Supplier fumes as carmakers take electric motors in-house

Motor supplier John Weber should be sitting on a gold mine right now, considering North America's growing interest in hybrids and electric vehicles.

But an odd thing is happening. His potential customers are entering his business.

Weber is CEO of Remy International Inc., a supplier of starter motors, alternators, electronics and, nowadays, hybrid-drive motors.

While the industry seems fixated on the batteries that will enable new generations of hybrids and electrics to move, the electric motor remains the overlooked star of the show.

Electric motors like Remy's -- a technology that has been doing the industry's grunt work for 100 years without much change -- will propel the vehicles without internal combustion.

But there is a twist. As automakers rush to create a North American manufacturing base for alternative vehicles, they are choosing to produce their own motors in-house.

Toyota Motor Corp., the lead player in the hybrid market so far, and maker of the big-selling Prius, relies on electric motors produced by Toyota itself -- not by one of its trusted keiretsu suppliers.

Nissan Motor Co. broke ground last month on a $1.8 billion factory in Smyrna, Tenn., that will produce the all-electric Leaf sedan and its battery packs. Nissan will rely on electric motors that it has developed and makes in-house.

Even General Motors, which has relied on Remy for various products for a century, has decided to eventually bring motor development and production in-house for its Chevrolet Volt plug-in hybrid. GM spun off Remy, then Delco Remy, in 1994.

In 2002, despite having electric motors from various suppliers scattered throughout its vehicles, GM had only eight engineers in the corporation engaged in any aspect of the lowly electric motor, says Pete Savagian, director of GM's electric motor engineering activity.

Now GM has about 100 engineers at work on them. The company has invested $2 million in supercomputing power to conduct design analysis on new motors. New investment is going into motor validation centers.

In January, GM announced that it will invest in a new manufacturing line for electric-vehicle motors at its transmission plant in White Marsh, Md., near Baltimore. Those motors will power GM's next-generation rear-drive hybrids.

"This needs to be a core General Motors technology," Savagian says. "Back in 2002 and 2003 we saw hybrid motors as a niche product with low volume. Since then it has become obvious that vehicles are going to become increasingly electrified and motors are going to be critically important."

But why go through all that trouble for a component that has been a commodity item for decades, powering everything from ceiling fans to dishwashers and windshield wipers?

John Weber is wondering the same thing.

"Does it annoy me that GM's going down this path?" he says. "It annoys the hell out of me. Especially given how much they've crawled around our plants and gone through our supply base."

Weber has heard the automakers' argument -- that in the new world of electric-powered vehicles, the motor itself rises to the level of a core technology to the driving experience.

But it is clearly a testy issue for him. He says automakers are declaring motor development to be proprietary even though there is no real breakthrough technology for it on the horizon for anyone -- including his own company.

"The strategy driving it is: 'We need to own this technology,' and that doesn't make sense," he says. "Under that argument, they should also get into windshield wiper motors and window motors because they're also part of the vehicle experience. They buy fuel injectors and tires from different people, and yet they're part of the driving experience.

"My prediction is that GM is going to spend a billion dollars and there's going to be blood all over the floor while they try to figure it out. And in five years, somebody smart is going to say, 'Why are you doing all this?' And then they'll outsource it."

Nissan's Mark Perry offers a reasonable explanation for automakers' investment in electric motors. Perry is responsible for the late-2010 launch of the electric Leaf, a model that promises 100 miles of driving per full battery charge.

"The motor touches on everything that's important to us," says Perry, director of product planning for Nissan North America Inc.

"It's central to the car's performance, it's central to system integration, and it's a question of cost control. We want to control all the key elements of the value chain, and how could you do that without producing the motor?"

Both Perry and GM's Savagian leave the door open to the possibility of outsourcing motors "some day." And initially at least, GM is outsourcing the motors for its Chevrolet Volt, expected in October, until its own manufacturing process is in place.

But after that and for the foreseeable future, Perry says, "We'll have to do it ourselves."

"The ability to cost-control on the development of this new technology helps us to achieve the affordability target that we've set for ourselves on the car."

Indeed, Nissan's marketing pitch for the Leaf is that it is a completely acceptable purchase for a family with average commuting habits. Nissan plans to retail the Leaf for $32,780, before destination charges. A federal electric-vehicle tax credit of $7,500 will bring the purchase price down to $25,280, and some states and municipalities are providing additional rebates and credits of as much as $5,000.

Weber counters that component cost reduction and quality targets are nothing new to suppliers such as Remy. Other key suppliers in the automotive electric-motor segment include Germany's Robert Bosch GmbH, Japan's Hitachi Ltd. and France's Valeo S.A.

Weber believes that smaller, nonautomotive players -- in addition to the automakers themselves -- aspire to enter the dawning new field. Remy prides itself on patented techniques of building motors, which he summarizes as "how you bend the copper wire."

But he poses the question: Why would automakers go through the expense and pain of learning what global motor makers have already learned?

"I've created about $20 million worth of scrap trying to figure out how to build a hybrid motor. They're very tough to do," he says. "If somebody else thinks they can get in and best us at it -- hey, knock yourself out."

GM's Savagian agrees that there are no revolutionary changes coming to motors. But he believes that competitive, proprietary gains are waiting to be realized. A critical r&d focus for GM will be reducing the use of rare earth magnets contained in motors, which represent up to a fourth of the motor's cost.

GM wants motors that are quieter, smoother, lighter, more reliable and more affordable, Savagian says. "And the idea of buying them off the shelf doesn't really apply."