Industry corner: advanced materials in automotive vehicles.

IN SPITE OF the glamour of high-tech fields and the pervasiveness of the service sector, one mature manufacturing industry remains most visible and significant on a worldwide basis and especially in the U.S., Canada, Japan and Western Europe. This, of course, is the manufacture of motor vehicles.

While automotive production is determined chiefly by customer demand, how the vehicles are made is influenced deeply by government regulations. The rules cover fuel efficiency, exhaust emissions, accident impact standards and recycling of materials. Manufacturers of cars, vans and light trucks react to such requirements by adjusting material usage. In this paper we focus on the use of "advanced materials" in the production of automotive vehicles in the United States and Canada. Suppliers of such materials expect faster growth rates than that for vehicle production.

DEMAND CONSIDERATIONS (THE ECONOMIC ENVIRONMENT)

Overall consumer demand is the key driving force in the production of vehicles. The diffusion of advanced materials in cars, vans and light trucks is also highly dependent on the volume of vehicles purchased by customers, but many other factors influence adoption of these materials. These include government rules, corporate inertia, technology, and cost/benefit tradeoffs among different materials.

In the United States and Canada, "light vehicles" (i.e., cars, vans, light trucks) are seen as basic necessities for personal travel and commercial delivery. A level of general prosperity is required along with a highly complex infrastructure that ranges from highways to garage mechanics, from financing to leasing arrangements. These conditions, in spite of economic recessions, prevail in the two nations. The trends in vehicle registrations, demand, and production during a fifteen-year span are shown in Table 1.

Growth in demand to 17.5 million units by 1998 represents an annual increase of 3 percent per year, a respectable rate by the standards of developed regions whose automotive markets tend to be mature. Stimulating factors include the recent economic recovery and expansion. While much of the demand will be replacement oriented, there is room for further market base expansion in both countries. Demographic patterns, income levels, interest rates and the age of the existing stock generally will play a positive role in this regard during the 1993-98 period.

In the 1950s and 1960s, Canadian and U.S. buyers of automotive vehicles demanded roomy cars and slick styling; many firms prospered by offering these. But the concern with fuel costs and with environmental damage in the 1970s had a major impact on both

William P. Weizer is senior analyst at The Freedonia Group in Cleveland, Ohio. Andrew C. Gross is professor of marketing and international business at Cleveland State University, Cleveland, Ohio.

Table 1

Trends in Use, Sales and Production of Cars, Vans and Light Trucks, U.S. and
Canada

1983-1998
(million units)

Cars, Vans & Light Trucks                                      % annual change
(US and Canada)(1)           1983      1993      1998         93/83      98/93

In use (registrations)(2)    171.3     202.5     218.5         1.7%       1.5%
Demand (sales)(2)             13.2      15.1      17.5         1.4         3.0
Production                    10.5      12.7      14.3         2.0         2.3

1 Light trucks are those below Class 4; medium to heavy trucks are Class 4 to
Class 8.

2 In use and registration statistics are not the same, because some vehicles
in use may not be registered (farm, military, antique), but the discrepancy
is small. Same holds true for the concept of "demand" and "sales."

Source: Authors' estimate, based on manufacturers' reports, Motor Vehicle
Manufacturers Association of USA, U.S. Federal Highway Administration,
Statistics Canada, Ward's Automotive Yearbook and other reports.

customers and the automakers. As imports squeezed domestic makers, the message got even louder. But customers still prefer roomy cars, so the automakers are accommodating them by sleeker styling, better power train efficiency, and especially with the use of "designed-in" lighter weight materials.

REGULATORY ASPECTS

Automotive producers are increasingly encumbered by government regulations with regard to vehicle emissions, fuel efficiency and safety. While well intended, such rules have an enormous impact. In regard to pollution control, we note the widespread adoption of lead-free gasoline and catalytic converters. The so-called CAFE (corporate average fuel efficiency) requirement doubled fuel economy between 1974 and 1990 to the current 27.5 miles per gallon. Rules now affect the making of seatbelts, airbags, antilock brakes, bumpers, and other parts. Thus, car, van and truck makers have to redesign components or even whole systems.

