Market Focus - Auto Industry Raises the Ante

BY LINDA M. CASATEbLl
Auto Industry Raises the Ante;
Finishers Meet the Challenge
Changing regulatory requirements keep metal finishing
community on its toes.
lie mature U.S. auto industry has
been losing market share to foreign competitors for several years. The
resultant loss in revenue has precipitated restructuring with numerous
plant closures and layoffs of skilled
production and engineering staff.
While this loss has been somewhat
balanced by tlie establishment of U S based manufacturing facilities by the
“transplants,” i.e., foreign auto companies that are now building their products closer to this market, the fact is
that many automotive parts are manufactured and, therefore, finished outside the United States.
Since the industry represents
approximately 40%-50% of the available market for metal finishers, this
migration of manufacturing has
caused significant erosion in available business. Add to that the new
environmental regulations, particularly those requiring the elimination
of hexavalent chromate finishes and
the End of Life Directive (ELV), and
you have the elements for a fierce
competitive environment challenging
U.S. metal finishers and their suppliers alike.
That begs the question: How has
the industry responded t o these
challenges? According t o Mark
Jankowski, vice president of marketing, MacDeriiiid, Inc., his company
has responded to tlie challenge by
developing several classes of new
chemistries. Some of these include:
coatings for fasteners, whicli are typically zinc and zinc alloy plated with
a conversion coating. Traditionally,
the conversion coating contained
March 2007 I metalfinishing I30
leechable hexavalent chrome a n d
was, therefore, non-ELV compliant.
The new technology utilizing trivalent chrome, or non-chrome passivates, fills most of the needs of the
OEMs. In addition, Jankowski
reports that these chemistries actually can outperform the hex-based
wheels, which typically consisted of
multilayer nickel overplated with
chrome. In this instance, MacDerinid
provides technology and services that
enable metal reduction and conservation, and has presented a trivalent
chromium decorative chrome plating
technology (TriMacIII) to the industry.
Lastly, the company offers non-hexavalent chromium conversion coatings for
aluminum-both for stand-alone corrosion protection and for surface
preparation prior to painting.
To compete with tlie “new domestics” offering extended warranties,
auto manufacturers are looking for
MacDermid is developing several classes of new chemistries to comply with changing regulations.
Some of these include coatings for fasteners.
systems in many instances.
MacDermid has also responded via
coatings applied for wear resistance.
Traditionally, these coatings contained lead and cadmium, thereby
exceeding the limits set by the ELV
Directive. New electroless nickel technology is now available and shows the
same or better performance, the conipany said.
Then there are MacDermid’s coatiiigs applied for decorative applications on metal, such as chrome-plated
quality. In regard to coatings, that
means corrosion resistance. “The
name of the game is quality,” said Bill
Rosenberg, president, Columbia
Chemical. Columbia Chemical has
developed new products to meet the
performance requirements, but it has
taken several product generations to
achieve the goal. According to
Kosenberg, the new trivalent chromates offer more corrosion-resistant
hours than imagined and can completely outperform the older, more
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traditional coatings, he said.
Others industry observers, including Shawn Ritchie, owner of Medina
Plating Corp. in Ohio, agree that
quality is critical. Although the industry in geiieral might be in decline, his
business is doing well because his
company is KS 6949 certified-whereas, he said, many finishers are not.
Approximately 95% of his company’s
business is with the automotive
industry, and he finds that his volumes are the same or greater than
past business.
Ritchie’s company saw the regulations
in the European Union tighten, so lie
began to gear up for its inception in the
United States. Even though the date for
U.S. compliance was originally 2002subsequently pushed to 2004, then
2006-Medma Plating has offered trivalent chromates in yellow, black and clear
since 1999. This has given them several
years of experience using the new coatings, so they are ahead of the cutve,
accotdmg to Ritchie. He also believes
that even today many finishers and suppliers are not really up to speed.
The improved quality does not come
without cost. “It’s an unrealistic goal
to eliminate hex chrome and expect
the same performance at the same
cost, “said Donald Houston, account
manager, Cadon Plating and
Coatings, LLC, Wyandotte, Mich.
“OSHA’s PEL requires a reduction
from 50 ppm to 5 ppm; there has been
a 357% increase in zinc metal commodity pricing, which in turn, resulted in cost increases from our zinc
metal suppliers, our zinc phosphate
suppliers and our zinc/aluminum
rich paint suppliers. Also, bulk acid is
up 62.3%, and bulk caustic is u p
82.6%.We have to be able to recoup at
least some of these costs.”
Cadoii Plating and Coatings has
implemented a zinc surcharge to offset some of the additional costs. But
Houston notes that while customers
understand the rationale, the surcharge has been coolly received.
It’s more than materials/metals
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cost. There are changes that also need
to be made to the process. “Although
the goal of developing replacement
technologies is to come up with a
drop-in chemistry, many of the new
products require some change at the
customer’s manufacturing facility,”
MacDerinid’s Jankowski noted.
