ACME — As automakers race to incorporate more technology in their vehicles, automotive industry suppliers are starting to rethink their operations in West Michigan and beyond.
While the automotive sector continues to shift its focus more to advanced mobility and technology, OEMs are relying heavily on supply chain manufacturers to come up with new solutions and strategies to help them compete. That shift is placing more pressure on the supply chain to find and capitalize on new opportunities as the OEM-supplier relationship evolves, according to industry insiders.
Mark White, president of Grand Haven-based Shape Corp., said technology adoption — particularly for newly electrified vehicle systems and components — will “provide better solutions (for OEMs) when things go to fully electric or fully autonomous.”
“As suppliers, certainly, we have to prepare for that, and we have to be very strategic around that in terms of how it’s not only going to affect our existing core technology, but how we can leverage that, and even add additional technology,” White said. “Manufacturing companies have to think about it, because … in the business that we’re in right now, it’s so competitive that you have to improve your technology every day to stay in the lead.”
A Holland-based Tier 1 supplier of automotive structural components, Shape focuses on improving its technology in two key segments of the vehicle: crash management and lightweight body structures.
“With (lightweighting as an) emerging trend, it creates more opportunity with our company,” White said.
For example, the manufacturer is developing products that seal a hybrid or electric vehicle’s battery pack from external elements via a highly-engineered component, White said. Because “range is critical” for electric vehicles and for ensuring efficiency, the company also needs to maintain a dual focus on lightweighting in developing the component, he added.
“When we think about some of the advanced trends like electrification … we’re towering in on new areas like battery protection, because we’re a crash management company,” White told MiBiz earlier this month during the Center for Automotive Research Management Briefing Seminars at the Grand Traverse Resort. “We’re looking at how can we develop a system to protect the battery, not only from impact, but (also to) dissipate the heat that’s coming off the battery.”
In other cases, automakers’ focus on technology is driving more frequent mid-cycle changes to vehicle platforms, said Tom Rizzi, CEO of GHSP Inc., Grand Haven-based Tier 1 supplier of electronic vehicle shifting systems and pumps for the automotive industry. As a result, GHSP has experienced a noted increased in quote activity, he said, adding that the new pacing creates both challenges and opportunities for companies in the supply chain.
“I keep telling my team to leverage our core technology, and they’re pushing back and saying, ‘Well, nothing is core anymore, the technology keeps changing,’” said Rizzi, who also serves as COO of Grand Haven-based JSJ Corp., the parent company of GHSP. “The things that we quote, the things that we have to design, it just intensifies — but that also creates opportunities.”
Automotive analyst Mike Wall at IHS Markit said some of those opportunities come as OEMs’ deployment of interior displays, integrated controllers and central body controllers continues to grow “off the charts.”
The refreshes and improvements with each iteration of technology will continue to quicken the pace of the quoting cycle and will only ratchet up as automakers adopt more advanced systems in the coming years, according to Wall.
“The step function that we’ve seen in electronics content is only going to (ramp up) again … as we bring in more of the autonomous content, more of the electronics content,” he said.
Given the current short supply of circuit boards and chips, the supply chain also must compete with electronics firms when it comes to orders for critical components, Wall said, noting the irony of “the old-school automotive industry” butting up against companies making the latest technologies.
“Not only are you competing with the other suppliers to satisfy those automakers, you’re now competing against Samsung that’s making the next TV or smartphone,” he said. “It’s gotten to the point that it’s not surprising when you go to the Consumer Electronics Show in January and there’s as many automakers and auto suppliers there as there are consumer electronic suppliers.”
TRENDING TOWARD TECH
Naturally, the adoption of new technology has led to new R&D investments and acquisitions within the automotive industry, including at the OEM level where companies continue “to really push the technological envelope,” according to Wall.
With 57 auto-tech deals completed so far in 2018, PricewaterhouseCoopers reports that transactions are “outpacing historical trends,” including an 8-percent increase from 2017.
On the local stage, the Grand Rapids-based Burke Porter Group, a manufacturer of dynamometers and other industrial equipment, has acquired three companies in 2018, including the Florence-based Galileo TP Process Equipment S.r.l. last month as part of a “desired strategy” to pursue more tech-oriented companies, as MiBiz previously reported.
As more technology enters the industry, Burke Porter President Dave DeBoer said it’s “created significant opportunities for us to address customer demands of today and well into the future.”
While automakers continue to leverage technology from a mobility standpoint — think investments in ride-hailing services such as Uber and Lyft — they’re also acquiring or pouring money into so-called Industry 4.0 capabilities.
In particular, Ford Motor Co.’s 2017 acquisition of Argo AI to develop its autonomous vehicle technology caused suppliers to take notice of the shift in focus, said Jack Endres, vice president of operations at Mann + Hummel USA Inc., a Portage-based manufacturer of liquid and air filtration systems.
In following a similar path as Ford, Mann + Hummel maintains a division in Silicon Valley that is identifying startup tech companies as possible M&A targets before deciding “what’s a good fit for us,” Enders said.
The three-year-old division functions as an incubator of sorts, he added, noting Mann + Hummel sends engineers out to Silicon Valley to help evaluate the technology under development.
“When we look at applying or adding tech, we look at the benefit we’re going to get from it, and then we look at the value that benefit is going to bring,” he said.