In many cases, vehicle makers must juggle conflicting goals. For example, customers still want "peppy" engines, but they also want fuel economy. The engines now are becoming more efficient due to use of sophisticated electronics, although mechanics must learn how to adjust these. Lighter materials play a role here. But it is in the frame, body panels, and various components connected to the engine that specialty steels, aluminum, and engineered plastics are making their presence felt.

Vendors of such materials have responded to the demands of their customers -- the car makers. A closer liaison exists between the vehicle manufacturers and their suppliers. The carmakers are reducing their own manufacturing; at the same time, they are becoming deeply involved in the assembly of premanufactured components. The burden of regulation, in part, is passed on to suppliers who now must invest in advanced equipment.

THE PRODUCT LINEUP (THE BATTLE OF THE MATERIALS)

Conventional steel has been the backbone of the modern automobile for many decades, accounting for over one-half of the total weight. It will remain the dominant material used in the construction of automotive vehicles for years to come. Such steel is low-cost, offers strength and formability, and can be recycled through established scrap dealers. The major negative feature is its weight, but thinner steel is now available. When searching for lighter materials and higher fuel economy in the late 1970s and 1980s, the automakers did cut back on use of conventional steel in the curbweight of the average U.S. passenger car, but the decline has now leveled off.

High-strength low-alloy, stainless, and other kinds of advanced steel are allowing steelmakers to hold on to most of their traditional share in the building of cars. These steels offer lower weight, more durability and flexibility. Medium-strength steels sell at a small premium, say 5 percent over conventional steel, but they offer 10 percent weight reduction; they are also much in demand. High-strength steels are up to two to three times more efficient than medium-strength steels and are suited for structural applications. Steel vendors now cater to car manufacturers because they account for much of their output. In turn, the vehicle makers realize that, as the chief executive of GM said, steel remains the material of choice for the auto industry because it is versatile and cost competitive.

Aluminum is a material that has been around for many decades, but its attractive features are only now being espoused in the automotive world. Aluminum is a very light metal and offers ease of fabrication along with attractive physical features. It can be used in existing stamping equipment and, as is the case for steel, it can be easily recycled. This metal has risen in significance but still accounts for only 5 percent of the average car. Aluminum has some drawbacks, including relatively high costs, lower formability, and resistance to welding.

Engineered plastics or composites have been hailed for some years now as the key threat to the use of steel and aluminum. In this battle of the materials, composites made headway in the past, but recently their usage rate leveled off. Engineered plastics are certainly lighter than the metals and they can offer high strength and modulus, desirable physical characteristics in several applications. The reason that they have not been embraced more intensely by car, van and light truck makers is that costs can be high and there is concern over recycling. Disposal costs for plastics loom for plastics molding firms, auto makers and ultimately car buyers (or the makers, if they are the ones forced to dispose of old cars). Cost reduction and recyclability would make composites more attractive.

Table 2

Historical Trends in Consumption of Materials In U.S. Passenger Cars,
1978-1993

                      (percent on a per car basis)

Item                         1978     1983     1988     1990     1993

Conventional steel          53.8%    47.6%    44.4%    43.0%    43.6%
Iron                        14.4     14.6     14.1     13.8     13.0
Advanced steel(1)            6.0      9.0     10.1     11.1     11.1
Aluminum                     3.1      4.3      5.0      5.5      5.6
Engineered plastics(2)       5.0      6.6      7.3      7.6      7.8
Fluids and lubricants        5.4      5.8      5.8      5.7      6.0
All other materials(3)      12.2     12.2     13.3     13.3     12.9

Total - percent            100.0    100.0    100.0    100.0    100.0
Total - lbs.                3495     3120     3010     2895     3150
Total - kg.                 1590     1420     1370     1315     1430

1 high-strength low-alloy; stainless; and other steel.
2 also known as composites.
3 glass, rubber, copper, zinc die castings, power metal parts, etc.

