suppliers. The depreciation of the euro to this program (currently USD9.38 billion) investment its lowest level in 11 years against the US from escalating. The report also dollar is a consequence of quantitative Volkswagen supplier Gestamp is indicates Michigan is looking to develop confirmed plans for a new facility in the similar agreements with GM and FCA. easing measures implemented by the Chattanooga, Tennessee, United States, Ford has agreed to spend an additional European Central Bank and continued area to support VW’s plant in the area. USD3.1 billion on Michigan facilities weakness of European countries’ economic The new facility will create 500 jobs. through 2025, a figure said to be double Gestamp will invest USD180 million to fundamentals. Such a depreciation brings Ford’s initial capital investment triple its capacity in Chattanooga. The commitment, to remain eligible for the additional benefits in the form of lower two companies also confirmed that the state tax credits. procurement bills for US suppliers as costs investment is specifically to for imported components drop markedly. accommodate stamping of Class A June 2015 – GM spending USD119 parts, including external metal skins, for million on components plant in US Some US suppliers are sourcing as much VW’s upcoming mid-size SUV. GM is investing USD119 million in tools as 10% of their procurement spending and equipment to support a June 2015 – ARaymond expands from Europe, which means that they could components plant in Grand Rapids, manufacturing operations in US save up to 2% of their purchasing budget Michigan, United States. The investment ARaymond has invested more than compared to one year ago. into Grand Rapids Operations, GM says, USD12 million in building and equipment will create 300 future new jobs; Cost containment measures remain in to expand its Rayconnect manufacturing currently, the plant produces precision- place at automotive suppliers in the region, facility in Michigan, United States. The machined engine components. Details of as suppliers approach capital investments expansion added 30,000 square feet the investment, however, were not yet manufacturing and office space to an shared. The USD119 million is part of a and hiring with relative caution. However, existing 75,000-square foot Rayconnect previously announced figure of USD5.4 capacity expansions at the supplier level facility. This will also allow the facility to billion in US investment through 2018. have started to catch up with the increases run three, eight-hour shifts, five days a GM earlier announced it would increase week. ARaymond will hire more than 60 in production; meaning that suppliers US employment by about 650; nearly people over next two years, including half of that number will be new jobs at operating in North America have been skilled production technicians capable of this facility. investing in new capacity or in re-enabling idled capacity.

US suppliers participating in an OESA (Original Equipment automotive suppliers, Japanese ones in particular, as they follow Supplier Association) survey in January 2015 have indicated that their major customers in investing in the country. During 2014 the annual production level at which they would break even is there have been between one and three announcements per 13.5 million units versus 12.7 in the same month in 2014, and 11 month of new investments by Japanese suppliers in the country. million in 2012. However, such break-even points seem to vary Companies like Bridgestone, Asahi Glass, JTEKT, Denso, Tokai wildly with companies claiming that they require as little as nine Rubber and Hitachi are all in the process of opening a new facility million units to be profitable and others requiring 17 million in Mexico to serve this new production hub, with expenditures units at the regional level. Also, capacity constraints seem to be of up to USD100 million. European companies are following suit concentrated in certain component areas more than others; for as it became evident that a presence in Mexico is fundamental example, powertrain components and electronic ones. In order to in the attempt to tap the growth of one of the most promising address such constraints several suppliers have made recourse to hubs for automotive production. Faurecia, Hella, Brembo, GKN, three-shift operations or even overtime schemes, which, despite ZF and Bosch are all in the process of expanding their presence their increased hourly costs, allow suppliers to delay capital in the country. More investments from automotive suppliers investment deployment. will be announced in the coming years – either linked to the announcements of specific OEMs (e.g. Hyundai) or by second tier >>Launch activity suppliers who will be in high demand in the country, especially A major source of concern for suppliers in North America remains as tier ones aim to increase component localization to make their the intense launch activity that is taking place in North America, Mexican investment successful. Tier one suppliers, who have with 31 new programme launches in 2014, up from 16 in 2013. recently started their operations in Mexico, have also indicated This has created issues for suppliers in preparing for model that the lack of a capable supplier network in the lower tiers is launch, as shown by the production disruption experienced by an issue which will require them to either invest in sub-supplier FCA when launching the new Wrangler and Grand Cherokee, development or lure some of their suppliers to invest in Mexico which led the group’s CEO to publicly criticize suppliers for as well. not being well-equipped to support the product launch. Such pressure due to the close-monitoring of launches is expected >>M&A Activity to remain high as a consequence of continued launch activity Merger and acquisition activity is in full swing in North America; in future years and the limited spare resources suppliers have however it is not necessarily resulting in a raft of mega- available at present. acquisitions as some industry observers expected. Until the About half of the respondents in a survey conducted by ZF-TRW deal, mega-acquisitions or mega-mergers had lost favour the OESA have indicated that they expect to face production among both trade and financial companies, which preferred scheduling difficulties in meeting OEM demands. Concerns about smaller and more targeted acquisitions, typically of companies meeting production ramp-up output and quality targets have with a specific technology or expertise which is complementary led to a review of the way suppliers and OEMs manage product to the acquirer’s and can yield “easy” cost savings by being launches. For example, Ford has introduced monthly launch acquired. reviews with suppliers and has promoted an increased presence Targeted investments and divestments continue to represent of its engineers at suppliers in North America in order to monitor the major leitmotif of investment activity in North America, progress against launch milestones. typically not causing major disruption to the operating business Several suppliers have initiated dual sourcing plans, where of the acquirer. For example, Visteon’s acquisition of Johnson they use two or more sub-suppliers for the same component or Control’s electronics, instrument cluster, infotainment, display allocate additional staff for supply chain management. Suppliers and body electronics products business, while divesting its 70% have, however, complained that directed suppliers, in other stake in Korean-listed climate systems supplier Halla Visteon, as words sub-suppliers from which first tier suppliers are forced to well as selling the last pieces of its interior business which was a source components by the OEM, can often be at the base of such legacy of the Ford-ownership years. supply chain issues as the tier one tends to have less control on Another example of targeted acquisition is Delphi’s takeover this part of the supply base. of Antaya Technologies, which claims to be the largest manufacturer of on-glass connectors for the automotive glass >>Investment momentum industry. Lear’s takeover of Eagle Ottawa, a leading supplier Investment activity in the form of new facilities or acquisitions of leather for automotive application, follows the rationale of targeting the North American region remained strong in 2013 increasing vertical integration and achieving efficiency savings. and 2014. Mexico is the main beneficiary of investments from The targeted nature of acquisitions does not mean that deal sizes

are necessarily small. The average deal size in North America a foothold in the chassis and active safety sectors, which will had actually crept up from an average of USD40 million to over witness substantial changes in the coming years. 115 million for the first three-quarters of 2014. In such deals, Between 2011 and early 2012 we saw private-equity firms, German suppliers seem to emerge as the main consolidators in which were among the main players of supplier M&A activity in the supplier industry, while North American ones held this role in pre-crisis years, being involved again in M&A, mainly divesting fewer instances than in previous years. In 2014, for example, few assets that they had acquired before the crisis and to which North American suppliers have had a prominent consolidator role, they had clung for longer than expected due to the absence of with the only exceptions being Linamar and Federal Mogul with buyers in 2008 and 2009. One example was Cerberus Capital two acquisitions each. Linamar acquired Carolina Forge Company Management’s sale of automotive textile supplier Guildford and a 66% stake in Seissenschmidt to reinforce its driveline and Mills for USD257 million. From the second part of 2012, private gear products businesses, effectively giving some diversification equity firms were also increasingly involved on the buyer to a company heavily hinged on its powertrain business. Federal- side, with Carlyle Group’s acquisition of Dupont’s automotive Mogul has acquired Honeywell’s brake pad business, which gives coatings business, and Walbro Engine Management, a supplier of the company a leadership position in the sector, as well as TRW’s carburettors and ignition systems from Sun Capital Partners. engine valve business. Carlyle also sold Metaldyne to American Securities, another ZF’s acquisition of TRW is a mega-acquisition per se, but private equity firm. Other private equity firms which have possesses the characteristics of a targeted deal, as the two become active in the automotive M&A arena, as well as Carlyle, companies’ expertise and capabilities reside in some of the Cerberus and KPS, are the 3i Group, which invested USD160 most promising areas for technological development for the million in rubber and silicone component maker Q Holding. And automotive industry (active safety, chassis, and powertrain). there was Atlas Holdings’ purchase of Johnson Controls’ headliner Immediate synergies will not be substantial, but ZF is taking and sun-visor business and American Securities LLC purchase of a long-term view of integrating TRW business in order to gain castings supplier Grede Holdings. 

