The topic of the day at this year’s Center for Automotive Research (CAR) Management Briefing Seminars was predictable.
After all, it was impossible for attendees to ignore the presence of COVID-19, especially when the pandemic was the very reason they were attending the annual market intelligence event virtually instead of in person at the Grand Traverse Resort as usual.
Touching on a variety of pressing issues and trends in the automotive industry, the 2020 Management Briefing Seminars focused heavily on COVID-19 discussions, measuring its effect on virtually every corner of the industry — from changing life inside manufacturing plants to influencing the components implemented in new vehicles.
By all accounts, COVID-19 has thrust the auto industry into a market downturn. Despite the hopes for a V-shaped recovery, it will require a several-year grind to return to normalcy.
A few of the telling numbers came via market research and consulting firm IHS Markit, which forecasts a 20-million-unit drop in global vehicle production this year because of COVID-19.
Global production in 2019 reached 88.9 million units, which is expected to fall to 68.8 million units in 2020. This includes a 3.7-million-unit drop in North America alone. Originally, production was only supposed to drop at a global level by less than 1 million vehicles and even see a slight uptick in North America.
Now, IHS Markit forecasts that production won’t recover to 2019 volumes until 2025.
The market downturn also has put many suppliers and manufacturers in distress, which PricewaterhouseCoopers predicts will usher in a very busy next few years of M&A activity and supplier consolidation as many businesses look for a lifeline to avoid bankruptcy or closing altogether.
Aside from the hard numbers that point to a less than rosy automotive outlook, the COVID-19 pandemic has introduced a few unique dynamics into the industry that experts outlined during the CAR Management Briefing Seminars.
Raj Batra, president of digital industries at Siemens Corp., explained that the pandemic not only highlighted the manufacturing industry as a whole and how vital it is to the country, but also it brought glaring inefficiencies to the surface, mainly an aging manufacturing infrastructure and the need for young talent to bring the industry into the digital age.
“We have an aging asset base in the country that is at the end of its useful life,” Batra said during a session at the Management Briefing Seminars. “You simply can’t get the productivity needed with technology that is 30-plus years old. You think about the fact you have to change your iPhone every six months. It’s not OK to have 30-year-old technology sitting in manufacturing environments that are really responsible for driving cutting-edge productivity.”
Also, a chaotic health event that could potentially cause strain in supplier relationships actually had the opposite effect, according to Kathy Worthen, vice president of direct purchasing for Yazaki North America in Canton, Mich.
“It’s very collaborative both within the OEs and within my supply base,” said Worthen, who spent more than 20 years at General Motors in various roles within global purchasing and the supply chain. “We’re in this together. This is so unique, this is so different as it relates to the things we’re managing through. We all want to continue to make money so we want to produce parts. We want to support each other. We want the OEs to continue building products. This is a very collaborative environment.”
Adjustments on the shop floor
Everyone from OEMs and Tier 1 and Tier 2 suppliers to other vendors that support the automotive industry found themselves returning to work under a completely new set of circumstances, having to implement new processes and practices to keep workers safe and protect production efficiency.
For a company like Grand Rapids-based Cascade Die Casting Group Inc., a manufacturer heavily concentrated in the automotive industry, those measures were relatively simple.
“We take daily health checks — taking temperatures — and then we put a sticker on everyone to signify they have been tested,” said company President Pat Greene. “Everyone in the workforce can, at a glance, see that everyone has been tested. That has been something that has made people more conscious than they ever have been before.”
Cascade Die Casting Group also requires masks when socially distancing is not possible. But because of the large machines employees use, social distancing is relatively easy to maintain within the plant, said Greene, who noted the company’s workers have had no reported cases of COVID-19.
“There have been some costs along those lines, where we had the need to spend some money, but it’s primarily been our own people (implementing safety protocols),” Greene said. “That’s an important attribute for us — making it a part of their job so they all feel like they have a stake in this game.”
For Mann + Hummel USA Inc., a German manufacturer of filtration equipment with a plant located in Portage, the company embraced its global resources and collective knowledge to create an internal task force to exchange ideas and best practices among its workforce around the country.
“Cleaning became much more critical in places like the common areas,” said Jack Endres, vice president of operations for U.S. original equipment at Mann + Hummel. “What we did was expand the services we currently have as far as housekeeping and things like that.”
Endres reported that his facility has not seen any employee-to-employee transmission of COVID-19, and the cases that the company did experience originated from employees who were on vacation or furloughed.
Endres also said the primary pain point for the company is the workforce, specifically bringing in enough people to fulfill orders.
Grand Haven-based JSJ Corp., which owns an extensive portfolio of companies, has worked closely with Cintas, and has been using fogging as a means for disinfecting. The company’s portfolio includes GHSP, a Tier 1 global supplier of mechanical and electromechanical systems to the automotive, transportation and appliance industries.
JSJ Corp. Chairman, President and CEO Nelson Jacobson said that his team is adjusting to the new normal quite seamlessly.
“All of us, we had to really significantly rethink how we would come to work — social distance and how we had to reconfigure shop floors,” Jacobson said.
As a result, Jacobson has seen permanent changes to the way that his company does business.
“The technology is eye-opening,” he said. “We’ve learned that we have a lot of opportunities to be much more efficient and effective in utilizing the technology, whether it’s Teams or Zoom or different meeting styles. I believe work is forever changed.”
The COVID-19 pandemic even already has automakers reexamining components that go into their vehicles.
As the need for more effective cabin air filtration or easy-to-disinfect surfaces rises, it spells opportunity for suppliers like Mann + Hummel.
“We’re seeing a lot more interest in HEPA filtration-level cab filtering applications,” Endres said. “So it is moving in that direction. We have acquired a couple new projects for cabin filtration that are HEPA-level filtration systems or smart systems, where depending on what the sensors are detecting, (it will affect) the level of filtration it will provide. We’re definitely seeing that.”
For Jacobson and JSJ Corp., his team had already made an investment in UV Angel, which specializes in ultraviolet disinfecting solutions. JSJ Corp. stands as key investor and manufacturing partner for UV Angel to apply the technology to passenger and commercial vehicles.
“We are involved in a lot of discussions on how do we utilize UV disinfection technology to make sure the touch screens or center consoles … stay clean,” Jacobson said.