Bio-Materials – Why is the Auto Industry Interested? Toronto, Ontario

Bio-Materials – Why is the Auto
Industry Interested?
Toronto, Ontario
July 12, 2006
Anne M. Cascadden, B.A.
AUTO21 NCE Network Manager
Innovation – what is it?
AUTO21 uses the CAPC Innovation Working
Group definition:
Innovation is the first successful
commercialization of a new technology.
Canadian Automotive Partnership Council
CAPC-IWG Preliminary Report 2003
Innovation requires:
ƒ New knowledge in the form of:
9 a new or improved process or public policy,
9 a new or improved material,
9 a new or improved product design.
Knowledge
Receptor
ƒ A plan to implement the new knowledge including:
9
9
9
9
physical infrastructure,
a favourable fiscal environment,
suitable human resources,
sales that will turn a profit or positive public policy changes that
justifies the initial investments.
NOTE: Research ≠ Innovation
Environmental Scan
key facts, priorities
and major trends
The Auto Industry – A Puzzling Giant
ƒ Global output is approx. 60+M vehicles/year and climbing to approx. 75M
by about 2015 (most of the market growth is expected to be in China &
India and possibly later in South America),
ƒ Huge companies with a strong imperative to be global in scope,
ƒ Drivers - government regulation, geopolitical forces and brutal business
competition,
ƒ Extremely capital intensive manufacturing plants (very tough for new
entrants and SME’s) + a thrust to build & sell products in the same place,
ƒ A conservative culture caused by the size of investments required and
the consequences of a market failure.
ƒ Only a few countries have direct ownership but many others are very
strongly dependant on the sector.
Organization of the Auto Industry
The supply chain is organized into
levels called “tiers”. The tier level of
a given company is determined by
the level of the company to which it
sells its products.
At the top of the structure are the
automakers or original equipment
manufacturers (the OEM’s).
The firms which supply parts directly
to OEM’s are called Tier 1suppliers.
Companies that sell parts to Tier 1’s
are called Tier 2 suppliers, those that
sell to Tier 2’s are Tier 3 companies
and so on.
The term “tier” describes product
rather than an entire company – so
some companies may be Tier 1 on
one product and Tier 2 on another.
Downloading Responsibility for RDT&E
Top Auto Industry Issues
(the top 10 issues really condense down to 3 main topics)
1. Making Vehicles Safer
Better electronics/user interfaces, better driver and occupant education,
better traffic management systems, stronger and easier to process structural
materials.
2. Improving Fuel Economy & Reducing Environmental Impact
Lightweight materials, reducing non-renewable resource usage, hybrid
powertrains (need better batteries), better transmissions (CVT’s), reducing
emissions (need better catalysts).
3. Re-thinking Old Methods
Improving supplier relationships, making assembly more efficient and safer,
controlling cost to improve profitability (lower cost materials & logistics as
well as design and test methods improvements).
(Automotive News - April 11, 2005)
Due to the enormous cost and risk of new product
development, the auto industry follows a highly
disciplined Product Development Process (PDP)….
Typical Automotive OEM
Program Engineer
Typical Automotive OEM
Financial Controller
Energy (i.e. oil) prices in
the future are clearly a key
concern driving
automotive design…
…but they also affect
materials & manufacturing
as well as the fuels we
use in vehicles.
