Ken Davis, president of Eaton Corp.'s vehicle group, says his company's new supercharger can boost performance of small engines, thus helping automakers to downsize their powertrains.
Like turbochargers, superchargers increase power by forcing more air-fuel mixture into the cylinders. But turbochargers are driven by pressure from the engine's exhaust while superchargers typically are driven by a belt connected to the engine.
Eaton, which mainly supplies products for commercial vehicles, is turning more attention to light vehicles. The company makes superchargers, engine valves, truck transmissions, differentials and other components.
Davis, 53, who took his job Jan. 1, discussed the turbo-vs.-supercharger debate and other topics with Industry Editor James B. Treece and Special Correspondent David Sedgwick.
Eaton ranks No. 88 on the Automotive News list of the top 100 global suppliers with worldwide light-vehicle parts sales to automakers of $1.4 billion in fiscal 2010.
Q: Eaton's vehicle group makes components for light vehicles and commercial trucks, right?
A: In July 2009, we combined our truck and automotive business into a single vehicle group. We found a lot of opportunities to sell automotive components to truckmakers, and vice versa. For example, we have a very large valve business. And yet we never sold any engine valves to International.
All the truck people asked, "Why aren't we selling valves to International?" We went in there and talked about our portfolio, and we picked up some business.
What are some of your high-growth products?
Clearly superchargers are the product line with the most growth potential. We think we can more than double our supercharger business in the next five years.
We are [diversifying] from high-horsepower vehicles into smaller engines. The trend is toward downsizing powertrains and providing better fuel economy.
Audi is our largest supercharger customer, and we are on a couple of platforms with Nissan.
But superchargers still draw their power from the engine. How do you compensate for parasitic losses?
Turbocharger manufacturers will talk about engine downsizing, but they don't talk about "downspeeding." And that's where we are effective because we can deliver air to the engine immediately.
So automakers can improve fuel efficiency by programming powertrains to operate at low rpms. But a turbocharger might lag when the motorist hits the gas.
Exactly. [At low rpms] a supercharger will spool up immediately.
Are you getting customers in North America?
Nissan will bring their supercharged vehicles here. We'll be on Audi and Volkswagen platforms, too. We are starting to get some attention.
How is the European market?
It is our largest market for superchargers. We're expanding now into Japan and China. So we are seeing some geographic growth.
We produce superchargers in Georgia and in Poland. If we get enough volume, we could put a supercharger line in China. Getting a foothold in China is important for us. If Chery sees the benefits, there will be opportunities for us to expand.
Are hybrid powertrains catching on with commercial vehicles?
We launched [hybrid powertrains] in 2008 for commercial vehicles. We think [that segment] will be boosted by the 2014-2018 CAFE standards for commercial vehicles.
We still struggle with the challenge of economic payback because the systems are still fairly expensive. We are working with a number of battery suppliers and motor suppliers to make [hybrids] more economical.
Obviously we've been helped by tax credits and incentives. The goal is to make the payback viable with no incentives.
We see the technology improving the payback every year.
Our goal is to get our customers a five-year payback. We're not there yet. In some applications, we're very close to that, especially for trucks that use a lot of outboard power.
How much is Eaton spending on r&d?
We spend about 3 percent of sales on r&d. When we are in a drawback mode, like we were in 2008 and 2009, we might have brought it down a little bit. And when we are expanding, we'll bring it up a little bit.
How much have rising raw material prices affected Eaton? And what have you done about it?
That is a very big challenge. Steel and nickel are prime materials for us. We try to manage with multiple suppliers. And we are trying to use our technology to minimize the impact.
We developed a new material, crutonite, to replace nickel. We got a PACE Award for it in 2008. That material has price fluctuations, but it's less volatile than nickel.
Do your contracts with customers include provisions for raw material price increases?
We have pass-throughs in most of our contracts to cover unavoidable market fluctuations of major commodities.
Coming out of the downturn, how is your supply network?
We lost a couple of suppliers. It didn't have a significant impact, but it did have some small impact. We had an active program to monitor the health of our suppliers. We've continued that health check.
Today, [our suppliers] are in much better shape. It's not a major concern for us now.
What are you doing to help them?
The biggest thing we can give them is accurate forecasts so they can better manage their businesses. With the strong growth, some had an inability to ramp up as fast as we needed.
We had more [trouble] on the commercial truck side, because the ramp-up has been steeper. We had to help our suppliers procure steel, mostly. We need a special quality [of steel for truck transmissions].
Some of our suppliers have a six-month lead time for steel supplies. So the challenge has been to forecast and buy enough steel and have enough lead time so that we have the proper supply.
Have you fixed this problem?
Yes. That one is pretty much behind us. That's more a truck issue than an auto issue.
Are you confident your suppliers can meet any future production surges?
Yes, we've worked really, really hard in terms of internal and external capacity to ramp up. We're confident that our suppliers can keep up. We are expanding.
There have been times we've been tight on raw materials and tight on internal capacity. But as we expand our manufacturing capability, we have initiatives with our suppliers.
Did you help suppliers with cash-flow problems? Did you speed payments?
No. There haven't been any large policy changes on our side in terms of how we pay our suppliers.
Did the March 11 earthquake in Japan have any impact on Eaton?
It was not significant. We have a very good relationship with Nittan Valve Co. in Japan. [The two companies formed a joint venture in 2008.] They take care of the Japanese automakers in Japan and their transplants around the globe.
The earthquake had some impact with them. We were with the Nittan team last week. The Japanese automakers are rebounding, and they are going to try to catch up in the second half of the year.
Did the earthquake spill into your other markets?
No, not in China or South America. It had a little impact on our North American business. We saw a slowdown, but it wasn't a significant impact, and they'll try to make it up.
So if vehicle production goes back up, you can meet demand?
We'll be OK with it.