Source: Authors' estimate, based on American Metal Market, Automotive Age and
other journals and Ward's Automotive Yearbook, Ward's Special Reports and
other books/monographs. Special thanks to D. Winter of Ward's.

Other materials that enter the average automobile are various fluids and lubricants; these account for a steady 6 percent of the total weight. The "all other" category consists of a wide variety of materials ranging from copper to glass, from magnesium to powder metal parts. Here again, the tug of materials continues. For example, copper has been squeezed by aluminum in heat exchangers, but its use increased in wiring. Glass is battling it out with plastics, while powder metals are finding use in parts. Magnesium is used sparingly in high volume vehicles but has been embraced more by high-priced specialty sports cars such as the Mercedes 300SL (seat frames) and the GM Corvette (experimental engine block).

Looking at the total tonnage of advanced materials shipped for automotive usage, Table 3 provides us with insights. As shown, the highest numbers go to the family of advanced steels, which account for half of the total in both 1993 and 1998. In the coming years, stainless-steel will exhibit the fastest growth rate. Aluminum follows the steel family in terms of total amount shipped, accounting for one-third of total tonnage by 1998. The amount of engineered plastics and other advanced materials shipped in the coming years is lower than that for metals, but they will grow at faster rates than the metals during the 1993-98 period.

END USES OR APPLICATIONS

Advanced materials are used now on all portions of automotive vehicles: structure, engines, drive train, wheels, etc. Indeed, there is no exterior or interior component not subjected to analysis in regard to safety, strength, durability, and therefore to a question of material substitution. But these considerations must be balanced against economic ones and recycling considerations. The lower part of Table 3 provides trends on tonnage of materials by four categories of applications.

Structural applications represent the largest share for advanced materials. The battle to provide front or back panels, hoods, trunks, bumpers, etc. is being waged among specialty steels, aluminum, and composites. Recently, GM made LTV Steel happy by switching back to steel from plastics on the body of its front-wheel-drive minivans. Chrysler also opted for steel bumpers for its 1994 New Yorker model but allowed plastic bumpers to remain on its Concorde, Eagle and Intrepid line to avoid a costly tooling change. Ford is testing all-aluminum panels for the Taurus.

Table 3

Trends in Use of Advanced Materials in Cars, Vans and Light Trucks U.S. and
Canada, 1983-1998

(million lbs. and % change/year)

                                               %
Advanced Material                        annual change
Demand                      1983    1993    1998    93/83    98/93

Total                       4471    7346    9135     5.1%     4.5%

By type:
High-strength, low-
alloy steel                 2200    3300    3850     4.1       3.1
Stainless steel              283     560     750     7.1       6.0
Aluminum                    1425    2288    2850     4.8       4.5
Engineered plastics          177     444     570     9.6       5.1
Other advanced
materials                    386     754    1115     6.9       8.1

By application:
Structural                  1624    2321    2783     3.6       3.7
Engine & mechanical          943    1869    2321     7.1       4.4
Drive train                  995    1793    2244     6.1       4.6
Other                        909    1363    1787     4.1       5.6

Advanced material/
vehicle (lbs/vehicle)        427     578     641

1 Other advanced materials: powder metals, thermoplastic elastomers, reaction
injection molding products, magnesium, advanced ceramics and advanced polymer
composites.

Source: W.P. Weizer, Advanced Materials in Light Vehicles, Cleveland, Ohio:
The Freedonia Group, May 1994.

Engines and mechanical components also constitute a rich battleground for advanced materials. Aluminum cylinder heads have now appeared in Ford V8 engines as well as in such GM cars as the Buick, Olds, and Saturn. Powder metal components are used in Ford's Lincoln Town cars. Composites are widely utilized for air and fuel intake manifolds.

