New mobility technologies have forced suppliers and automotive original equipment manufacturers to push boundaries with material and parts development.

OEMs are getting ready to roll out a variety of new electric vehicle platforms within the next six years, highlighted by investments from General Motors, Ford, Fiat Chrysler Automobiles, Volvo, Volkswagen and Toyota, among others. Fuel economy pressure from government regulations regarding greenhouse gas emissions are driving OEMs to make these significant investments.

What remains to be seen is how fast the public will embrace these new technologies, as a variety of hurdles must be cleared before electric vehicles have the chance to take significant market share. The three biggest obstacles are battery range, the charging infrastructure—especially in the U.S.—and affordability.

Most forecasts have internal combustion engine-based platforms dominating the overall fleet for at least the next decade, meaning suppliers and OEMs must walk the fine line between investing for the future and focusing on its core business.

Electric push

Two suppliers aren’t waiting around for EVs to take over.

Freudenberg Sealing Technologies has been upfront about the potential threat to its core business—with about 70 percent of its automotive sales, just north of $1 billion, on the line should it fail to adapt.

Two of its strategic acquisitions in 2018 are, so far, paying off. The firm acquired Elcore and a significant interest in Michigan-based Xalt Energy to form its Battery and Fuel Cell Division. CEO Claus Moehlenkamp said Xalt is projected to more than triple its sales for 2019—about $50 million—under Freudenberg’s ownership, and the firm forecasts it will double again to $100 million in 2020.

Dana Inc. also is preparing for the shift, becoming a lead investor in Hyliion Inc., which develops intelligent, electric-hybrid architectures for Class 8 vehicles that can be installed on new trucks or retrofitted on existing trucks.

The Hyliion stake is just one of six other strategic transactions in the last couple of years to position itself as a leader in E-propulsion. Others include acquiring a controlling interest in TM4, a Canadian electrification company, and agreeing to buy the drive systems business of Oerikon Group, a Swiss-based engineering technology company.

So while it may be awhile before EVs take significant market share from ICE platforms, major suppliers are setting the foundation to be ready when the shift happens.

False start

Tenneco had big plans when it acquired Federal Mogul in 2018, but those plans had to wait until 2020.

The newly formed $17.1 billion company—based on 2017 pro forma total revenue—was to re-form into two divisions: Driv Inc. was to focus on aftermarket and ride performance and Tenneco was to focus on powertrain technologies. The company was to split in late 2019 to form two companies.

Because Tenneco also took on $3 billion in debt from Federal Mogul, the plan had to be delayed. The firm said that with weaker automotive demand, neither of the smaller companies would have been able to handle its share of the overall debt burden.

Expanding footprints

A number of automotive suppliers added to their global capabilities, including but not limited to:

• Toyoda Gosei, which opened a fifth plant in India and expanded in China. The firm also recently disclosed plans to divest its European-based Meteor unit, which also has a presence in the U.S.;

• Fukoku is investing $3 million to install six machines to its plant in Laurens, S.C.;

• Tigerpoly will invest $10.7 million at its site in Grove City, Ohio, to add new equipment, space and jobs; and

• Vibracoustic will add a materials development center in Germany.

Improving relationships

Relationships among suppliers and six of the major OEMs improved in 2019, albeit slightly.

According to the OEM Supplier Working Relations Index, conducted by Plante Moran, scores with Toyota, Honda, Ford and Nissan improved while General Motors only fell slightly—by just four points. FCA’s score dropped by 16 points to a 188, the lowest among the six surveyed.

Toyota saw just a three-point increase while the other three car makers improved by at least 10 points, with Nissan leading the way at 16. That wasn’t enough, however, for Nissan to get out of the “very poor tier,” reserved for OEMs with scores less than 250. Toyota, Honda, GM and Ford were all classified as “adequate,” with scores of at least 250, but less than 350.