“Many of the changes to this point
have been minor, such as adding heat
or varying control parameters. Soine,
however, require new equipment,
such as new tanks or a change to the
manufacturing sequence or cycle
time. This is completely product
dependent and is dealt with on a caseby-case, product-by product basis.”
Medina Plating’s Ritchie contends
that the new compliant materials,
regardless of supplier, don’t always
~7orkthe way that they should, To
that end, the company has a chemical
engineer on staff to alter the
chemistries differently for each formula so that the new coatings work
accordingly.
Houston agrees there can be additional costs. His company had t o
install side treatment tanks, counterflowing rinses, evaporators and
tighter automatic controls. Yii addition, treating and dumping is no
longer an option with these new
chemistries, as a new tank costs us
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March 2007 I metalfinishing I 31
$2,500 iii chemistry to make up,’’ he
explained.
There is another twist to the story:
Many plating shops find themselves
in the predicament of having to inventory both traditional and new e m ronineiitally
friendly
coatings.
Observers say soiiic customers are
happy enough with the older coatings
and are not willing to incur the extra
expense regardless of tlie improved
performance. ‘ S o , in inany cases, the
regulations have put an added burden
on tlie sinall shops that don’t always
have the rooin to spare for such inventory,”
Columbia
Chemical’s
Rosenberg said.
Beyond chemicals and operations,
there can also be additional costs on
the equipment side. Ray Singleton,
president, Singleton Corp., noted that
the equipment has to be more resistant to corrosion than before because
of the new acidic environment of
soiiie of the new chemistries.
Therefore, they use materials that
have a higher corrosion resistance,
which adds expense.
Singleton’s busiiiess has done well
in the new environment because the
company produces automatic barrel
plating equipment-which is soiiiewhat of a niche for the firm. Company
execs note that there can be a balance
with the new automatic systems,
because it can mean reduced manpower. “It 17 still a challeiige for the
finishers to be competitive, though, as
they are undei tremendous ptesssure
to reduce costs,” Singleton said ‘(111
inany cases, they at-e sqLieer;ed at both
ends.”
This epitomiLes the dilemina facing
inetal finishers: automotive nianufactuiers want the improved performance and quality, but are unwilling to
paj7 the additional expense that it
costs to manufacture these coatings.
“The automotive companies stress
quality, but are iiot really willing to
pay for it,’’ Mediiia’s Ritchie said.
“They waiit improved product a t
lower cost ”
Columbia Chemical’s Rosenberg
feels that with additional education,
the OEMs will rea1ir;e that the
improved chemistries have to come
with additional costs. He noted that
the plating shops in Europe get a better price for these environinentally
friendly coatings, because the market
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M a r c h 2007 I metalfinishing I33
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Despite all the challenges, many industry observers feel there are some benefits
relative to the new requirements. “One
of the good things that has come out of
the new requirements is the spark of
creativity and innovation,” Rosenberg
said, adding that “with innovation
comes profits.” He also noted that the
new regulations have taken his companfs business in a dfferenc dmction
than he would have prehcted five years
ago. “Finally, engineers who design cars
are looking at coatings in a new light
and understanding what coatings can
do for a car.”
MacDermid’s Jankowski attests to
the plus side. “There are tremendous
opportunities created by the environmental and operator safety drivers,”
he said. ‘These drivers are coming
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iiarch 2007 I metalfinishingI 34
and from the DoD/military. The
other significant driver is raw material costs-especially metal costs. All
efforts to reduce metal consumption
and offer recovery arid reuse solutions
offer major opportunities.”
Jankowski also noted Khat because
the automotive pie is smaller and more
competitive, MacDermid has begun
focusing more on direct contact with
the automotive companies in addition
to its traditional Tier 1 level selling.
“We have invested resources in a
focused OEM program to maintain
ongoing coiitact with the engineered
grotips within the automotive companies,” he explained. “We have been very
successful in presenting new products
and services to these OEMs.”
Cadon Plating’s Houston said
change is necessary for success. “We
must diversify our product lines, as
well as penetrate the transplant manufacturing, and develop new finishes
and niche markets to survive.’
In the past several years, many metal
finishers have closed their doors due
to tough market conditions. Houston
notes that a number of companies in
his area, which were similar in size to
Cadon Plating and Coatings, are now
gone. “Our goal is to diversify into the
transplant business as much as possible for the obvious reasons: stronger
companies, growing market share,
truer partnering relationships,” he
said. “What we have found, though, is
the transplants have also brought in
their own tier suppliers with already
established partnerships.”
Rosenberg offers an alternative
view. He feels that those finishers who
have weathered the recent difficult
times should now have a good run.
Most respondents emphasized the
need for partnerships between the finisher, chemical supplier and the OEM
to maximize efficiency and minimize
costs to remain competitive in a global marketplace.
It will be interesting to revisit the market after more of the dust has settled.
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