The drive trains of cars, vans, and light trucks were traditionally made of conventional steel and iron. But magnesium is used in clutch housings and transfer cases on Ford light trucks and in the automatic transmission case of the sporty Corvette by GM. Stainless steel was the material of choice for the constant-velocity joints of the Honda Accord made in Ohio.

Other applications of advanced materials range from instrument panels to wheels. The trend, as elsewhere, is to find the most suitable material. Thus, composites proved right for instrument panels, while stainless steel, aluminum and magnesium are used for wheels.

As a general rule, low volume production vehicles are used for experimenting with new materials. Paralleling this, it is often not the Big Three of Detroit or the transplanted Japanese firms that undertake such a task, but rather specialty vehicle producers. Two examples, both in the field of composites, illustrate the point. Currently, Consulier Engineering in Florida is making a gas-powered van for utilities. It is producing such a vehicle under contract for Mosler Auto of Canada. The prototype version weighs 2500 pounds, compared to 4500 pounds for a steel-body van. The average Canadian fleet owner can thus save $7500 per year on gasoline alone. The weight difference may be even more spectacular for an electric vehicle: 3000 versus 8000 pounds, which includes the motor and batteries.

The other example also involves the coming of age of natural gas vehicles (currently some city buses run on natural gas). Brunswick Corporation in Illinois is introducing an all-composite fuel tank that provides a 70 percent savings over its steel counterpart. Target markets range from vehicle makers to fleet owners, including even converters of vans, cars, and light trucks. The tank is a combination of high density polyethylene and glass fibers. The result is high strength-to-weight ratio, tolerance of numerous cycles, and superior fatigue characteristics. Without the need for metal lining, the new tank also offers a 15 percent greater capacity within the same external volume.

TECHNOLOGY

There is agreement that the rich variety of material properties cannot be understood within the context of any single discipline. Thus, material scientists with diverse backgrounds are recruited by companies and by the vehicle makers. These professionals then must balance a complex juggling act, including: (1) economic, i.e., cost considerations; (2) the physical characteristics of materials; (3) ease of fabrication, molding, forming, and retooling; and (4) recycling characteristics and possibilities.

Suppliers of advanced materials for auto makers take the task of protecting or expanding their market share seriously; the stakes are high in terms of both absolute dollar amounts and as a portion of their sales. In addition to their own corporate marketing efforts, therefore, they created special programs or centers. Thus, for example, Alcan, Alcoa, and Reynolds Metal joined in the "aluminum-intensive vehicle" project, touting the metal for car frames, rods, connectors, etc. The makers of composites formed a center in Detroit to promote increased plastics usage to the Big Three headquarters. In a demonstration at the center, several connected panels are formed from different types of plastics using a giant injection press.

But the Big Three apparently felt overwhelmed by the conflicting claims of the different material producers. To evaluate the claims of their vendors, to make their own independent analysis, and to save research dollars at the same time, scientists from Chrysler, Ford, and GM announced the formation of USAMP, the U.S. Automotive Materials Partnership, in mid-1993. This followed another consortium, the U.S. Council for Automotive Research, created a year earlier to do battery and other research. Both enjoy antitrust exemption. USAMP will take a look at composites first, but then analyze other advanced materials and their contributions to weight reduction, cost savings, pollution control, fuel efficiency and recycling.

INDUSTRY STRUCTURE

About 6,500 firms supply parts and/or raw materials to makers of automotive vehicles in the U.S. and Canada. Industry concentration varies from a more competitive situation in steel to more concentration in the case of aluminum and selected engineered plastics. Due to tradition and the in-depth knowledge needed in a given area, there is little crossover from one material family to another. But it pays to keep tabs on rivals in other fields and also to note that, in spite of the trend to outsourcing, some of the car makers are willing to manufacture their own material, e.g., Ford-glass.

Producers of advanced materials serve the vehicle makers in various ways; some provide raw materials, some offer the end product, and some can do both. The makers of plastic resins are not integrated downstream, so they provide the raw materials for processors who then undertake molding components, e.g., instrument panels. Similarly, steelmakers offer their goods for use in exhaust systems but will not do the fabrication. On the other hand, aluminum companies provide both flat-rolled sheets for hoods and side panels as well as the extruded products such as bumpers.

