A Quick Glimpse at the State of the Automotive Industry
By Tim Burke, Vice President of Global Motor Vehicle Industries, Plex Systems
Attending the Center for Automotive Research’s (CAR) annual Management Briefing Seminars in Traverse City always presents a wonderful opportunity to take the pulse of the industry and get a sense of how the OEMs and suppliers are preparing for the next generation of vehicles.
This year the mood is considerably brighter as manufacturers are invigorated by designing innovative ways to meet the magic number of 54.5 – the MPG average which all manufacturers must meet by 2025 or face fines from the U.S. government. They are relentlessly seeking to reduce the weight of components through redesigning parts and using new materials like aluminum, magnesium and carbon fiber. Mazda has set an ambitious goal: to reduce the weight of every redesigned vehicle by 220 pounds.
And as OEMs seek to reach that MPG goal, all options are on the table: hybrids, electric vehicles, hydrogen fuel cell, clean diesel – even three-cylinder engines, which we’ve not seen in the United States for quite a while.
But as enthusiastically as the industry seeks solutions for the MPG mandate, there are some trends that cause concern, including the slowdown of the economies in Asia and the downturn in Europe, even as we expect an uptick in sales in North America.
Annual sales in North America are currently running at about 14.3 million units, but forecasters like R.L. Polk anticipate a 12 percent increase in vehicle sales next year to 15.2 million vehicles. Other forecasters are less optimistic and note that joblessness, a sluggish housing market and global uncertainty may create economic headwinds that will slow sales.
And while OEMs want to sell as many vehicles as possible – they’d love to get back to 17 million units per year, as they were in the “good old days” – increasing production may have some challenges.
When the economy tanked in the middle of the decade, a number of Tier Three and Four suppliers folded. They couldn’t operate efficiently enough to meet quality standards or reduce costs low enough to be competitive. Many Tier One and Tier Two suppliers consolidated. The result is that lower-tier suppliers are working at their capacity to keep up parts delivery to meet the 14.3 million unit volume.
As Plex Manufacturing Cloud customer Larry Jutte from Ernie Green Industries shared in a panel discussion at MBS, “A lot of the Tier Twos have been running six days a week trying to keep up with 13 million the best they can; what’s going to happen when the industry needs 15 million?” That’s what he describes as a supplier pinch point.
For Plex Systems, this challenge for suppliers presents an opportunity. The only way for suppliers to operate efficiently, reduce waste and maintain high quality is through leveraging technology. Those unwilling to make the investment in technology will gradually disappear because of inefficient, costly work processes and more nimble and capable competitors.
At Plex, we’re in the business of helping companies leverage technology to drive inefficiencies out of manufacturing. If the supplier community is taking heed of the vehicle sales projections – and are currently challenged to maintain volume at today’s sales levels – then they’ll see that the best solution for them is to invest in technology.
Plex Systems customers have already made that choice and are benefiting from the ability to scale production as needed to meet demand. I just hope that suppliers recognize the challenges coming their way and plan accordingly. Making the right decision about a technology solution positions them for success as the market improves and sales accelerate.
Tim Burke (left) speaking with WJR-AM's Paul W. Smith during MBS 2012