Growing Worldwide Vehicle Sales
25.0
1.4
80M Capacity
65M Production
80% Global Utilization
1.1
15.0
19.6
16.7
0.1
3.7
2.7
2.0
2.5
ASEAN/India/Aust
0.8
2.0
6.0
China/Taiwan
Japan
West Europe
0.0
North America
5.7
2.6
C/E Europe
5.0
South America
10.0
2001
2011 Growth
1.1
0.7
ME & Africa
20.0
Source: CSM Worldwide
The cost of SE Asian capital
investment vs. North American
investment
x 2.8
x 2.5
x 1.875
x 2.25
x 1.5
Stamping
Tools & Dies
Body Shop
SE Asia
Paint
Assembly
N.A
Source: ASG-Renaissance
Explosion of New Products – Building
More Vehicle Types with Fewer Plants
100
91
83
Model Count
80
2003-05
2006-08
Industry
Model Count
2003-05 359
2006-08 385
2009-11 371
2009-11
77
61
67
64
60
43
48 47
40
29
34 34
31 34 33
17 17 18
20
14
18 20
0
GM
Ford
DCX
Toyota
Honda
R/N
Hyundai
Automakers need to increase flexibility to assemble
more different vehicles in the same plant
Source: CSM Worldwide
Consolidation of Supply Base
Consolidation of Auto Parts Supplier Companies
Parts Suppliers
35000
30000
30,000
25000
2006 ~ 7000 companies
20000
15000
10,000
10000
5,000
5000
0
1990
2000
2010
Based on OESA Projections
Canada’s Automotive Sector Today
ƒ World’s 8th largest producer of motor vehicles (> 2.8 million units /
$100+B in annual sales).
ƒ Six OEM’s: 12 active assembly plants (+1 more in 2007) + a number of
engine and drivetrain part plants and support facilities.
ƒ 3 OEM engineering R&D centres including DaimlerChrysler Canada,
General Motors Canada & International Truck & Engine-Navistar.
ƒ Hundreds of suppliers of parts at all tier levels including Magna,
Siemens-VDO, Dofasco, Alcan, Dupont, Wescast Ind., Woodbridge,
Solectron-Invotronics, NEMAK Aluminum, Ballard Power Systems,
General Hydrogen, Stuart Energy Systems, Hydrogenics, Schukra,
QSS, Ventra Group, AutoLIV Canada, Ventra, Delphi, Lear Canada.
ƒ Over 500,000 Canadians work directly and indirectly in the auto
industry - 1/7 jobs and 1/6 in Ontario.
ƒ The auto sector generates 12-13% of Canada’s manufacturing gross
domestic product and is the largest source of foreign exchange.
AUTO21: A Network Built by Partnerships
Project ideas come from
the academic and private
or public sector partners.
Funding comes from the
private sector and the
public sector (through
AUTO21).
Proposals are reviewed
for academic excellence
AND for relevance and
thus their potential for
impact on Canada.
Great results for Canada!
Ideas and Funding
Public
Sector
Private
Sector
Academe
Industry
Associations
Society atLarge
Pathways from the Farm to the Future Car
Fibres for
reinforcement/filler
applications
Fibres for
woven NVH
applications
Oil from oilseeds
for polymer
production
Ethanol for fuel
production
?
So…why are we doing all of this?
Since 2000 when we started writing the AUTO21
NCE proposal….
ƒ The price of oil has gone from $21/bbl to over $70/bbl with a
new “floor” price that is generally agreed to be around $50/bbl.
ƒ The price of natural gas (and therefore the cost of plastics)
has also increased enormously and the price of most metals
have been very unstable.
ƒ The Canada-US exchange rate has risen by nearly 50%.
ƒ China has gone from about #16 to around #3 or #4 in vehicle
production and Canada has gone from #5 to #8 while actual
production numbers have stayed about the same.
ƒ The 9/11 terrorist attacks have shaken the world’s economy
and shifted the centre of gravity on nearly every issue.
More interesting auto industry statistics:
ƒ Annual Sales
> $2 Trillion / 64+ million vehicles
ƒ Employment
> 8 million people
ƒ R&D investments > $90B/year
ƒ Tax Revenues
> $620B/year
ƒ Excess Capacity > 3M units in North America
~ 16M units worldwide
(about 20% of capacity)
(NOTE: 16M units is approx. the total North American vehicle production volume)
Source – Dr. Van Jolissant – Chief Economist – DaimlerChrysler Corp.
…so...the negative consequences to Canada of a poorly functioning
automotive sector that lacks innovation are simply too large to ignore.
Developing the best people and
the best technology for the future of
the automotive industry
www.auto21.ca
www.nce.gc.ca