19.6%

United States 10.9% LIGHT VEHICLE PRODUCTION 5.0% US light-vehicle production (2013–2018) 7.5%

In the midst of low fuel prices, light 3.0 2011 2012 2013 2014 truck sales helped pace the overall

market improvement for the month, 2.5 something that will likely occur for much Millions of the year. IHS projects North American 2.0 light vehicle sales to reach 20.2 million units in 2015. North American production in May 2015 declined 0.9% 1.5 year on year (y/y), or 13,700 units, with 1.49 million units produced, which 1.0 translates to a seasonally adjusted annual rate (SAAR) of 16.9 million units. 0.5 The decline is not indicative of fundamental market issues, but 0.0 represents instances of retooling 2013 2014 2015 2016 2017 2018 downtime and the ramp-up of several Ford General Motors FCA new and redesigned vehicles. Inventory FordToyota HondaGeneral Motors Renault/NissanFCA fell 3.0%, or 106,700 units, at the end of ToyotaHyundai BMWHonda OthersRenault/Nissan May to 3.50 million units, or a 56-day Hyundai BMW Others supply. Despite the highest US selling Source: IHS Automotive rate since July 2005, at 17.7 million.

19.6%

United States 10.9% 7.5% 5.0%

2011 2012 2013 2014

TRELLEBORG- MAHLE GRUPO CARBODY FAURECIA U-SHIN VIBRACOUSTIC ANTOLIN Air Ducts Pads/plugs Complete seats, Lockset rows 1-2-3 Exhaust Condensor Front Dome Dampers Lamps Conter console HVAC Modules Interior Door panels Ambient TAKATA MITSUBISHI Lightinng Instrument panel ELECTRIC BEHR-HELLA Multipurpose Passenger THERMO- EDSCHA Lamps Airbags Alternator CONTROL Spare tire Rear Dome Blackbox carrier Lamps (Electronic climate control) FAURECIA Instrument panel

METALDYNE Rubber crankshaft dampers [K9K 80 gen6 1.5L engine and R9M B30 1.6L engine]

ZF Chassis Components

AISIN Rear Wheel Steering Image: Renault

CIKAUTXO ITT Vacuum hose Brake Pads (engine R9M) [Tier 2] PROFIL Body In White (BIW) fasteners FLEXITECH KYB TRELLEBORG- MANUFACTURING VIBRACOUSTIC Front Brake METHODE HELLERMANNTYTON Hoses Shock ELECTRONICS Chassis absorbers TI AUTOMOTIVE Components Cablebundling Rear Brake called EPB Switch & fixing Hoses Harmofreq Brake Lines Module Top Mounts elements

MAHLE BEHR-HELLA AKA DOW INTEVA STABILUS THERMOCONTROL AUTOMOTIVE PRODUCTS Condensor Rear Hood 2 x gas spring Blackbox Hinges BETAMATE™ Door Latch hood HVAC Modules (Electronic climate control) BETASEAL™ 2 x gas spring tailgate

CIKAUTXO METHODE PROFIL ELECTRONICS DELFINGEN Rubber EDSCHA Body In White supports for (BIW) fasteners U-SHIN EPB Switch Wiring Radiator Door hinges Module Exterior Door Protection Hood hinge Systems [Tier 3 Handles and below] Spare tire carrier SHAPE CORP. GRUPO ANTOLIN Front bumper beam GRUPO License Plate ANTOLIN Lamps Rear bumper beam License Plate Lamps

POWERTRAIN MAHLE EXTERIOR TRELLEBORG- INTERIOR VIBRACOUSTIC Bearings and Bushings Engine Mounts ELECTRONICS Camshafts Torque Rod CHASSIS Conrods Exhaust Gas Recirculation HELLERMANNTYTON DURA System GETRAG Engine & Shifter Systems Fuel Filter 6DCT451, a Aggregates - Cables - MTX Oil Filter six-speed cablebundling & Dashboard dual-clutch fixing elements Piston Pins transmission for Trigger up to 450Nm Piston Rings 7DCT300, a Pistons seven-speed MITSUBISHI Valves dual-clutch HONEYWELL transmission for ELECTRIC up to 300Nm Turbo 1.6L Alternator Diesel ELRINGKLINGER NEMAK Engine cylinder- Head IWIS head gaskets FEDERAL- FAURECIA Timing chain MOGUL Exhaust system Emissions specialty drive for engine Bearings R9M control systems gaskets KSPG Bushings AUTOMOTIVE Cold Gaskets Electrical Heat Shields exhaust control SKF PLASTIC RÖCHLING OERLIKON valve Seals OMNIUM AUTOMOTIVE Engine PTFE Synchronizer Vacuum bayonet Valve Seats and Fuel tank Active Grille [Tier 2] regulating valve crankshaft seal Guides system Shutters

Seven trends affecting suppliers’ business

The traditional business process that suppliers are Some of these trends are linked to accustomed to is changing, as supplying parts to industry shifts; others are linked to automakers becomes increasingly complex. We look at technology shifts; and some of them are caused by harsh competition within the what business planning tips for the suppliers can take in automotive industry. But do these mean in order to become a best-in-class supplier detail, and what sort of impact they have on suppliers’ business plans?

Matteo Fini, Senior Manager, Global Component >>OEMs platform strategy sees Forecasting, IHS Automotive the convergence of part families, creating targeted purchasing >>Over the last few years, there has trends in the industry would consist of, but agreements been a number of overarching megatrends not exclusively include: IHS Automotive research has been developing in the automotive supplier ■■Increasing volumes per part number able to actually quantify the average sector. The way that OEMs conduct their ■■Increasing R&D requirements volumes associated with the requests- business is changing and this has a huge ■■Increasing global footprint requirements for-quotations (RFQs) of OEMs. What we impact in the way that the automotive ■■Decreasing development times have been seeing over the last few years, supply sector should plan its business. ■■Increasing financial burden from OEMs and what we are likely to see in future, is Developments in the automotive to suppliers that the average volumes per platforms are industry’s structure are creating challenges ■■Supply base consolidation going up. Clearly this is caused by the fact and opportunities for suppliers. A list of ■■OEMs’ supplier clubs that OEMs are keen to create economies

of scale, and therefore increase their >>OEMs increasingly requesting a paid for by suppliers in the US increased negotiation leverage when they deal with global footprint for production from 9% of the total to 14%, so suppliers suppliers in order to create purchasing and R&D will need to factor in these extra costs and synergies and reduce their costs. Suppliers now have to think of how their impact on the bottom line. In future, there will be cases where as many product launches they will need much as 80% of the volumes of a certain to support in the different regions of the >>OEMs purchasing strategies, carmakers will be built off as little as two world, so this means the footprint not poor margins and greater platforms. This gives you an idea of the only in terms of manufacturing locations product focus have been driving size of the contracts that they will put or production facilities, but also in terms consolidation in the supplier out there in terms of competing process of R&D centres. OEMs are requesting sector with the suppliers. But there are also other support from suppliers with local R&D There has been a degree of consolidation measures that OEMs are implementing facilities in order to adapt and develop across the industry as many companies to create greater volumes, one of them components locally. focus on specific component areas, being the creation of targeted purchasing Currently, there are 15 R&D centres in whileshifting their focus away from agreements between major OEMs on not China from the top 10 suppliers, and given certain other areas, selling off that part of overly-engineered parts. the number of launches that will have to their business. That means there are fewer This increases the size of volumes on be supported in that area of the world, players out there, and because of this a which suppliers have to bid, therefore more and more of these R&D centres will bigger slice of the pie for those players in driving greater synergies. have to open closer to where demand is. those areas. What we will see in future is that there One big topic that suppliers have not will be more and more platformisation of >>Development cycles really considered over the last few years component areas and greater convergence significantly shorter, increasing is the fact that OEMs really want to of the different part families that the the resource requirements for introduce suppliers into development OEMs are engineering and asking suppliers to go at the pace process and the strategic process at a suppliers to make. OEMs are trying to required by the OEMs much earlier stage than they currently put an end to part proliferation. For Over the years development times have do. What we are starting to see is OEMs example rather than having 6-7 different shrunk by a substantial amount thanks creating programs that bring suppliers into “flavours” of infotainment systems to to CAD/ Virtual prototyping leading to the process, such as Ford with its aligned accommodate the different regional and suppliers having to deploy more resources business framework. These groups involve: product requirements, OEMs prefer to to make sure that they are able to support ■■Earlier involvement in the development create modular component platforms. This the OEMs appropriately in responding to process for suppliers means they will leverage 3-4 component market requirements in a timely fashion ■■Cost and forecast transparency platforms which allow the OEM to give and reduce time to market. . ■■Collaboration on global footprint different systems levels depending on the ■■Long-term sourcing agreements specification of the underlying building >>OEMs are offloading a greater blocks (e.g. processor, graphic card, share of the financial burden on The idea of these supplier programs connectivity module, etc) suppliers, not only in negotiation is to involve suppliers earlier, give them The size of R&D budgets for the top but also costs of quality access to long-term forecasts and long- 10 suppliers has been expanding to (warranty, recalls) term technology roadmaps, and at the around 5% of their sales over the last few In IHS Automotive’s OEM-Supplier same time also have preferential access to years. This is due to the requirement for relations study, a large portion of OEMs is business. Under these programs, suppliers suppliers to develop technologies that rated as having quite a low profit potential who embark on a follow-sourcing strategy have significant greater electrification, according to suppliers around the globe. by opening a plant in a certain region have greater semi conductor content, etc That is not only a because of the pure a strong chance of adding business from OEMs have also increasingly offloaded discount requests that a supplier might that OEM in that area. some of the R&D burden on to suppliers. get in negotiations, but also because Being inside these frameworks can Suppliers have many areas in which they of the increasing financial burden that be a real advantage to suppliers. 65% of can innovate, innovation requires greater OEMs are tryin to offload on suppliers, for Ford’s purchasing is made through the resources due to the increasing complexity example in the areas of warranty costs. 110 suppliers in the aligned business of systems. For example, the share ofwarranty costs framework; in the region of USD110

