While automotive sales continue to hit a wall at around 15 million units, the industry is going after another target.
Suppliers want to prove Darwin's theory of evolution.
Survival of the fittest will force many midsize plastic processors to acquire a company or be acquired; to absorb more responsibilities — and costs — for design and engineering; and to find new technologies that play into the industry's mission to whittle down excess costs.
In other words, it's a jungle out there.
``It's not as simple as [before] where the focus was only on being an excellent supplier,'' said Fred Keller, chairman of injection molder Cascade Engineering Inc. in Grand Rapids, Mich. ``A middle-sized supplier must now be in a better position in terms of cost [savings], quality and delivery and be big enough to have a critical mass of technology work going on.
``There are suppliers who have figured out that formula and will thrive and those that will struggle.''
Cascade is an example of what Keller calls ``survivability'' by keeping agile. In May, the processor formed a joint venture with Essex Specialty Products Inc. of Auburn Hills, Mich., to make sound-deadening foam products for vehicle exteriors, a partnership that will broaden Cascade's base.
And, in a well-publicized move in September, the company supervised a team from both Chrysler Corp. and the supply community to form the prototype CCV ``world car.'' The CCV car, or Composite Concept Vehicle, features a structural body shell made from PET material and could be the first vehicle on the road with an entirely plastic body.
The project pushes the bar out considerably for the injection molding of large parts, Keller said. But it also spotlights how suppliers are seizing hold of a project early in design.
``Our long-term survivability depends on how skillfully we put together relationships with other suppliers and customers,'' he said. ``The CCV offers a little glimmer of hope for suppliers.''
Contrary to the gush of activity by suppliers, automotive sales in North America remain a stagnant pool — albeit one at a high-water mark. Carmakers expect vehicle sales to reach 15.4 million units this year, the same figure as for 1996.
Since 1994, units sold have hovered around 15 million, said Chrysler chief economist Van Bussmann in Auburn Hills, Mich. But few are complaining about those figures, he said.
``At the risk of sounding monotonous, we're quite happy with stability,'' he said. ``We've fulfilled most of the pent-up demand by consumers after having some down years in the early 1990s.''
Yet, some analysts warn that the bubble could burst before the decade is out. Traditionally, the auto industry starts a downturn before the economy begins to head south, said auto analyst David Andrea of Detroit-based Roney & Co.
``Nobody is looking at anything as a source of a shock to the system that would drop the trap door open to the market,'' Andrea said. ``But sales should start to fall off.''
On the supply side, pressures are forcing Tier 1 firms to restructure their supply base from top to bottom, said Craig Fitzgerald, a partner at Plante & Moran LLP, auto industry consultants in Southfield, Mich. The large companies want their subsuppliers to take a lead role in design and engineering for a specific part, he said.
That requires some financial muscle by smaller companies.
``The last two years have been marked by blockbuster large transactions,'' Fitzgerald said. ``Now, I think the privately held companies in the $25 million to $250 million sales range will be the ones participating in mergers and acquisitions.''
Consultant Donna Parolini of International Business Development Corp. in Troy, Mich., said she expects the loss of another 500 suppliers in North America during 1998. Some suppliers are finishing contracts that have not been replaced and other family-owned businesses are exiting quietly, she said.
Material suppliers have reason for optimism. Worldwide, Dow Automotive expects 67 million vehicles to be sold by the year 2002, up from 55 million units purchased today, global Vice President Larry Denton said from his Southfield, Mich., offices.
Firms with the size and international stature of Dow will have the opportunity to support carmakers globally in vehicle design and development, Denton said. That could lead to an increase from 11 billion pounds of plastic used in the auto industry today to 16 billion pounds in 2002, he said.
``In my view, nobody yet has optimized globalization beyond having global factories,'' Denton said. ``You have to be able to follow the source. That means when we sell plastic to a Tier 1 supplier in France, we also work with a [carmaker] in Germany and shop the material to an assembly plant in North America.''
Thermoplastics will encroach more heavily on interior structural parts for applications such as instrument panels, doors, rear shelves and headliners, he said. Carmakers are shifting to plastics because of its energy absorption and thermal capabilities, he added.
``We will stop making plastics that just hang on vehicle parts as an aesthetic function,'' Denton said. ``The structural products can fully support a roof, a door or an exterior part. By doing that, we can offer considerable cost saving by eliminating parts.''
Denton used the example of the current Chrysler Jeep Cherokee sport utility vehicle, which uses a structural instrument panel made with polypropylene. The component has half the number of parts of a typical instrument panel, he said.
Montell Polyolefins also expects a major boom in thermoplastics use in North America. The top 10 thermoplastics suppliers in North America will produce about 830 million pounds of PP and thermoplastic olefins this year, said senior marketing manager William Windscheif of Montell's Troy, Mich.-based automotive division.
By 2007, that figure should climb to 1.23 billion, Windscheif said. The growth will spread over interior and exterior markets, where bumpers and side cladding will continue to use TPO materials in greater numbers, he said.
Carmakers also are learning to design with plastics, he said.
``We're starting to see material engineers work with design engineers and establish a close relationship," Windscheif said. "It's a matter of necessity now, as more business is pushed down to the Tier 1 level.''
All in all, the pressures on suppliers to conduct design work could spike another renaissance of plastics usage, according to Cascade's Keller.
``The plastics industry for a period of time reached a plateau in innovation,'' Keller said. ``With larger structural bonded parts, for instance, we've now been allowed to let our imaginations run wild. It's a very competitive world, but a whole new evolution in thinking is occurring.''