Supplier technology for everyone - Opinion & Analysis: Supplier Insight - OEM suppliers - Brief Article

Automotive Industries,  Feb, 2002  by Greg Janicki

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Every OEM is looking for the segment buster, that new vehicle that will shock the industry. There will, however, come a point when the market no longer cares about the next retro vehicle or hybrid SUV/wagon/sedan. The one thing the market will always want though is smart, comfortable vehicles that meet the needs of the average Joe (or Josephine). This means that no matter the vehicle type, segment, size or color, the market will still demand features. And this is where suppliers must step up.

Suppliers have long looked at the introduction of new vehicles as the method to introduce new technologies. Typically, the new technology appears on the high-end vehicles first and then trickles down to the rest of the market. Depending on the technology, it could take years for the feature to get its legs (run-flat tires, navigation systems) or it could happen rather quickly (in-dash CD players). It is an uncertain time frame because some technologies simply take longer to get through the standard s-curve adoption cycle.

For suppliers who now must bear more up-front development cost, waiting for a technology to reach its potential just may not be a viable option. And hoping that the luxury car market will prop-up volumes is a dangerous assumption. In fact, production of North American luxury brands (BMW, Cadillac, Lincoln, Mercedes, etc.) will not be as large as one would think after listening to the OEMs touting all of the new luxury vehicles due to hit the market in the next few years. In 2002, luxury brands will represent approximately 16.2 percent of North American light vehicle production (or 2.4 million units). By 2006, that percentage doesn't rise much (16.6 percent). Total volume grows (to 2.8 million units), but so does the rest of the market; thus, the overall gain is marginal. New feature growth (and supplier growth) is not going to be driven by an influx of luxury brand vehicles. It will really be (must be) pushed by the migration of features to lower priced vehicles. The question is, will your neighbor want a nav igation system in her Grand Am? Or better yet, will your neighbor be willing to pay for it?

The most important question then becomes -- for a supplier anyway -- how do they accelerate the time it takes to get your neighbor to want the navigation system, or HID headlamps, or passive entry system? We've already determined that one segment is not going to boost installations, so the next thing is to push the feature at the OEM. That gets us to the final question: What are the reasons an OEM offers a feature? You could argue a multitude of reasons, but the main ones are to establish the vehicle (and OEM) as the market leader, and to gain exclusive right to a supplier's technology. Of course, all of this is done under the auspices of cost. But cost can be overcome if there is an upside profit potential. That is, if the feature makes the vehicle more competitive in the market.

If you walked the recent North American International Auto Show, you would have noticed that amid the hype of new segment vehicles, the OEMs were debuting supplier technologies on concept and production vehicles of all segments. Making new technologies accessible to all vehicle segments is the next big hoop suppliers must jump though.

GREG JANICKI

Vice President

CSM Worldwide Inc.

GregJanicki@csmauto.com

www.CSMAuto.com

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