billion. VW has recently initiated a similar actually following a clear commodity class business planning system leads to: program, FAST (Future Automotive strategy which goes well beyond the Increasing sales efficiency and Supply Tracks), that goes in exactly the Net Present Value model when it comes rationalising resource deployment (e.g. same direction, trying to include suppliers to business allocation. In this regard application engineering) earlier in the development of the process. purchasing departments have clear Eliminating bad decision-making due to One of the main benefits for VW is strategies on how to fix, grow or exit from a biased view of the market leveraging the innovation push that comes certain suppliers’ businesses. More effective sales strategy compared from the supply base. Having a biased view of the market, to the competition with unrealistic market share perception. Reinforce a long-term sustainable >>Implications on suppliers’ Looking solely at their own book of business business planning business without considering that of their Create marketable and differentiating With higher volumes per part number, competitors. technology missing a sourcing window means missing Devoting substantial resources to Best in class suppliers work with market a far bigger opportunity than in the past. A unmarketable innovation. share information that is validated by an lot of innovation is being pushed by R&D Getting a best-in-class approach external party like IHS, which eliminates departments, but there are issues that in Moving towards a best-in-class approach bad decision making due to a biased view many cases as suppliers are developing can involve prioritising certain parts of the of the market. innovations that are not really marketable business RFQs. By doing this, suppliers can Transparency over a competitor’s book for OEMs and it becomes evident that a lower their application engineering costs of business means that a supplier can strict validation process is increasingly by not chasing every possible business implement commercial countermeasures required for innovations. In terms of opportunity but only real opportunities. to secure further business at the global footprint requirements, suppliers A best-in-class suppliers can have two detriment of its competitors. need to have the right capacity, at the different sets of proposals; one set of Finally best in class suppliers tend right time, in the right place – both from standard ones which will be used for all to have a clear and unbiased view of a manufacturing standpoint and from a the RFQ’s that are not strategic, and then what customers are going to do and all R&D perspective. purely strategic ones for which it will departments exposed to innovation work The quality, cost and delivery. paradigm use a much greater amount of internal all in the same direction, that of creating is still in place when awarding business, resources. innovation which is marketable and given the financial burden that suppliers For suppliers, implementing a best-in- differentiating.

are under it will be more difficult for Getty suppliers to excel in these three key metrics. Having an understanding of which are the areas of weakness of a

suppliers’ bid is important. With supplier Getty clubs coming online some market participants which are not part of these programs will find it more difficult to gain transparency on OEMs’ technology roadmaps and future strategy, potentially leading to information asymmetries. A conventional approach to business planning has some of the following traits: suppliers which run around each and every possible RFQ without prioritizing and without knowing what is up for grabs with a decent amount of notice and chance. Or thinking that OEMs just go after whoever offers the cheapest deal, while it is clear that a number of OEMs’ are

protocols for defensive driving (eg, staying Autonomous vehicles: out of the blind spot of other vehicles and pausing before proceeding after a red light turns green). Passenger and pedestrian One giant leap or a protection technology includes foam front-end and flexible windscreen. series of small steps? Google maintains that this is a research project and not development of a specific production vehicle. It seems clear that the autonomous question is if, not when; results of this and other projects advancing the technology rapidly, though true consumer demand is less certain. However, though Google is in the driving seat in terms of development, they are unlikely to be producing the necessary physical parts for any autonomous driving As search giants Google and Baidu press ahead with system. Instead their opportunity is likely to come in licensing software they road testing their autonomous vehicles, OEMs and develop, for which they need to be first to suppliers are prepared to take the long view market, hence an aggressive 2017 target. Google is less interested in being a vehicle >>Google is set to begin on-road built with incorporated sensors, whereas manufacturer than it is preparing the testing this summer of its prototype self- previously its sensors were added onto landscape for change and then enabling it driving car. Google has built 25 vehicles a standard Lexus. The Google prototype by taking care of the tougher part of the that it will take to the streets around its is limited to 25mph and Google drivers development, or the software. offices in California, United States. The will have a detachable steering wheel, In addition to this, Chinese web- company’s latest iteration of its prototype accelerator pedal and brake pedal to take services company Baidu has announced vehicle uses the same software as its test over control as necessary. plans to launch a self-driving car in China fleet of Lexus RX 450h vehicles, though Google also said that the prototype by the end of the year. Wang Jin, Baidu’s with more sensors. cars have sensors which eliminate blind senior vice-president, was quoted as The new autonomous prototype the spots next to the vehicle and 200 metres saying that the company would launch company is set to use has been custom in all directions. The prototypes include a self-driving car (SDC) prototype with

BMW in 2015. The executive added that and tires) and Roush as its partners, >>Defining autonomous the prototype car would be used to test the confirming earlier reports that Roush had The announcement by Baidu highlights road-readiness of Baidu’s technology but built the two-seater that Google says it the openness of the term “autonomous”. would still have driver controls. will begin testing this year. Google’s Chris The head of Baidu’s deep learning lab Baidu teamed up with the BMW Umson, director of the self-driving cars Yu Kai has previously said that that the Group last year for a research project programme, confirmed that Google will company is not looking, as Google is, which envisaged self-driving vehicles look to a large automaker for production at completely autonomous car, looking operated on urban highways in Beijing when it commercialises the technology. instead to develop a vehicle that will and Shanghai. Baidu offers similar services The shift of R&D responsibilities onto retain the traditional pedals but give the to rival Google and is China’s largest suppliers – once seen as a strategy by driver greater freedom. To consumers, search engine. As well as the self-driving OEMs to transfer a costly element of auto the idea of autonomous vehicles is being vehicle project, the company has formed production – has proved beneficial as tier defined by tech companies, that being collaborations with several automakers for ones find themselves market leaders in as a vehicle that completely drives itself, connected-car technology and has been a number of key technologies. OEMs are without human intervention. Anything reported to be considering buying Nokia’s only just starting to play catch-up, while less does not count as autonomous. map business. the major suppliers are now ploughing as The differing strategies also have much as 5% of revenue back into R&D. differing timelines for the introduction of >>Incremental gains or full Google has the opportunity to take fully autonomous vehicles to the market. autonomy now? advantage of this swing by doing the Continental spokespersons have indicated Most automakers at this stage are development for a self-driving vehicle. the company believes 2025 is the earliest following a different strategy of However for the project to really work, it SDCs will be seen on the road. Google’s incremental advances in automation to needs to be first to market. Sergey Brin told The New York Times: augment or relieve the driver of more and Looking to have automakers build the “[advances by traditional suppliers] seems more driving tasks until the car becomes Google self-driving car is consistent with not entirely in keeping with our mission self-driving, rather than leaping straight Google’s current status as a software of being transformative.” to full autonomy as Google and Baidu are and data company. If Google encourages The shift of R&D responsibilities onto aiming to do. Almost all have their own the automaker to step in for production suppliers – once seen as a strategy by autonomous vehicle projects, and are and provides the software and ability to OEMs to transfer a costly element of auto quietly working on the other aspects that integrate software, hardware and firmware production – has proved beneficial as tier build towards it, such as active safety. systems, it has potential to free Google ones find themselves market leaders in The last few months have seen a number up from having to resolve industry issues a number of key technologies. OEMs are of automakers announce progress on that automakers can address much more only just starting to play catch-up, while autonomous vehicles projects, including quickly and efficiency – for example, the major suppliers are now ploughing as Audi, Mercedes-Benz and Hyundai. safety system regulations, lighting much as 5% of revenue back into R&D. For Google though, the retrofitting of standards and other functional vehicle Baidu and Google has the opportunity to vehicles is no longer sufficient and they issues. take advantage of this swing by doing the have now reached the point where they However, Google stopped short of development for a self-driving vehicle. need to prove this out with purpose- saying it was looking to license its self- However for the project to really work, it built hardware. Interestingly, it seems driving technology. Google’s car is still needs to be first to market. that Google is now working closely with in the research phase. If a traditional Although Google’s limited test on public automotive suppliers, not OEMs, on automaker can develop the systems roads by 2017 is feasible, IHS Automotive creating vehicles. necessary to commercialise a self-driving forecasts the first Self Driving Cars In January, Google confirmed that it had car ahead of or on a similar timeframe (SDCs) will be on the road around 2025, been working with suppliers to speed its as Google, they may be less likely to which would be Level 4 (meaning fully push to bring self-driving cars to market. fabricate a vehicle for the technology autonomous, but also able to be controlled Google named Bosch (power electronics giant. However, there are automakers by a human driver). Level 5 SDC-only and long-range radar); ZF Lenksysteme with fewer resources; for one of them, (no human controls) cars are forecast (now Robert Bosch Automotive Steering; assembling for Google could get them into to appear about 2030. We forecast the steering gear); LG Electronics (batteries); a sector they might not otherwise be able first SDC cars will have global sales from Continental (automotive electronics to get a foothold in. 230,000 in 2020 to 11.8 million in 2035. 