High-strength, stainless, and specialty steel are offered by the same large firms that make conventional steel. Bethlehem Steel, LTV Steel, and USX produce the specialty steels as an integral part of their overall operations. Armco and Allegheny Ludlum are two firms well positioned in the stainless steel field. Some small firms remain competitive by specializing in certain alloy, corrosion-resistant, and lightweight grades.

The leading suppliers of raw aluminum and fabricated aluminum are the giants in the field: Alcan, Alcoa, Alumax, and Reynolds Metal. Alcan makes aluminum engine and transmission components. It is also the largest producer of so-called fin stock for radiators and heat exchangers. The four giants and American Racing Equipment (Noranda) offer aluminum wheels. Douglas & Lamson makes aluminum trim, AE Piston offers pistons made from this metal, and Cascade, ITT, and Zollner are known for their aluminum die castings.

Engineered plastics or composites are offered by several chemical and other firms. Vehicles account for 20 percent of all composite sales, so this market is important to the vendors. The two largest, holding half of the engineered plastics market between them, are DuPont and General Electric. Other companies in the field are BASF, Dow, Mobay, Monsanto and many small firms. The range of goods supplied is enormous, but the dominant engineered resins used are variations of nylon. The recent challenge from improved steels is forcing composites "back to the drawing board."

Consolidation is occurring in each sector, especially in the case of engineered plastics. One factor is the heightened capital requirement to undertake manufacture, fabrication, tooling, etc. A second factor is the set of complex government requirements regarding plant safety, pollution control, recycling, etc. But possibly the most important consideration is the action by car makers. Vehicle manufacturers now wish to deal with fewer suppliers than before. Ford cut back from 2,400 vendors in 1980 to 1,400 in 1994; it is also expanding its global sourcing activities, leaving less room to maneuver for North American suppliers. Still, there will always be room for highly innovative job shops, because there are many car models and because the car makers encourage experimentation and entrepreneurship.

BEYOND THE UNITED STATES AND CANADA

This paper focused on the use of advanced materials in cars, vans, and light trucks manufactured in Canada and the United States. The trend to the use of specialty steel, aluminum, composites, and other advanced materials in vehicles made in other nations is equally strong. This is so because of the driving forces governing the use of such materials that are prevalent abroad. Thus, the price of gasoline is two to four times higher than in the United States; safety, pollution control, recycling are evident in Japan, Western Europe and elsewhere. Vehicle makers are forced to consider lighter cars, more fuel efficient engines, recyclable features. Some examples: all-aluminum cars by Honda and Audi; magnesium parts under the hood of Mercedes; and the wide use of engineered plastics in the Lotus. Italian carmakers can be relied on to experiment with new materials in their esoteric offerings.

The trend toward worldwide sourcing on the part of carmakers will have implications for the vendors of advanced materials. It means that they will have to reappraise their manufacture of both raw materials and fabricated components, working more closely with vehicle makers. This applies especially to "world cars," e.g., Ford: Mondeo/Mystique/Contour.

CONCLUSION

This paper examined the use of less traditional, more advanced materials in cars, vans, and light trucks being built in the United States and Canada. We find increasing usage of such materials, but their march to replace conventional steel and iron has slowed. Partly because the market for their offerings has matured, there is a lively battle for market share among the makers of advanced materials, be they in raw format or as fabricated components. There are cross-currents at any given time and no clear victor is likely to emerge. In each subsector large firms seem dominant, but there is room for small, innovative enterprises. The vehicle makers are forming their own consortium to evaluate the claims of vendors. They are also putting pressure on suppliers for improved goods (lower costs, lighter weight, etc.). The ultimate beneficiaries are the buyers of the end products -- the individual or fleet purchasers of cars, vans, and light trucks.