Suppliers ride the mpg wave
Saving fuel brings soaring profits
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Gasoline at $4 a gallon and government-mandated fuel economy targets are creating vast opportunities for many big global suppliers.
In North America, those suppliers are selling turbochargers, direct injection, stop-start equipment, eight-speed transmissions and many other systems that save fuel.
"If you bring a real idea to an OEM to improve fuel economy or lower emissions, they will seriously listen," says Tim Manganello, CEO of BorgWarner Inc., a top maker of turbochargers.
The trend is particularly beneficial for large global suppliers with major operations in Europe, such as Robert Bosch GmbH and ZF Friedrichshafen AG. In Europe, home of $8 a gallon gasoline, those companies have been developing fuel-saving technology for decades.
While top European suppliers are thriving in North America, nearly all top suppliers enjoyed a good year in 2011. Most posted solid increases in revenue last year as vehicle sales continued to bounce back from the recession, according to the annual Automotive News ranking of top suppliers of original-equipment parts to automakers in North America.
Demand for fuel-efficient parts is a boon to ZF, a German supplier that produces transmissions and other parts.
The company's North American arm, ZF Group NAO, posted sales of original-equipment parts last year in North America of $2.68 billion, up 47 percent from 2010. The company is No. 17 on the list of suppliers to the North American auto industry.
ZF is supplying fuel-saving eight-speed transmissions to Chrysler Group from plants in Kokomo, Ind., and Germany. The transmissions are available in the Chrysler 300 and Dodge Charger. In the fall, they will be installed in the re-engineered Ram 1500 pickup.
The eight-speed transmission boosts fuel economy at least 6 percent vs. ZF's six-speed automatic, ZF says.
Meanwhile, ZF is spending 300 million euros, or about $386 million at current exchange rates, to build a transmission plant in Greenville, S.C. The factory will produce eight-speed transmissions along with nine-speed automatic transmissions for front-wheel-drive vehicles typically powered by a V-6. Deliveries start in 2013 from the plant.
The plant's production capacity is spoken for, the company says, and expansion plans are under way. The company expects the nine-speed will boost fuel economy by at least 10 percent vs. a six-speed fwd transmission, ZF says.
ZF says demand for its electric power steering also is strong. Electric power steering eliminates the hydraulic power-steering pump, which reduces weight and drag on the engine.
ZF's electric power steering plant in Florence, Ky., supplies General Motors vehicles such as the GMC Terrain and Chevrolet Equinox, Cruze, Volt and Malibu. ZF says it is expanding the plant to meet growing demand.
Turbos sell briskly
Meanwhile, North American automakers are snapping up turbochargers, which save fuel by capturing waste energy in exhaust gases and using it to force more air into the engine.
And because turbos boost engine output, a turbo-equipped inline-four is roughly equivalent in horsepower and torque to a V-6 without a turbo. This allows automakers to downsize engines, saving weight and fuel.
Honeywell Turbo Technologies says a car with a turbocharged inline-four is about 20 percent more fuel efficient than a comparable vehicle with a heavier V-6.
Last year, about 10 percent of new vehicles in North America were sold with turbos, says Tony Schultz, vice president for the Americas for Honeywell Turbo Technologies (No. 87 on the list). In 2016, he expects that number to reach 23 percent. Honeywell and BorgWarner (No. 28) dominate North America's market for turbochargers.
But Germany's Continental AG is seeking a piece of the action with its family of turbochargers built by affiliated supplier Schaeffler Group of Germany. Continental Automotive Systems U.S. Inc. is No. 3 on the list, while Schaeffler Group USA Inc. is No. 59.
Continental won the contract to supply turbos to Ford Motor Co.'s three-cylinder engine, which went on sale this spring in Europe. Ford plans to offer the engine with a turbo in the spring of 2013 on an as-yet unidentified vehicle or vehicles in North America.
Also, a turbo-making joint venture of Robert Bosch and Mahle GmbH, Bosch Mahle Turbo Systems, is knocking on automakers' doors. The joint venture, founded in 2008, has said it has production contracts with six global automakers and expects to produce 1 million turbochargers annually by 2013.
