Cost Cuts Squeeze SAE Show Again

March 13, 2004

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The Society of Automotive Engineers (SAE) meeting in Detroit last week reflected the continuing effort across the automobile industry to trim costs. Indeed, an annual survey by DuPont showed that cost cutting was the number-one issue on the minds of engineers as they gathered at Cobo Hall and the annual SAE exposition.

The floor space occupied by the show continued to shrink and was significantly smaller than in 2003 — and most of the companies that did bother to display opted for small, simple booths. Even the big participants that did stick with the show, such as Yazaki and the U.S. Department of Defense Tank and Automotive Command, which displayed its latest variant of military-oriented hybrids, put their displays on the fiscal equivalent of the Atkins diet. Dana Corp. was the largest supplier with a major display but Dana came to the show with a special mission — to celebrate the company’s 100th anniversary and to try and rehabilitate the company’s image in the wake of the failed ArvinMeritor takeover. Dana survived the bid but its reputation suffered.

Several of the show’s participants said the exposition has suffered as the supplier side of the industry has consolidated, because many of the larger suppliers find it more effective to hold private shows for a select list of customers rather put up a large public booth.

Meanwhile, large, centralized purchasing departments such as those at General Motors and DaimlerChrysler now prefer to have suppliers in for private audiences as they prepare for the final bidding process on new vehicle programs. In addition, shows like SEMA now attract some companies that used to stake out SAE, observers noted.

Trending abroad

The SAE show underscored the pressures facing suppliers in North America.
Chinese and South Korean-based suppliers took up more space at the SAE show, showing how the Asian companies are making big inroads into the component business at all levels. The Chinese and South Koreans aren’t using the show to sell technology as much to show off their manufacturing prowess, observed an executive with a German supplier company.

Aisin, for example, a major Japanese supplier of transmissions, engine components and chassis parts, has quietly built up its North American presence by adding or expanding five new manufacturing sites in the United States. “In 2001, AWA sales were less than $1 billion; today I am pleased to announce that we are projecting to exceed $2 billion in sales by 2004 and $2.7 billion by 2007,” Junichi Nishimura, president of Aisin World Corp. of America, said during the SAE show.

Nishimura said Aisin growth is due primarily to the steady growth of Toyota’s business in North America but the company also is rapidly expanding its business with the Big Three as well.

A new study by Roland Berger predicted that North America and Western Europe would lose between 11 percent and 20 percent of their global supplier production share by the end of 2010. At the same time, production in Asia and Eastern Europe will soar. China will attract much of automotive supplier investment. China’s share of Asia’s automotive supplier production will increase by 165 percent by 2010, the Roland Berger study predicts.

Meanwhile, suppliers from South Korea and Japan, faced with stagnant markets at home, will focus on overseas expansion. “Growth opportunities in distant markets and increasing global cost competition elevate the pressure to act globally,” said Wim van Acker, managing partner of Roland Berger’s Detroit office.

“Domestic automakers have lost almost ten percent of U.S. market share in less than ten years,” he added. “The decrease has accelerated the need for domestic automotive suppliers to seek overseas customers and to invest outside of the U.S,” van Acker added.

On the technical side, the show underscored the fact that much of the industry’s technical capability is focused on innovations used for helping drivers avoid or mitigate a crash.

Dr. Wolfgang Ziebart, deputy chairman of Continental AG, said the car of the future will link active and passive safety systems such as adaptive cruise control, electronic stability control, lane departure systems, road sign recognition, data interchange with other vehicles, and seat belt systems, along with additional sensors. Onboard computers will constantly assess relevant information related to the driver, the vehicle and its surroundings to help avoid crashes and minimize injuries, he said.

The other trend evident is that despite all the talk about fuel cells, in their heart of hearts, both suppliers and automakers clearly believe the internal-combustion engine is going to be around for a very long time. There is continuing effort to improve the performance of IC engines with new materials and electronics.

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