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Auto is ‘shining star’ of manufacturing

Keywords: Tags  Metals Service Center Institute, automotive, supply base, capacity constraints, lightweighting, Michael Robinet, IHS Automotive Consulting, Ford Motor Audi

SCHAUMBURG, Ill. — The auto industry is the shining star of North America’s manufacturing sector, according to IHS Automotive Consulting managing director Michael Robinet.

Annual sales of 16 million vehicles are sustainable possibly to 2020, he said, with a world total of around 106 million light vehicles annually by the end of the decade, including 18 million within the North American Free Trade Agreement region.

"Welcome to Utopia, better known as automotive," Robinet told attendees at the Metals Service Center Institute’s Economic Summit in the Utopia conference room at the Schaumburg Convention Center.

North American automakers today are concerned with capacity constraints, lightweighting and how fast they can create a sophisticated supply chain and infrastructure to competitively build vehicles in Mexico, which lacks automotive-quality steel production.

Most, if not all, assembly plants in the United States are running two shifts, with many running three shifts. "We are running at the edge of full capacity" at assembly and related operations and at supplier plants, Robinet said. "It’s brick-and-mortar time in North America."

The localization-of-supply trend among the Big Three automakers and foreign transplants will continue for the next 10 years, Robinet predicted, driven by logistics costs and volatile currency exchange rates. Automakers "are tired of taping dollar bills to every part they import," he said.

Since the recession ended, automotive suppliers are more savvy and protect their margins better than before, but they have a lot on their plates. There are 18 new-model launches this year, with 32 scheduled for next year, Robinet said. "Think of how strained the supply base is already."

As for lightweighting, Robinet advised the metals industry to "get used to smaller vehicles." Vehicles such as Ford Motor Co.’s Fusion and Edge will make up 80 percent of the market in the near future, Robinet said. "V-8s will be down to 10 percent" of all engine production as automakers "devote all their energy to 4- and 6-cylinder engines, and more of that on 4-cylinders. They will eke out as much fuel economy as possible."

Metals-based innovations will be key to mass reduction because the body and structure make up 35 percent of the average vehicle’s weight and the chassis and suspension make up 25 percent, Robinet said.

Mexico is the last major concern. Assembly capacity—especially Japanese and German transplants—is being added, but there is not the same skilled labor and tooling expertise that is available north of the border. Original equipment manufacturers (OEMs) are raiding their suppliers for skilled workers, and the workers are willing to make that move, Robinet said. All the OEMs and their suppliers are so close together geographically that poaching is almost unavoidable.

Audi AG can build a car in Mexico and ship it to Europe at a lower cost than building it in Europe, and Nissan Motor Co. Ltd. can do the same building vehicles bound for Asia. However, infrastructure and logistics will struggle to keep up with planned capacity of 3 million vehicles annually within a few years, Robinet said.

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