Robert Bosch's North American unit is No. 4 on the list; Mahle Inc., the North American subsidiary of the German company, is No. 49.
Turbochargers are key components of Ford's EcoBoost family of engines, along with direct injection and other technologies. Ford introduced EcoBoost in 2009 on a few models, such as the Lincoln MKS, and has steadily spread it to other vehicles.
The technology is well-known as an mpg-booster for the popular Ford F-150 pickup. BorgWarner supplies the turbo for the pickup's 3.5-liter V-6. The EcoBoost option's sticker price is $1,095 as an upgrade from a 5.0-liter V-8 on various F-150 models.
The automaker expects to offer the optional engine on 90 percent of its nameplates in 2014.
Turbo makers are investing heavily for the future, part of an industrywide quest to coax more efficiency from internal combustion engines. For instance, Honeywell won a 2012 Automotive News PACE Award, in part by using ceramic ball bearings on steel raceways to reduce friction in its turbos. The annual PACE Awards celebrate and honor innovation by automotive suppliers.
GM's mild hybrid
GM's eAssist engine technology is another new opportunity for suppliers.
The technology turns a vehicle into what the industry calls a mild hybrid. The system provides extra power to the wheels, but it doesn't propel a vehicle by itself.
The system uses an electric motor-generator, supplied by Continental, that is bolted to the front of the engine and takes the place of the alternator. A drive belt connects the motor-generator to the crankshaft, boosting the engine with an extra 15 hp when the vehicle accelerates, say, onto a freeway.
Power for the motor-generator is supplied by a small lithium ion battery stored in the trunk. It is recharged by energy captured by the motor-generator during braking and coasting.
Hitachi Vehicle Energy Ltd. makes the lithium ion battery cells for the 115-volt battery pack, which GM assembles.
The base powertrains of the Buick LaCrosse and Regal include eAssist as standard equipment. It's also on the Chevrolet Malibu Eco model and will be available on the upcoming redesigned 2014 Chevrolet Impala.
GM says eAssist boosts fuel economy up to 25 percent vs. a comparable car without the technology. The 2013 Malibu Eco, with a base sticker of $25,995, including shipping, is rated at 37 mpg on the highway.
Using mild hybrid starter generators to boost fuel efficiency is "popular in Europe today and in its early stages of gaining ground in North America," Continental said in a statement. "We feel this type of technology will expand in the coming years throughout North America, as automakers look for solid tools to assist them in meeting the upcoming CAFE standards." Federal corporate average fuel economy standards mandate sharp boosts in mpg over the coming years.
GM's eAssist package also includes a stop-start system, which saves fuel by turning the engine off at a complete stop and restarting it when the driver's foot leaves the brake. And stop-start, common on hybrids such as the Toyota Prius, is on the verge of huge growth in North America because it is spreading to nonhybrids.
Stop-start requires a beefed-up battery, a more durable starter, various sensors, plus an electric auxiliary water pump. Direct injection is a nice complement because it eases restarting.
Ford's stop-start system, which debuts as a $295 stand-alone option on the redesigned 2013 Fusion this summer, generates fuel savings of 4 to 10 percent, depending on driving conditions, Ford says. Denso International America Inc. (No. 5) is supplying the starter.
Ford has not said which upcoming vehicles will get stop-start. But EcoBoost vehicles, because they have direct injection, are strong candidates.
The Fusion will use a more durable 12-volt lead-acid battery, called an absorbent glass mat battery, purchased from Johnson Controls Inc. (No. 2). In the battery, mats of glass fibers are sandwiched between lead plates. Because the glass fibers soak up the batteries' electrolyte fluid, the batteries won't spill, even if damaged.
So while saving fuel often requires the high-end engineering of turbochargers and hybrid batteries, even the humble 12-volt starter battery provides an opportunity for suppliers with better technology.
You can reach Charles Child at cchild@crain.com.
