Technology, regulations, competition to challenge auto industry

EDITORS: The complete report is available to reporters at no charge from the Office for the Study of Automotive Transportation, (734) 764-5592.

ANN ARBOR—Rapid changes in technology, increased regulation and accelerating globalization are forecast for the auto industry over the next 10 years, according to a University of Michigan study.

“Automobile manufacturers and their suppliers will continue to face many formidable challenges in the next decade as they address growing environmental challenges, tough global competition and more demanding customers,” says David E. Cole, director of the U-M Office for the Study of Automotive Transportation (OSAT). “Furthermore, shortages of capital and skilled human resources and time pressures to do more, better, and yet faster, exacerbate their challenges.”

The U-M report on future automotive product technology, co-written by Cole and Gerald F. Londal, a retired General Motors Corp. engineering manager, is part of the 10th biennial U-M Delphi Forecast and Analysis of the North American Automotive Industry. The study is based on responses from 86 auto industry experts and is part of an eventual three-volume report that also includes trends in materials and marketing through 2009.

According to the forecast, fuel economy federal standards are expected to be significantly more restrictive, with Corporate Average Fuel Economy (CAFE) projected to increase from 27.5 mpg to 32 mpg for passenger cars and from 20.7 mpg to 26 mpg for light trucks (pickups, sport-utility vehicles and vans) in the next decade.

Cole and Londal say that CAFE—designed to conserve fuel and, more recently, to minimize global warming—creates a fundamental conflict between auto manufacturers and customers. Current gas prices notwithstanding, the cost of fuel is expected to be reasonably low in the next decade, encouraging consumers to buy less fuel-efficient vehicles that are larger and offer other advantages.

“It is politically more expedient for legislators to ask automobile manufacturers to solve the problem of fuel consumption, whereas increased fuel prices would be, in theory, a more effective tool,” Londal says. “But CAFE standards cause artificial constraints on domestic and European manufacturers in product mix and pricing, while Japanese manufacturers are little affected, since their vehicles are more fuel-efficient than domestic vehicles primarily because they are smaller, on average.”

While there is no single “silver bullet” to improve fuel economy dramatically in the next 10 years, the use of hybrid powertrains and energy storage will have the greatest impact on CAFE, the researchers say. The largest improvements in currently used vehicle systems are expected to come from increased engine efficiency and vehicle weight reduction.

The study projects a 5 percent reduction (150 pounds) in the weight of passenger cars by 2009, which would result in a 0.5 mpg improvement in fuel economy. No decrease is expected in the weight of light trucks.

Although electric and hybrid-electric vehicles are predicted to comprise no more than 4 percent of passenger cars by 2009, more than half of the study’s respondents believe that a clean, super-efficient vehicle with a fuel economy of 80 mpg can be achieved by 2010.

“Such a vehicle will require the development and applications of new technology, particularly improved powertrains and lightweight structures,” Cole says. “The technology may be available today to attain the fuel economy goal, but not at a cost that is competitive with current vehicles.”

Almost half of the respondents believe that vehicles with electric drivetrains can reach drivetrain cost-parity with gasoline-engine, automatic-transmission-powered vehicles by 2010.

In addition to environmental issues, the report also projects that about 70 percent of product design and engineering of North American-produced passenger cars by traditional domestic automakers will be done in North America in the next 10 years, compared with about 80 percent today. On the other hand, international automakers are expected to increase the amount of product design and engineering for North American-produced passenger cars in North America from 15 percent today to 30 percent by 2009.

The forecast also predicts that traditional domestic manufacturers will source an increasing percentage of parts, components and sub-assemblies from outside North America, with 60 percent (down from 70 percent) still expected to be sourced from the United States, Canada and Mexico in the next decade. However, the Mexican component and sub-assembly sourcing is expected to expand from 15 percent today to 25 percent by 2009.

Further, Cole and Londal say, the engineering process is being revolutionized with greater use of computer-aided engineering (math-based engineering and virtual prototyping), projected to rise from about 40 percent of engineering today to 70 percent in 2009. As a result, automakers could reduce product development time by as much as 25 percent.

Finally, although alternative powerplants are generating much excitement, the internal-combustion engine will still be dominant throughout the remainder of this decade, the researchers say. About half of today’s engines are expected to be redesigned in the next 10 years, and advanced engine technology (overhead cam valve trains, four-valve cylinders, and variable lift and timing valve mechanisms) will be far more common.

Other highlights of the U-M study include:

—The use of steel and cast iron is projected to decrease by 15 percent and 20 percent, respectively, in the next 10 years, while the use of aluminum, magnesium and plastics/composites is expected to increase by 17 percent to 20 percent, if CAFE requirements are set at 35 mpg.

—The integral body/frame or unibody should remain the major passenger car platform through 2009, with space frame and separate body/frame construction expected to be used on 5 percent and 2 percent, respectively.

—The use of aluminum in cylinder heads and blocks in passenger cars is expected to increase to 95 percent and 50 percent, respectively, by 2009.

—Gasoline direct injection will comprise 10 percent of passenger car fuel-management systems in the next 10 years.

—Anti-lock brake systems are forecast for 80 percent of passenger cars and 40 percent will have traction-control systems in the next decade, with four-wheel, anti-lock brakes envisioned for about 85 percent of light trucks.

—Side air bags are predicted for 35 percent of passenger cars and 20 percent of light trucks by 2009, with modest use of rear-seat occupant bags expected in all vehicles.

—About 15 percent to 25 percent of passenger cars will feature adaptive cruise control, adjustable pedals, collision warning systems, navigation systems, in-vehicle message systems and ground-positioning system/cellular phone-based safety systems.

—The application of electronic/electrical features in passenger cars should increase significantly in the next decade: anti-theft devices (from 30 percent today to 55 percent in 2009); CD players (from 32 percent to 60 percent); and electronic keyless entry (from 49 percent to 70 percent).

As a division of the U-M Transportation Research Institute, OSAT provides research and analysis, information resources and communication forums that respond to the continually changing needs of the international automotive and motor vehicle transportation industries.

David E. ColeDelphi Forecast and Analysis of the North American Automotive IndustryTransportation Research Institute