2005. IHS Automotive forecasts that number could fall to 195 by Global platforms 2020. At the same time, the average number of vehicle programs being developed on each discrete platform is rising; among the increase leading global OEMs it is expected to grow by nearly 50% in the same time line. The proportion of light vehicle production engineered on levels of parts major platforms by the leading global OEMs was 35% in 2005, but is forecast to rise to 83% by 2020 as platform counts are consolidation rationalized and deployed globally. This concentration of platforms implies both risk and opportunity for suppliers and OEMs.

>>Modular designs Although Volkswagen is credited with being the first OEM to adopt a megaplatform strategy—with the launch of the Automakers are reducing the number ubiquitous MQB architecture in mid-2012—it had, in fact, already embarked on a modular approach with the longitudinal engine of platforms they operate, creating MLB architecture in late 2006. Volkswagen may have the first- global megaplatforms mover advantage, but Renault/Nissan, PSA, and Daimler have all launched similar modular architectures. Toyota, BMW, and >>The leading global automakers are rethinking their General Motors have all described upcoming efforts that will platform strategies in response to the pressures generated by deliver the same attributes. intensifying competition, new global consumers, and state There are clearly identified advantages to the modular approach regulators. The trend toward a strategic consolidation around cited by almost every OEM: greater economies of scale, reduced modular architectures or “megaplatforms” is replacing the development costs, shorter development times, and greater earlier, often successful, rationalization within a segment that manufacturing flexibility. Renault/Nissan quotes a potential 30- sought to make best use of a common platform and provide 40% reduction in the entry cost per vehicle model and a 20-30% variation in vehicles by adopting “top hats.” percent reduction in component costs across the alliance through The new megaplatforms take a more holistic approach toward the implementation of its Common Module Family (CMF). the aim of consolidation, stretching beyond segment coverage to Meanwhile, PSA expects to be able to build up to six vehicle encompass the layout or the basic architecture of a vehicle type. types on a single production line with the introduction of its

This is leading to differentiation based around how a vehicle is Shutterstock purposed—for example, a hatchback, sedan, or crossover—rather than just the segment it is in; architectures are emerging that accommodate the basic requirements of transverse front-wheel- drive, longitudinal rear-wheel-drive, or all-wheel-drive layouts.

>>Stepping down from the platform As the cost balance in vehicle engineering continues to shift from steel to silicon—and as the emphasis on electronics surpasses the need to focus on structural hard points, such as the floor pan—this modular approach is increasingly the key denominator, overriding more traditional physical or dimensional constraints. The flexibility inherent in these new modular architectures is an enabler in accommodating newer, complex infotainment and emerging connectedcar technologies, safety systems, and new powertrain combinations. In turn, this trend is leading to a further consolidation in the number of platforms being engineered by the major OEMs. Major auto OEMs were using an estimated 277 individual platforms in

Efficient Modular Platform (EMP). At manufacturing should allow for any level will be amplified due to the this stage, the deployment of these combination of “accepted” modules to be ssociated increase in volumes that the architectures is too immature to be able to built in any plant correctly configured. megaplatforms will bring. Second, when confirm these claims. As modular platforms are increasingly a product redesign is required, costs rise While the trend has been established, stretched across layouts—that is, covering and execution becomes more difficult and many risks remain. For OEMs there is the all transverse front-wheeldrives as more resource consuming. And third, the challenge of executing on these strategies, opposed to just one or two segments— need for suppliers to support contracts while suppliers will be measured on how there will be significant increases in scale covering increased volume and geographic well they respond to the new demands as volumes are multiplied across key requirements could lead to an accelerated for greater volume, regional presence, and component sets or modules. Successful narrowing of the supply base, as suppliers technology innovation. execution will become the cost of are challenged to scale their operations. The modular approach may require entry for the major OEMs in order to be Whatever the reservations, they are greater upfront investment costs, but competitive, providing scale, efficiency, utweighed by the rewards of success as the payoff is significant from the lower and flexibility. OEMs build scale and as suppliers compete number of unique engineering bases However, there are risks that need to for fewer but larger contracts. The process required, which reduces production be recognized. The first surrounds the is underway, and both OEMs and suppliers complexity and overall lifetime costs. exposure to fault or recall, where the need to position themselves to adapt to The payoff in flexibility is that modular impact of a single failure at a component the new competitive pressures. 

governments are providing a regulatory New powertrain framework that will change and determine the required technology offerings and development and choices. >>A pleathora of new and existing regulation solutions From a technological standpoint, announcements of the death of the ICE are premature. OEMs have been finding varied and creative solutions to reduce

CO2 output and meet emissions legislation around the world. The technology mix Increating new systems and components, engine and adopted varies by region and is typically a function of the test cycle specific to transmission suppliers must balancing the demands of that region, but there are common trends new technology and stricter regualtions worldwide in electrical and mechanical systems. The deployment of these ICE >>For OEMs, trying to balance choices in the context of rapidly changing technologies is having a big impact on the myriad demands placed on global societal preferences and within a changing meeting regulations. One challenge powertrain development has never been regulatory environment. for the industry will be passing on the harder. All major global automotive As auto manufacturers navigate an additional compliance costs to a price- markets have in place increasingly increasingly complex landscape, they sensitive public, especially since the stringent legislation focused on need to contend with three main drivers. technologies deployed typically get controlling carbon dioxide (CO2) First, changes in the development of ICE more expensive as the industry works its emissions and exhaust gas emissions— (internal combustion engine) technology way down the emissions curve. Within such as particulates and nitric oxide are occurring at breakneck speed. Second, electrical systems, all forms of hybrid (NOx)—and improving fuel economy. A societal adjustments in response to technologies will be adopted in larger key challenge for the industry is to make demographic and urbanization shifts are numbers. Mild, full, and plug-in hybrids the right powertrain and technology shaping the demand of mobility. Third, will show significant growth in percentage

terms, but overall volumes will remain Meanwhile, increasing urbanization comparatively low out to 2021. The across the globe means there is growing current low oilprice environment has a demand for small and efficient passenger dampening effect on the take-up rate of cars, a trend that has the potential to these technologies particularly in the have a significant impact on powertrain US, as the economics of adoption are developments. In many cities particulate undermined. For example, the payoff pollution is increasingly a public issue, period between a standard ICE and a full resulting in the adoption of zero- and hybrid on the same midsize car in the US lowemission zones. rises from 6 years with gasoline prices at New personal transport concepts, $4 per gallon to over 12 years with prices such as the Renault Twizy electric at $2 per gallon. Start-stop technologies, quadricycle, are being introduced to offer in contrast, have a rapid payback period zero-emission individual urban mobility and will be widely deployed by 2021, solutions. However, not all countries and thanks in part to test cycles that include cities are deploying policies in the same significant idle time. way or rate. On the mechanical side—and in a Finding the right mix of technologies reversal to a strong trend in the last that meets both consumer demand decade—there is now a significant and legislative requirements will be a political shift away from diesel- significant challenge for the industry. powered vehicles as governments focus increasingly on reducing pollution from >>Is a single global approach possible? particulates as well as on CO2. This helps explain why global diesel penetration is The third challenge will be to navigate forecast to remain static in years to come, the different and changing regulatory while the trend of turbo-boosted gasoline frameworks currently in effect across the engines shows sharp growth. globe. The good news is that fleet targets Finally, the widespread adoption of across the globe are set to converge by the higher-speed, fuelefficient automatics and early to mid-2020s. Significant progress a new clutch technologies is also playing has been made in Europe, for example,

a role in helping the ICE meet emissions where legislated CO2 levels have fallen to challenges. In tandem, the light-weighting 130g/km in 2015, with impetus to bring of vehicles is being increasingly deployed the level down to 95g/km by 2021. Similar to help increase fuel efficiency. targets are being set elsewhere. This trend should, in theory, make it easier for OEMs >>Rapidly changing customer to provide global powertrain technologies base that meet emissions levels in a more cost- Another challenge for OEMs is how effective way. to respond to the rapidly changing The next logical step in this process is to demographic and consumer trends bring global vehicle regulatory standards rippling through the global economy. and specifications into a fully harmonized In developed markets the population worldwide light vehicle test procedure is getting older and younger buyers are (WLTP). This cycle will yield certified becoming harder to attract. In developing fuel economy and exhaust emissions markets larger numbers of young, first- performance far closer to real-world time buyers are appearing. These younger experience, and it will be adopted by groups are voicing their environmental several nations. Nonetheless, ifferences preferences more loudly and are acting as for vehicle types will likely be allowed, a catalyst to improve the overall efficiency giving rise to a looser definition of a of conventional ICE technology. “harmonized” cycle. 

