The Industry’s Move To Focus On Mobility Is Seen As A Major Business Opportunity For Suppliers.
The automotive industry scene is evolving thanks to the rapid innovations in technology. The progress in the said sector has advanced to the point that auto suppliers are now joining their manufacturing clients with a new focus: mobility.
Major opportunity for suppliers
Three leading supplier executives discussed mobility, their position in this new industry and Detroit’s competitiveness during the Detroit Economic Club meeting last Tuesday with moderator and Detroit Free Press columnist Carol Cain. American Axle & Manufacturing (NYSE:AXL) CEO David Dauch, Lear Corporation (NYSE:LEA) CEO Matt Simoncini and BorgWarner Inc (NYSE:BWA) CEO James Verrier are all steering their respective companies through a transformation.
“We've got to be agile; (mobility) is no one thing,” Verrier told the crowd. “We have to be anticipating those trends, understanding them and building a value proposition around them to be successful.”
And “to be successful” would come in several different ways among these three auto suppliers; BorgWarner Inc (NYSE:BWA). strengthening its propulsion technologies for use in self-driving and connected vehicles. Lear Corp., meanwhile, is investing in startups that concentrate on software it can integrate into seats. American Axle & Manufacturing is branching out its products for use in autonomous cars and other alternative systems.
Lear Corp.
Mobility, as Simoncini said, offers a huge business opportunity for auto suppliers like Lear.
“Ride sharing is what our customers are investing in and it creates a huge opportunity for production,” Simoncini stated during the meeting. “What we need to be able to do is create a car that can hold up (to constant use). We can't have a seat wear out because of constant use. We're just scratching the surface.”
Simoncini also believes mobility is a big opportunity for the region and city. Previously, Lear unveiled an innovation center in the Detroit in October.
The Lear executive describes it as a competition.
“It is us against them. It's us against Silicon Valley. It's us against CES (Consumer Electronics Show in Las Vegas). It's us against SEMA (Specialty Equipment Market Association, also in Las Vegas). We have to go out and grab our birthright. I'm fearful as an auto executive and a native Detroiter that we're going to lose this...”
BorgWarner Inc.
Meanwhile, CEO Verrier takes a separate approach, one that is more cooperative.
“I think Detroit and Silicon Valley can be one,” Verrier said. “There's some healthy competition, sure, but bringing both of those things together can bring a better result.”
CAFE, Taxes
When the discussion turned to the policies of US President Donald Trump, Dauch claimed the whole auto industry is in a wait-and-see mode until the Trump administration decides what it will do with free trade, fuel economy standards and tax policy.
“We need the best tax policy to compete,” Dauch stated, referencing the need for a lower corporate tax rate, which currently stands at 35%. Trump had previously campaigned to reduce it to 15% and the Republican-led House has floated bills cutting it to 20%.
However, Verrier wants the administration to disregard the projected demands of car companies regarding Corporate Average Fuel Economy (CAFE) standards.
“Do not slow down the pace of CAFE standards. Don't go back. Let's be thoughtful and careful that solving one problem doesn't create more problems.”
BorgWarner and other auto suppliers have benefited from stern fuel economy standards as they have been able to develop more costly, higher margin products. On the other hand, automakers have claimed the standards are not supported by market trends, such as low gas prices that have driven sales of less fuel efficient trucks and SUVs.
Simoncini expressed that it is time for the White House to provide real direction.
“Develop your strategy along the border,” the aforementioned executive stated, regarding free trade with Mexico. “What we need is clarity in policy and time to react. All we've had are vague policies and vague comments. We need specifics on policy and definitions of what truly is an import. If we don't, (Trump) will put our industry at a disadvantage.”