Higher Fuel Economy & Supplier Opportunities

Columns From: 11/10/2011 Automotive Design & Production, , Vice President from IRN, Inc.

If CAFE standards and emissions reduction are mandates that ebb and flow rather than offering a steady trend that can be extrapolated for new product development, how do automotive component suppliers manage their participation in this dynamic environment?

President Obama’s announcement in July of his Administration’s agreement with 13 major automakers to press on with more stringent fuel efficiency and greenhouse gas standards means that, once again, weight reduction and fuel-consumption-reduction technologies are at the forefront of OEM development activities, and with good reason. The 54.5-mpg standard by model year 2025 will require every tool currently in the toolbox, and then some.


This round of action is intended to provide some clarity by bringing together fuel economy and air pollution goals. Historically, it has been difficult to balance those objectives, since measures to improve one can worsen the other. 


We are not convinced that the industry will find greater consistency and regulatory certainty over the next 15 years than it has had over the first 35 years of CAFE standards. Although regulatory forces have added a non-market-based push to certain aspects of vehicle development, the intensity of focus has waxed and waned. If you pay any attention to national politics, you have probably detected a certain anti-government, anti-regulation sentiment in some quarters. It is entirely possible that the standards could be altered by a future administration with a different philosophy about these matters. The U.S. is not the only country with environmental and oil dependency concerns, however, so even if there were a temptation on the part of automakers to “make haste slowly” in the hope of a rollback, the global nature of the industry ensures that progress will still need to be made at some level. 


So if CAFE standards and emissions reduction are mandates that ebb and flow rather than offering a steady trend that can be extrapolated for new product development, how do automotive component suppliers manage their participation in this dynamic environment? 


The fact that so many enabling technologies have already been commercialized is evidence that suppliers have been in it for the long haul already. Steering systems integrators like TRW (trw.com), for example, have been developing and promoting electric power steering for more than two decades. These systems offer greater fuel economy by eliminating the belt-driven hydraulic pump as well as other hydraulic components. Market reaction was tepid for many years, but electric power steering has earned a spot on the technology pathway to achieving the necessary gains to meet CAFE standards. Transmission suppliers coming up with six-speed and eight-speed variants, and tire makers focusing on low rolling resistance tires are two other examples of companies that have been playing offense, using their product or system expertise to present new and more sophisticated options to the market. 


Since it is clear that the package of solutions to meet the stringent standards will necessitate weight reduction as well as systems improvement, many suppliers have an opportunity to get in the game by serving up material substitution in their current products. Engine blocks, body parts, structural members, even electrical components, are all being evaluated for alternative construction, yielding plenty of innovations like Tower International’s (towerinternational.com) VarioStruct multi-material construction, which combines a standard sheet metal shell with a cast light metal structure for applications such as carriers, pillars, sills, and dashboard supports. Tower calculates a weight savings of up to 30%; for a comparison of costs, though, considerable work must be done, as outlined on VarioStruct’s very own website (variostruct.com). Companies can do this kind of R&D or product development on an offensive or defensive basis. We know suppliers that have undertaken analysis of lightweight materials just to keep their options open, in the event of a market shift or a significant event (e.g., a new government target) that changes the economics of the alternatives for their customers. In that case, their development of these innovations is more phased and gradual, in proportion to the interest of prospective or long-standing customers. 


Finally, there are suppliers that are thinking outside the box about how to leverage the situation to their advantage and protect themselves from displacement by a savvier competitor. Consider SRG Global (srgglobal.com), maker of chrome-plated plastic parts. That might not seem like much of an opening, but the company has a patent-pending design for what it calls an active shutter grille. Thermostatically controlled louvers behind the grille monitor coolant temperatures and allow only the air that is needed for cooling, to minimize drag from airflow through the engine component. It is a pretty innovative concept for what might seem to be an inopportune base from which to play in the fuel economy game, yet OEM interest is keen, so the investment is paying off for this proactive supplier.