Suppliers to the CARBODY ■■EVA SIDE WALL PACKING ■■EVAPORATOR SIDE new Ford S-MAX ■■EVAPORATOR TOP

CARCOUSTICS

■■Fibre Insulation for Rear Trunk Wheelarchliner ■■Foam Block in B-Pillar Details on 197 parts supplied by 50 different ■■Foam strips in C-Pillar suppliers to the new Ford S-Max. Includes a look ■■Front Door Sealing Pad ■ at the CD4 Platform and production data ■ Insulation Vent Air Duct (Dual Layer solution) ■■NVH Fleece on D-Pillar ABC GROUP ■■Quarterlight Fix (glazing) [The code we ■■NVH Pad on NON Aux HVAC are using for the S-Max is CD539 and ■■Rear Trunk Insolation Acoustics Pad ■■HVAC Distribution Duct System not CD389] ■■Windnoise prevention on Fender Area ■■Windshield Washer Bottle System ■■Rear Door glazing [The code we are using for the S-Max is CD539 and not CIKAUTXO AGC AUTOMOTIVE CD389] ■■Exhaust Hangers ■■Front Door glazing [The code we are ■■Radiator Isolators using for the S-Max is CD539 and not BROSE CD389] ■■ Seat adjusters CULTRARO AUTOMAZIONE ■■Front Fix (glazing) [The code we are ■■Electric power steering motors ENGINEERING using for the S-Max is CD539 and not ■ ■ Front seat adjuster ■■Sunglass holder damper [Tier 2, Supply CD389] ■ ■ Handsfree access To: Grupo Antolin]

DELFINGEN FTE elements ■■Navigation&Radio: cable bundling and ■■Wiring Protection Systems [Tier 2, ■■Clutch hydraulic actuation system fixing elements Supply To: Delphi] GESTAMP HONEYWELL DOW AUTOMOTIVE ■■B-Pillar Assembly ■■Turbo on 1.6L Diesel ■■“BETAMATE™ - Side walls to body ■■Door Beams frame” ■■Front Subframe, Rear Subframe, Rear ■■“BETAMATE™ Hemflange doors & Suspension Links HUF HÜLSBECK & FÜRST ■ motor hood” ■ Stampings ■■Locksets ■■“BETAMATE™ Spring boxes” ■■“BETAMATE™ Wheel arch” GETRAG IAC ■■“BETASEAL™ Glass Bonding” ■ ■■PAPI 95 E ■ 6DCT451, a six-speed dual-clutch ■■Centre Console ■■SPECFLEX NM - DASHBOARD transmission for up to 450Nm ■■Centre Console Assembly ■ ■ 6MTT450, a six-speed manual ■■Instrument Panel EBERSPÄCHER Ford

■■Electrical Heaters - 1.000 W PTC Air Heater

ELRINGKLINGER

■■for the engine: cylinder-head gaskets ■■for the engine: specialty gaskets ■■for the exhaust system: shielding systems ■■for the exhaust system: specialty gaskets

FAIST CHEMTEC

■■Sound deadeners

FAURECIA

■■Easy Fold system for rows 2 & 3 ■■Emissions control systems ■■Front & rear bumpers / fascia ■■Rear headrests KEY SAFETY SYSTEMS transmission for up to 450Nm ■■Rear seat structures (rows 2 & 3) ■ ■■Seat foams ■ Seatbelts HELLERMANNTYTON KIEKERT FEDERAL-MOGUL ■■Body: cable bundling and fixing elements ■ ■■Bearings ■ side door locking systems ■■Electric& Electronic: cable bundling ■■Cylinder Head Gaskets and fixing elements ■■Piston Rings MAGNETI MARELLI ■■Fuel System: cable bundling and fixing ■■Pistons elements ■■Rear lamp Fog ■■Valve Guides ■■Horn:cable bundling and fixing ■■Rear Lamp LED

Ford S-MAX production forecast from IHS Automotive Country Production Plant Assembly Type SOP EOP Primary Design Centre 2015 2016 2017 2018 Spain Valencia #1 CBU 2015-05 2021-06 Ford-Dearborn 30,567 50,783 48,631 44,059 Source: IHS Automotive © 2015 IHS

MAGNI GROUP METALDYNE OERLIKON

■■Magni Coating 140 on brake rotors [Tier ■■Connecting rod blanks [Duratec HE 2.0L ■■Synchronizer 2] engine] ■■Magni coating 565 on fasteners [Tier 2] ■■Crankshaft rubber dampers [Duratec HE OMRON 2.0L GTDI engine] ■■3rd row seat switches MAHLE ■■Valve bodies [for 6F35 transmission] ■■DC-AC inverter unit ■■Bearings and bushings ■■Electric park brake switch METHODE ELECTRONICS ■■Charge Air Cooler ■■Fuel Pump Module ■■Camshaft ■■Ignition Starter Control ■■Immobiliser base station ■■Control valves ■■Pedal Controls ■■Instrument Panel Switches ■■EGR (Exhaust Gas Heat Exchanger) ■■Steering wheel Controls ■■Power window switches ■■Piston pin ■■Rear heated seat switch ■■Pistons MIDWAY PRODUCTS ■■Ring PREH-WERKE ■■Thermostats ■■Liftgate hinges ■■Valve guide ■■Electronic Control Panel ■■Valve seat insert MITSUBISHI ELECTRIC PROFIL ■■Door hinges MAZZUCCONI ■■VCT (Variable Cam Timig) ■■(BIW)Body Fasteners ■■Aluminium Steering Gear Housing [Tier 2, Supply To: ZF Lenksysteme] NEMAK RÖCHLING AUTOMOTIVE

■■Blocks ■■Active Grille Shutters MEANS INDUSTRIES ■■Heads ■■Battery Box ■■IDS Hub ■■Cowl System ■■Deflectors and shields ■■Degas Bottle ■Underbody panels

Ford ■

SCHAEFFLER

■■Clutch ■■Differential Bearing, Transmission ■■Dual Mass Flywheel, Transmission ■■Gearbox Bearings, Transmission ■■Strut Bearing, Chassis ■■Wheel Bearing, Chassis

SHAPE CORP

■■Front beam

SRG GLOBAL

■■A-Pillar Appliques (Mold-In-Color) ■■Door Claddings (Mold-In-Color)

■■Fender Vents (Painted) THYSSENKRUPP PLATFORM OUTLOOK ■■Liftgate Applique (Mold-In-Color) ■■Camshaft -2.0L/2.2L Diesel = DW10/ Platform: CD4 ■■Rear Panels (Painted) DW12 Program: CD389 ■■Rocker Panels (Painted) Ford S_MAX Forecast Annualized Volume (2015–17): 48,700 TRELLEBORGVIBRACOUSTIC STABILUS Overall Risk: Medium ■■Front top mounts ■■Tailgate – automatic: 1 x Powerise + 1 x Ford sought to increase flexibility and ■■NVH-Dampers volume with its new CD platform. The Federbein ■■Powertrain Mounting System result is the new CD4 platform that ■■Tailgate – manual: 1 x gas spring + 1 x ■■Torsional Vibration Dampers supports Ford Europe, Ford North Federbein America, and requirements in Asia; although European deployment was WEBASTO delayed while Ford focused on STANLEY ENGINEERED FASTENING restructuring its manufacturing ■■Parking Heater footprint in the region. ■■Aero shield fixation [Tier 2, Supply To: Röchling, Martinrea] CD4 offerings will include coupe, ■■Metal Fasteners WR CONTROLS sedan, hatchback, CUV, and MPV body ■ ■ NVH Clips for brake & fuel lines ■■Front Door Lock/Latch Cables [Tier 2, styles. The platform will protect RHD ■ and LHD developments, and different ■ Plastic Fasteners Supply To: Kiekert AG] drive formats, such as FWD and AWD. ■■Rear Door Lock/Latch Cables Lastly, lightweight structures will be critical to the CD4 basis. In TAKATA consolidating what were previously ■Driver Airbag ZF two separate platforms, CD-EU and ■ ■ CD1-3, Ford should enjoy greater scale ■ Steering Wheel ■■Chassis components economies and compensate for the ■■Clutch system loss of Volvo, Mazda, and Land Rover ■ as engineering partners, but we TENNECO ■ Damping system Nivomat (optional) expect the CD4 cycle will peak in ■ 2017/18 before the Fusion and ■ Emission control components Mondeo start to migrate to the C2 platform.

Production began in September 2014 with the next-generation Ford Mondeo [CD391], sourced from Ford’s Valencia, Ford Spain, plant. The S-Max [CD539] and Galaxy [CD390] followed the Mondeo in early 2015.

The CD4 platform is expected to continue within the Ford Group to become the consolidated global platform for C- and D-segment vehicles. Regional variances will be minimized to drive commonality in the build process.

