What's on the Horizon?
While the future of the automotive industry is uncertain, a November
2009 presentation by John Murphy, senior director of Bank of America
Merrill Lynch, for the Original Equipment Suppliers Association
Conference, was quite optimistic. According to Murphy, "The recovery is
just beginning to recover," with the upside to auto demand and supply
greater than most expect. The leaders, he noted, are Hyundai, Ford, and
Honda, which will be the ones to follow.
As to the supplier landscape, "It should get better from here," he
noted, but consolidation will continue to accelerate. "Success hinges
on proprietary technology, diversification, and a strong balance
sheet," Murphy pointed out. "Restructuring, recapitalization, and
reorganization of the value chain have made significant progress with
more to come. We are not `cautiously optimistic'; we are flat out
There are several examples of positive news, including some
developments coming out of Canada. For instance, Magna International
-in conjunction with the National Research Council Canada - is setting
up an R&D facility to develop lightweight, strong composite parts
for the next-generation vehicles. Called the Magna-NRC Composite Center
of Excellence, it will be located at Magna's Exteriors & Interiors
facility in Concord, Ontario. The Center is expected to be operational
by summer of this year.
And, in the United States, there's also light at the end of the tunnel
for ailing GM. At the recent Detroit Auto Show, GM's President Mark
Reuss said that plants that build the Cadillac SRX, Chevrolet Equinox,
and Buick LaCrosse are at full capacity and can't meet demand. To help
that situation, GM is considering reopening some closed facilities. The
company, said Reuss, has placed its Janesville, Wis., and Spring Hill,
Tenn., plants on standby in the event it needs more capacity when the
U.S. auto industry begins to improve. The Spring Hill plant was
recently upgraded, at the cost of millions of dollars, to build the
Chevrolet Traverse. The facility is flexible and can build other models
Automakers are holding out hope for alternative-fuel and "green"
vehicles. Delphi announced plans in December to implement an $89.3
million award from the U.S. Department of Energy (DOE) to support
expansion of engineering capabilities in the manufacture of advanced
"green" technologies. A vacant manufacturing site in Kokomo, Ind., has
been selected for production of power electronics components for global
customers, with initial products to be built for Allison Transmission
in partnership with two Indiana technology leaders. Delphi will match
the award for a total of $178.6 million to advance the development of
low-cost manufacturing of electric-drive vehicles (EDV) in the United
"Electric-drive vehicles hold the promise of meeting two critical
government and industry goals - reducing dependence on petroleum and
reducing greenhouse gas emissions," said Delphi Electronics &
Safety President Jeff Owens. "Delphi has a long history of successfully
developing and commercializing automotive electronics. With this DOE
partnership, we will apply our proven expertise to develop technologies
and processes that will help lower the cost of electric-drive vehicles
and make them more attractive to a broad range of consumers."
Additionally, General Motors has high hopes for hydrogen vehicles.
Daniel O'Connell, director of fuel cell commercialization for GM, is
working to make hydrogen vehicles a reality. "We currently have 100
hydrogen fuel cell Equinox cars on the road that to date have
accumulated 1.2 million miles in customers' hands," he said in a recent
The company has 30 of these hydrogen vehicles in New York State. The
big challenge, noted O'Connell, is putting in the filling stations.
Currently, there are five hydrogen filling stations in New York City
and three in Rochester. "We're exploring ways we can put enough
stations from Buffalo to Long Island, a route that will be called the
NYSERDA Hydrogen Highway," he explained. Since the cars only have a
200-mile limit, customers testing the cars are constrained to driving
within a 100-mile radius of a filling station. Other challenges, said
O'Connell, include getting the cost of the vehicles down to make them
affordable for large numbers of consumers and increasing the durability
of the vehicles.
GM's hydrogen R&D facility is located in Honeoye Falls, N.Y., where
the company employs 400 people. Currently, said O'Connell, there are
nearly 1,000 people working on the hydrogen technology in various
areas. "These are the kind of jobs you want - high-skilled, high-tech
jobs," stated O'Connell. "We have a world-class employee base
worldwide that we've brought to the New York area to work on this
technology for GM. We also have close relationships with all the
colleges in the area. Rochester offers a unique opportunity thanks to
companies like Kodak and Xerox; there's a lot of talent in this area.
And there's also a lot of hydrogen in New York State. This technology -
wells to wheels - will result in an 85 percent reduction in CO2 from a
renewable source - Niagara Falls."
It is hoped more positive automotive news is on the horizon for 2010.