DETROIT — The automotive industry's push to produce modules outside the automakers' gates will mean more work is trickling down the supply chain. Major automotive suppliers admit the drive to turn out complete systems ready for automakers to snap into cars as they pass down the assembly line — rather than individual components — is making them reconsider if they should produce each piece themselves.
"We only want to make those things that [original equipment manufacturers] are going to want to buy," David E. Cote, president of TRW Inc., said March 7 at SAE 2000 in Detroit. "It's a good opportunity for our suppliers."
TRW Automotive already has 10 factories devoted to modules and another four set to come on line within the year, Cote said.
With each system, whether for cockpits or chassis, TRW faces increasing demands by automakers to test and pre-assemble the units.
That means the company must spend more time, effort and money on bringing together each piece of a module puzzle.
It simply doesn't make sense for the business to continue producing each one of those pieces, said Arvind M. Korde, vice president integrated supply chain management for Cleveland-based TRW Automotive.
"We used to believe every process we needed to be involved in ourselves," Korde said. "What is happening is with increasing assembling, testing and integration studies, we can do better focusing on these things.
"Our outsourcing will go up."
TRW is going through each facility this year to determine what it should continue producing itself and what it can hand off to another business, Cote said.
"We just make too many things," Cote said.
Southfield, Mich.-based Lear Corp. also is passing things down the chain, and seeking solid links as it takes on more modules, said Ash Galbreath, vice president of advanced engineering and validation.
"Our Tier 2 partners are key to our strategic growth," he said.
Lear is bringing its suppliers on line with research in early stages of projects, so it is certain it has a good team available.
The company also is looking for Tier 2 companies offering innovations it can add to the mix, adding customers for both businesses, he said.
Rather than struggle to hang on to a Tier 1 status, smaller suppliers may find more businesses opportunities at a Tier 2 level and production passes down the line, noted Norman D. Lemon, director of marketing communications Europe-Asia/Pacific for Meritor Automotive Inc.
The Troy, Mich.-based company is seeking buyers for its roof module systems, expected to hit the European auto market by the 2004 model year.
Some of those suppliers already are feeling the business ripples.
Clinton, Mass.-based Nypro Inc. will have nearly $100 million in auto industry sales this year and is seeing growth of 15-20 percent per year, said Lawrence E. Bell, business manager for the automotive group.
The company is spending $6 million to open an injection molding plant in Monterrey, Mexico, in June with 10 presses on line. Bell expects the site will expand to 20 machines within a year with further growth to 40 presses a few years after that.
That growth is coming from Tier 1 companies moving into modules and away from components, he said.
"As these major Tier 1s get more into modules, they're asking us to take on more piece work," he said.
"What we're finding from many customers is that they need to spend more on assembly," added Alfred J. Cotton Jr., Nypro's public affairs manager. "Injection molding no longer fits their purposes."
Nypro, with operations in Asia and North America, can provide a global partnership to Tier 1 companies, Bell said.
"They're looking for partners who can take on more value-added operations," he said.
Even some bigger Tier 2 operations are farming out plastic molding, said Henry Jackson, owner of Jackson Plastics Inc.
His Nicholasville, Ky.-based company opened its third plant in January, a $14 million injection molding operation in Danville, Ill., supplying Lear and Textron Automotive Co. Jackson Plastics had about $12 million in sales last year.
Jackson said he is ready to follow up on Cote's remarks and make certain TRW knows what his company can offer.
"The Tier 1 [businesses] are getting much more selective about what they're going to make," he said. "I'm seeing it happen all the time."