Since Volvo and Land Rover programs have moved to in-house developments, the CD4 architecture is now confined to just Ford products. The next generations of the Mondeo, S-Max, and Galaxy will be hosted on C2 platform, while the Explorer replacement will be hosted on the CD6 architecture.

Being inside these frameworks can The rise of purchasing be a real advantage to suppliers. Around two-thirds of Ford’s purchasing is made supplier ‘clubs’ through the 110 suppliers in the aligned business framework. VW has recently initiated a similar programme, FAST (Future Automotive Supply Tracks), that goes in exactly the same direction, trying to include suppliers earlier in the development of the process and making sure that they can leverage the innovation push that comes from the supply base. In OEMs are increasingly looking into suppliers’ costs, return, FAST partners will also contribute technologies and ability follow-source ahead of bids. their ideas to the pre-series development But what will the potential cost be for those who opt-in? of vehicles at an earlier stage. For suppliers on the scheme, it’s an effective way of securing business >>GM’s new parts-buying vehicle design process earlier, automakers and undoubtedly a sign that OEMs are programme, is said to forgo conventional can expect suppliers to share more increasingly prepared to offer better supplier bidding and focus more on an technology and better processes that help terms. GM’s Steven Keifer’s previous analysis of the suppliers’ facilities and save money. The US automaker has already experience with Delphi means that he is costs. Suppliers who agree to be part of started signing long-term contracts with acutely aware of life as a supplier. During a new programme, called the One Cost some of its key suppliers. the Automotive News World Congress in Model, will receive long-term contracts OEMs are increasingly looking to January, he was quoted as saying, “Having from the automaker for periods ranging up introduce suppliers into development been a supplier, I know how hard it is to the life of a vehicle. In return for these process and the strategic process at a making money in this industry.” lengthy contracts, the automaker will not much earlier stage than they currently However, there is still some risk for seek bids from other suppliers. do. For OEMs, it’s also a way of trying suppliers.For OEMs these supplier Under the programme, suppliers looking to change the traditional adversarial frameworks are a way of mitigating for business from GM allow a team of the relations between manufacturers and the risk that has been created as the automaker’s engineers and purchasing their suppliers that, despite periodic development of crucial new technologies executives to evaluate its factories and improvement, has been a hallmark of the has been handed over to suppliers. costs data. The evaluation, which GM calls automotive OEM-supplier industry for By bringing them on board, they can activity-based costing, assesses material decades now. cherry-pick the best new technology and costs, labour, scrappage, production cycle The latest way that OEMs are reaching retain a degree of exclusivity on some times and other costs. GM then meets out to suppliers is by creating programs projects. Because of this, suppliers will with the supplier to discuss the evaluation or ‘clubs’ that bring suppliers into the have to choose their projects carefully. and a potential agreement. If both process at an earlier stage. One of the It’s also a way of spreading the pressure parties agree on terms, then GM awards earliest examples has been Ford with its to create new innovations for shorter the contract to the supplier. The entire aligned business framework. The idea of product development times over a process can take up to 20 weeks. The One the programme is to involve suppliers at preferential supply base. Suppliers Cost Model programme further requires an early stage, provide them with access may also find themselves in a situation suppliers to identify fresh cost-cutting to long-term forecasts and long-term where competitors are part of the opportunities from time to time. GM will technology roadmaps, while at the same same club, creating some synergies of update its cost analysis every year to see time saying that they have preferential information access. Suppliers have a if the supplier can reduce costs by using access to Ford’s business. Suppliers that right to be cynical about automakers more efficient production, the report adds. match an OEM’s investments in a certain motives, but these developments could The thinking within the industry is region by following with a plant of their mark an improvement in OEM-supplier that by locking suppliers into longer-term own have a stronger chance of getting relationships that might this time be contracts and getting them involved in the business from that OEM in that region. sustained. 

IHS Automotive SupplierBusiness Analysis Issue 5 • 2015 30 © 2015 IHS PURCHASING Who are your competitors supplying? Who is on the latest model launches? Who is supplying your competitors? find out with the WhoSuppliesWhom Database

WhoSuppliesWhom from IHS SupplierBusiness identifies the key suppliers of components, modules and systems to European and North American light vehicle models and platforms. Our database platform contains:

>> More than 100,000 data entries >> Around 125 components per car, on average >> Covering over 800 models

Data is delivered in a user friendly web-based format or downloaded into excel. Data can be searched by OEM, supplier, model or component. The components are classified into around 500 subsectors, 50 sectors in five main areas of the vehicle: exterior, chassis, powertrain, interior, and electrical/electronic.

Data can be sorted to reveal OEM-supplier relationships, evaluate the supplier landscape by geography and sector, and identify potential partnerships. This database is used by Automotive News to create their regular car cutaway feature, but contains many more component listings.

To view the database in demonstration mode, please visit: www.whosupplieswhom.com/demomode

Regarding your database and interactive interface, I find it so useful and so easy to use; anyone undertaking a search for suppliers or new technology would use this as a starting point. “Senior purchasing executive from a major vehicle manufacturer © 2015 IHS 31 Issue 5 • 2015 IHS Automotive SupplierBusiness” Analysis ACTIVITY

Latest Supplier Investments

Area of Company Region Investment Comment operation

Fisker Automotive United States Plug-in hybrid - Fisker, now known as Fisker Automotive and and Technology electric vehicle Technology Group (FATG), is to build a plant to Group (PHEV) assemble the Karma plug-in hybrid electric vehicle (PHEV) in Moreno Valley, California. The plant will be built in a newly constructed 55,670-square feet facility, which the company will lease. FATG expects to create about 150 full-time manufacturing jobs, though the production start date of the relaunched model was not indicated. The city authority stated that FATG will have a vehicle showroom on the site and provide tours of the manufacturing plant.

AvtoVAZ Russia Light vehicle RUB30 billion AvtoVAZ has announced that it will invest RUB30 production (USD564 billion (USD564 million) in its Togliatti production million) facility this year in preparation for the new Vesta and X Ray, which are due to start production later this year. Vnesheconombank (VEB) will supply the biggest percentage of the investment, while AvtoVAZ will provide some from its cash flow, according to the firm’s acting CFO Stephan Maurer.

Benecke-Kaliko Mexico Foam foils EUR11.4 Benecke-Kaliko, a company of Continental’s million ContiTech Division, commenced construction of a (USD12.8 new 7,000 metre square production building adjacent million) to its manufacturing plant in San Luis Potosi, Mexico. The company expects to start production of Tepeo and Tepeo2 foils for the North American market from the third quarter of 2016. Benecke-Kaliko is investing around EUR11.4 million (USD12.8 million) in capacity expansion.

BorgWarner United States Transfer case USD13.3 BorgWarner is expanding its existing manufacturing production million operations in Seneca, South Carolina (United States) by investing USD13.3 million. Additionally, BorgWarner is leasing another 100,000 square feet of warehouse space in a former factory building within the Seneca Commerce Center, located at 320 Shiloh Road, owned by the city of Seneca.

Continental / China Hydraulic braking CNY600 Continental and Chinese joint-venture partner Huayu Huayu Automotive systems million Automotive Systems are to invest a total of CNY600 Systems (USD97 million (USD97 million) in building a new hydraulic million) braking systems factory. The plant will be based in the western Chinese municipality of Chongqing and production is expected to begin in the third quarter of 2016. The plant will produce brake calipers, vacuum boosters, and electric parking brakes. The initial phase is expected to create 600 jobs. The first phase of the plant will cover 80,000 square metres.

Area of Company Region Investment Comment operation

Continental China Tires EUR250 German tiremaker Continental is planning to double million its investment at its Hefei plant in China to boost its tire production in the country, according to a report by Reuters News. Nikolai Setzer, a member of executive board and a top chief at the company’s tire division, reportedly revealed in a statement that Continental reached an agreement with the Hefei provincial government during late April to invest EUR250 million (USD275.5 million) at its Hefei plant, but now intends to invest another EUR250 million, which increases the total expected investment at the Chinese tire plant to EUR500 million.

Daimler Germany Engine EUR500 Daimler is investing EUR500 million (USD550.3 components million million) in its Mercedes-Benz plant in Berlin, Germany (USD550.3 to develop it into an advanced facility for engine million) components, the company said in a press release. Of the total EUR500 million (USD550.3 million), the German automaker will invest EUR150 million (USD165 million) at the facility this year and the remaining amount will follow over the next few years.

EP Manufacturing Malaysia Chassis parts MYR60 Malaysia-based EP Manufacturing Bhd (EPMB) Bhd million has decided to open a new chassis plant in Kedah, (USD15.9 Malaysia, investing MYR60 million (USD15.9 million). million) The company has secured a new contract to supply chassis parts for Mazda’s Skyactive model. “We are on a product development stage for Mazda, and a new facility is planned for the Northern corridor, maybe close to Mazda’s assembly plant in Kulim, to cater for this new business,” said Executive Chairman of the company Hamidon Abdullah.

Ficosa United States - USD58 million Spain-based auto parts supplier Ficosa will invest USD58 million in a new production facility in Cookeville, Tennessee (United States). The new facility at the Highlands Business Park in Cookeville will start operations by middle of 2016. The planned investment is expected to create 550 jobs.

Area of Company Region Investment Comment operation

Ford United States Light vehicle USD3.1 billion Ford has pledged to invest USD3.1 billion into production Michigan, United States, facilities. The agreement will enable Ford to keep tax breaks, capped at USD2.3 billion. A state board approved an amendment to Ford’s Michigan Economic Growth Authority (MEGA) tax credits. The state’s governor has been working to keep the state’s long-term liability from this program (currently USD9.38 billion) from escalating. The report also indicates Michigan is looking to develop similar agreements with GM and FCA. Ford has agreed to spend an additional USD3.1 billion on Michigan facilities through 2025, a figure said to be double Ford’s initial capital investment commitment, to remain eligible for the state tax credits.

Ford Argentina Light vehicle USD220 Ford has announced plans to invest USD220 million production million in its Argentine operations through next year. The investment will be dedicated to upgrade vehicles currently manufactured in the country.

General Motors United States Light vehicle USD175 US automaker General Motors (GM) is investing production million USD175 million at its Lansing Grand River Assembly plant in Michigan (United States) for the production of the next-generation Chevrolet Camaro. According to a statement, the investment will be made in building three new paint systems for Camaro-specific colours, installing two robotic framers, and adding a second shift employing 500 workers starting this summer.

GKN Driveline Turkey Driveshafts EUR4.5 GKN Driveline has invested EUR4.5 million (USD4.9 million million) to expand driveshaft production capacity at (USD4.9 its Eskişehir plant in Turkey. The expansion resulted in million doubling the plant total area to 6,300 square metres and ramping up of driveshaft production capacity to 1.8 million units per year. GKN added an expansion line and expanded warehousing facilities at the Eskişehir plant. The UK-based supplier currently employs 130 people at the Turkish plant, with plans to add 70 more jobs over the next five years.

Henkel India Adhesives and EUR30 million Henkel Adhesive Technologies India will invest EUR30 surface treatment (USD33.8 million (USD33.8 million) in a new adhesive plant in million) Kurkumbh near Pune, Maharashtra (India). The plant, Henkel Group’s 10th in India, will cater to various end- markets including automotive, metal and industrial. The plant will have an operational area of about 20,000 square metres and annual capacity of 80,000 metric tonnes of adhesives and surface treatment. The plant will mainly focus on consumer packaging and metal and chemicals for the automotive and metal industries. The plant is expected to start production early 2017.

Area of Company Region Investment Comment operation

Hexpol Mexico Rubber - Sweden-based Hexpol plans to expand its rubber compounds compounds capacity to meet increasing demand from Mexico’s automotive and engineering sectors. The expansion includes addition of a 135-liter compounding line and extending the infrastructure at its site in Queretaro, Mexico.

Korens United States - - South-Korean auto parts supplier Korens Inc has decided to open a new plant in Alexander City, Tallapoosa County, in the United States. The company plans to add 200 employees by the end of 2019 and raise the headcount further to 400 by the end of 2021. As a part of the process, Korens will refurbish a 80,000 square foot building in the old Russell Corporation Yarn-Dye Building in the Central Alabama Business Park. The company expects to begin production in 2017.

Marada Industries United States Underbody USD56 million Marada Industries, a subsidiary of Magna, will structural open an underbody structural components plant components in Lyon Township site in Michigan, United States. The 150,000-square foot plant will be built with an investment of USD56 million and is expected to create 250 jobs. Magna has secured USD1.6 million as performance-based grant from Michigan Business Development Program. The construction of the plant will begin in the last quarter of this year and expected to finish in the last quarter of 2016.

Michelin North United States Light truck and USD22 million Michelin North America plans to invest USD22 million America SUV passenger in its Dothan facility in Alabama (United States) to tires expand the production of its high-performance light truck and SUV passenger tires. The investment will include significant equipment upgrades that will result in a 10% increase in production capacity. The expansion will add 40 new jobs to the plant’s current headcount of 560. Installation of the upgrades has begun at the facility and will be completed by the summer of 2016.

TWB Company United States Weldings USD18 million TWB Company, a US-based welded automotive products supplier, will be locating to a new manufacturing facility in Nashville, Tennessee (United States). The company will invest USD18 million in expansion and expects to create 41 new jobs in Davidson County. Production is scheduled to start in October 2015.

Latest Joint Ventures and Partnerships

Company Partner(s) Area of operation Comment

SsangYong Open Automotive Connected cars South Korean automaker SsangYong has joined the Open Alliance (OAA) Automotive Alliance (OAA), an alliance of technology and automotive industry leaders to make the Android solutions available in cars. SsangYong plans to deliver in-vehicle infotainment systems equipped with this function in its product line-up in the near future. Android Auto brings the Android experience into the car by “projecting” applications and services to the screen in the car’s dashboard. It makes it easier for the drivers to get the information while they are on the road.

ArcellorMittal Steel Authority of Steel manufacturing ArcelorMittal and Steel Authority of India Limited (SAIL) have inked a India Limited (SAIL) Memorandum of Understanding (MoU) to set up an automotive steel manufacturing facility in India). The facility will be set up through a joint venture (JV). As per the MoU, the two companies will jointly construct a state-of-the-art cold rolling mill and other downstream finishing facilities in India, offering technologically advanced steel products to India’s fast-rowing automotive sector.

Harman Hortonworks Connected cars Harman has partnered with Hortonworks to transform automotive enterprise by enabling connected car ecosystem with real-time, Internet of Things (IoT) data, insights and prognostics solutions. The partners will collaborate to seamlessly integrate Hortonworks Data Platform (HDP) into Harman’s cloud-based offerings, providing automakers a feature rich enterprise platform to support value- added user experience.

MIRA Parque Tecnológico Lithium-ion batteries MIRA and Fundação Parque Tecnológico Itaipu (FPTI) have joined Itaipu (FPTI) hands to develop a new centre of excellence for lithium-ion batteries targeting automotive and stationary power applications. “Brazil is a key strategic growth territory for MIRA and this exciting collaboration provides the opportunity to apply and further develop relevant MIRA technology with the demanding environments and duty cycles of the territory. It brings together two ambitious and capable partners with the intention to demonstrate Brazil’s competitiveness in emerging technologies, with the associated environmental benefits and contributions to the local economy,” said Declan Allen, Chief Operating Officer at MIRA.

Osram Opto Advanced Vision Cameras Osram Opto Semiconductors and Advanced Vision Systems have Semiconductors System partnered to develop a camera that provides high quality images at night or in poor lighting conditions. Available for OEMs, the new camera system has Osram’s emitter and Advanced Vision Systems’s camera. The image quality is 400-700nm, and is near infrared, 940nm, spectrums. Normally this technology would require two different cameras and alternating filters. Additionally, Osram and Phantom Intelligence, a startup company specialising in LIDAR (Light Detection and Ranging), have developed a low-cost LIDAR detection system to meet 2018 Euro NCAP Automatic Emergency Braking requirements in a bid to self-driving car.

Latest Mergers and Acquisitions

Acquirer Acquired Business Sector Comment

Amtek Auto Rege Holding GmbH Various engine India-based forging supplier Amtek Auto will acquire Germany- and transmission based Rege Holding GmbH for undisclosed sum. Rage operates components two production plants in Germany and one in Romania and employs over 1,400 people. The company produces engine and transmission components including connecting rods, crankcases, cylinder heads, gear housings and valve body components for automotive customers including GM, Hyundai-Kia and Volkswagen. Amtek will acquire Rege through its Singapore-based subsidiary Amtek Engineering Solution Pte. The company expects the acquisition to be closed by 15 August this year.

A.P. Plasman Thermotech Inc Plastics A.P. Plasman (APP), a Canada-based manufacturer of injection-moulded (APP) plastic automotive components, has inked a deal to acquire auto parts supplier Thermotech Inc,. APP is one of the portfolio companies of Insight Equity. Insight Equity Holdings also announced that it had completed the acquisition of the US-based A-Brite Plating in December 2014.

GS Yuasa Inci Aku Sanayi ve Batteries GS Yuasa’s subsidiary GS Yuasa International Ltd. plans to acquire 50% International Ticaret Anonim Sirketi of shares in Inci Aku Sanayi ve Ticaret Anonim Sirketi (Inci), a Turkey- Ltd. (Inci) based manufacturer of lead-acid battery for automotive, forklift and stationary applications, the company announced in a press release yesterday (10 June). Transfer of shares is expected to complete by the end of next month. GS Yuasa also plans to change the name of Inci to Inci GS Yuasa Anonim Sirketi in August this year.

MAHLE Kokusan Denki Mechatronics MAHLE has increased its stake in Kokusan Denki to around 90% from 38.87% in 2014. The company raised stake in Japan-based supplier, listed on the Tokyo Stock Exchange (TSE) through successful public tender offer. Following the acquisition, Kokusan Denki will be integrated into the MAHLE Group as “Electric Drives and Applications 2” profit centre.

PPG IVC Industrial Coatings Coatings PPG has reached a definitive agreement to acquire US-based coatings manufacturer IVC Industrial Coatings. IVC’s products are used on metal office furniture, material handling and storage products, automotive parts, motorcycles, small appliances, and electronics. Financial terms of the deal were not disclosed. The deal is expected to close in the third quarter.

PPG Industries Cuming Microwave Coatings PPG Industries has signed a definitive agreement to acquire US-based Corporation Cuming Microwave Corporation and its wholly-owned subsidiary Cuming-Lehman Chambers, Inc.). The company did not disclose the financial terms of the transaction, which is expected to close in the third quarter. Cuming Microwave is one of the major global suppliers of specialty coatings and materials that absorb microwaves and radio waves, such as radar, for use in diverse applications including automotive.

Siam GS Yuasa Battery Malaysia Batteries GS Yuasa’s Thai subsidiary Siam GS Battery Co., Ltd. (SGS) has acquired Battery Co., (YBM) 40% stake in a Malaysian joint venture, Yuasa Battery Malaysia (YBM). Ltd. The acquisition increases GS Yuasa’s stake in YBM from 30% to 70%, making it a consolidated subsidiary of GS Yuasa.

Latest Management Changes

>>Akebono Brake has appointed >>JK Tyre & Industries has appointed serve on the company’s senior leadership Hisashi Mori as president and CEO of Vivek Kamra as its president, India team. Akebono Brake Mexico S.A. de C.V., says operations. He replaces Arun K Bajoria, a press release. Currently, Mori is vice- who has been promoted to director and >>Sogefi has appointed Monica president of Akebono Brake Mexico S.A. president of international operations. In Mondardini as chairman of the company de C.V. Hiroaki Sakamoto will assume his new role, Bajoria will mainly lead JK and Yann Albrand as the new chief the role of director of sales Akebono Tyre’s Mexico business managed by its financial officer (CFO. Mondardini has Brake Corporation from the current role subsidiary JK Tornel. been serving as the CEO of Sogefi’s parent, of executive vice-president of Akebono CIR, and has also been serving as deputy Brake Mexico S.A. de C.V. The new roles >>Bridgestone has named Takashi chairman at Sogefi since last October. In will become effective on 1 July 2015. Tomomoto as vice-president and officer her new role, Mondardini will be successor commercial products global marketing to Rodolfo De Benedetti, who will remain >>Brose has named Mike Brosseau strategy and advanced business planning; on the board as a director. new president for its North American concurrently director, commercial subsidiary, Brose North America. Brosseau products global marketing strategy >>Takata has appointed Hiroshi succeeds Jan Kowal, who will retire division, concurrently director, advanced Shimizu, senior vice-president, who has but will continue to act in a consulting business planning division. been in charge of quality assurance since capacity for the company. 2013, to its board of directors, giving more >>Johnson Controls has appointed authority. Shimizu is one of the three >>DuPont has appointed Philippe Greg Guyett as executive vice-president, new appointments to the Japanese safety Hanck as business director, Performance Corporate Development, effective 10 system supplier’s board, according to a Polymers, in Asia-Pacific. In his new role, August. In his new role, Guyett will report filing to the Tokyo Stock Exchange. Hanck will be responsible for the growth to Bruce McDonald, executive vice- of DuPont’s performance polymers president and vice chairman of Johnson >>Toyoda Gosei announced several business in automotive, consumer Controls. He will be responsible for senior management changes at the annual electronics and other industries. He will maintaining and developing relationships shareholders meeting held on 17 June. The lead teams in China, Japan, Korea, India, with external financial advisory firms, company has promoted Tadashi Arashima South East Asia, and Australia. leading merger and acquisition activities, from the position of president to chairman and working with the businesses on of the board. Naoki Miyazaki, currently >>Eaton has appointed Craig Arnold growth initiatives. executive vice-president, will become as its new president and chief operating president. officer (COO) and member of the board >>Knorr-Bremse has announced of directors, effective 1 September 2015. that Hinrich J. Woebcken, a member >>Visteon Corporation has appointed Arnold will later succeed Alexander M. of executive board responsible for the Sachin Lawande as the president and CEO “Sandy” Cutler as chairman and CEO in commercial vehicle systems division, of the company, effective 29 June 2015. In June 2016. Cutler, who has been Eaton’s has resigned. Woebcken’s resignation his new role, Lawande will be succeeding chairman and CEO since August 2000, will is effective from 30 June. From 1 July Timothy D. Leuliette. Lawande has over retire on 31 May 2016, after reaching the 2015, Klaus Deller will handle the a decade of global leadership experience company’s mandatory CEO retirement age responsibilities in addition to his role as in the automotive OEM industry. He has of 65. chairman of the executive board. Knorr- been serving at Harman as president of Bremse has appointed Klaus Deller as the the Infotainment Division since 2013 and >>Harman International has named new chairman of the company’s executive as executive vice-president (EVP) since Yijing H. Brentano its new vice-president board, effective 1 January 2015. 2009. Prior to that, Lawande has served of strategy and investor relations, effective in various leadership roles at Harman 8 June. Brentano will report to Dinesh C. >>Navistar International has including EVP and president of the Paliwal, chairman, president and CEO, and appointed Jeff Sass as senior vice- Lifestyle Division, EVP and co-president Sandra Rowland, executive vice-president president, North America Truck Sales and of the Automotive Division, EVP and chief and chief financial officer, of Harman. Marketing. Sass will report to Bill Kozek, technology officer and chief software president, Navistar Truck and Parts, and architect.

The Turbochargers and Superchargers Report

Make Better Decisions Relevant and Regional Data This latest edition of Japanese Supplier This research utilises IHS Automotive’s Light Report offers an informed perspective on Vehicle Production Forecasts; the industry the current status and the way ahead for standard for automotive forecasting and Japan’s automotive industry. The report has analysis. detailed analysis of Japan’s macroeconomic fundamentals and comprehensive analysis of The report also includes an appendix of over the Japanese automotive industry, including 120 profiles of Japanese suppliers, or the sourcing strategy and OEM supplier relations. Japanese operations of global tier-1s. These The report also offers a detailed analysis of profiles provide you with relevant data on outlook for the Japanese supplier industry, corporate strategy, investments, product supported by extensive data, including offerings and contact information all built from forecasts by IHS. SupplierBusiness research. The majority also feature maps with manufacturing plant data.

For more information

Americas Asia Pacific Europe, Middle East & Africa IHS Auto America Ayako Ando Sarah Graham [email protected] [email protected] [email protected] Tel: +1 800 464 7655 Tel: +81 3 6262 1783 Tel: +44 (0) 1733 520 066 Our Reports

Original research and analysis from the SupplierBusiness IHS AUTOMOTIVE IHS AUTOMOTIVE Supplying Ford The ASEAN Automotive Analysis team of automotive analysts SupplierBusiness Supplier Report 2015 edition supplierbusiness.com SupplierBusiness

2015 edition supplierbusiness.com • Supplying Ford The latest edition in our ‘Supplying the OEMs’ series covers all major areas within the Honda, looking at globally best-

selling models, most-used platforms and the company’s SUPPLYING THE OEMS Ford REGIONAL REPORT Indonesia, Malaysia, Philippines, Julian Buckley Thailand, Vietnam production footprint. Principal Analyst Regional supplier reports are sponsored by • The ASEAN Automotive Supplier Report This report provides a detailed look at the ASEAN Automotive & Supplier Market.For each country, the report examines planned investment in infrastructure development, manufacturing advantage, structure of the automotive industry, investments by OEMs, and future outlook of the region.

OrderForm Annual Subscription (10 Issues)

Yes, I would like to subscribe to SupplierBusiness Please fax or post this order form to: Analysis for ten issues (1 year) Tel: +44 1733 520 050 Email: [email protected] PDF format only €630 / $830  IHS SupplierBusiness  Print delivery + PDF format €700 / $930 Willoughby House, 2 Broad Street, Stamford, Lincs. PE9 1PB, UK Payment details For corporate subscriptions please contact I enclose a cheque for £ / $ / €  Sarah Graham on: +44 1733 520 066  Please invoice or email: [email protected] Please debit VISA/AMEX/MASTERCARD  Your details Account No. Name...... Cardholder name...... Title...... Expiry Date...... Company...... Position...... Street/PO Box...... Signature...... Town...... Customers in EU member states please enter your Zip/Post Code...... VAT/MWst/ TVA/BTW/MOMS/IVA/FPA registration Country...... number below Telephone...... Fax...... Email...... NB: Prices are liable to 20% VAT where applicable – for more information please email  Please tick if you do not wish to be contacted by us or our partners [email protected]

Subscribe online www.supplierbusiness.com

SupplierBusiness Analysis: Unauthorised photocopying/reproduction is not permitted.

IHS AUTOMOTIVE Issue 5 • July 2015 Supplierbusiness Analysis

IHS AUTOMOTIVE Issue 5 • July 2015 Supplierbusiness Analysis