Automotive Engineering - March 2024 - 3

SUPPLIER EYE
History is a great teacher
H
istory is a great teacher. There are
lessons from the past that we should
never forget. Lessons that are often
the difference between success and
failure in business. In the auto industry, some of
the oft-forgotten constructs are capital intensity
and long lead times. History's lesson is that
optimizing capacity utilization and flexibility
are core to survival.
Back in 1989, this author worked on the first
detailed compilation of a North American light
vehicle production capacity study. Researching
the JPH (jobs per hour), shift structures and
labor constraints in addition to each plant's
production capacity was ground-breaking. At
the time, it was becoming apparent that the
Detroit Three's North American production was
being augmented by Asian OEMs locating new
capacity (solely or through joint ventures). As
the domestic players were losing market share,
adding capacity was going to pressure profitability.
Understanding utilization rates by each
OEM and vehicle build structure (unibody vs.
full frame) was key to early identification of
emerging issues.
Many vehicle and powertrain facilities closed
before and after the 2009 GM and Chrysler
bankruptcies. Iconic though underutilized facilities
such as Chrysler-St. Louis, Ford-Twin Cities,
GM-Shreveport and more were taken offline.
The ability to strengthen the core and ensure
any capital investment was better focused on
raising productivity and manufacturing flexibility
was key.
Michael Robinet
Executive Director,
Consulting,
S&P Global Mobility
SAE Foundation
Trustee
michael.robinet
@spglobal.com
As the industry
invests billions
to electrify
their vehicle
portfolios,
capacity
utilization
will face new
challenges.
Rising demand and the ability to employ
three-shift and three-crew setups allowed OEMs
to improve productivity with fewer facilities.
The chart below utilizes the SP Global Mobility
North American Light Vehicle Production
Forecast to understand utilization rates.
Examining capacity utilization at a normalized
level (assuming the highest possible line rate of
two shifts and five days per week), levels eclipsing
100% were reached over the last decade.
Additionally, higher capacity utilization enabled
the industry to focus elsewhere, placing utilization
concerns on the back burner. Several years
of record production levels of over 17 million
units diverted our attention.
The onset of COVID-19, chip scarcity and other
supply-driven constraints lowered capacity utilization,
cratering utilization rates to the point
where they have not yet rebounded to pre-2020
levels. As the industry invests billions to electrify
vehicle portfolios, capacity utilization will face
new challenges.
It can be easy to boil overall industry utilization
to single number. The reality is that beneath
the topline, OEMs are often dealing with capacity
focused solely on BEVs or ICE propulsion
offerings or unibody versus full-frame architectures
with little to no ability to flexibly build
these in the same facility. As fleets are electrified,
it may not be cost-effective to build extreme
manufacturing flexibility into every facility.
Unless the industry fully understands the rate
at which the fleet will transition to BEVs, which
seems unlikely, capacity utilization will be in a
trough for years to come. It's yet another unintended
consequence of electrification.
As this lumpy transition continues, winners
and losers will emerge throughout the value
chain. From OEMs on down through the supply
tiers, this ongoing production imbalance will
lower overall industry utilization and drive winners
and losers. With the high production levels
from the past behind us, volume will not mask
this issue. We'll need to get used to low utilization
rates and the resulting impact on OEM competitiveness,
their suppliers and the viability of
others in the ecosystem.
Historical and predicted light-vehicle capacity utilization in North America, 2010 to 2030.
Data compiled February 2024 from S&P Global Mobility.
AUTOMOTIVE ENGINEERING
March 2024 3

Automotive Engineering - March 2024

Table of Contents for the Digital Edition of Automotive Engineering - March 2024

Automotive Engineering - March 2024 - INTRO
Automotive Engineering - March 2024 - SPONSOR
Automotive Engineering - March 2024 - CVRA
Automotive Engineering - March 2024 - CVRB
Automotive Engineering - March 2024 - CVR1
Automotive Engineering - March 2024 - CVR2
Automotive Engineering - March 2024 - 1
Automotive Engineering - March 2024 - 2
Automotive Engineering - March 2024 - 3
Automotive Engineering - March 2024 - 4
Automotive Engineering - March 2024 - 5
Automotive Engineering - March 2024 - 6
Automotive Engineering - March 2024 - 7
Automotive Engineering - March 2024 - 8
Automotive Engineering - March 2024 - 9
Automotive Engineering - March 2024 - 10
Automotive Engineering - March 2024 - 11
Automotive Engineering - March 2024 - 12
Automotive Engineering - March 2024 - 13
Automotive Engineering - March 2024 - 14
Automotive Engineering - March 2024 - 15
Automotive Engineering - March 2024 - 16
Automotive Engineering - March 2024 - 17
Automotive Engineering - March 2024 - 18
Automotive Engineering - March 2024 - 19
Automotive Engineering - March 2024 - 20
Automotive Engineering - March 2024 - 21
Automotive Engineering - March 2024 - 22
Automotive Engineering - March 2024 - 23
Automotive Engineering - March 2024 - 24
Automotive Engineering - March 2024 - 25
Automotive Engineering - March 2024 - 26
Automotive Engineering - March 2024 - 27
Automotive Engineering - March 2024 - 28
Automotive Engineering - March 2024 - 29
Automotive Engineering - March 2024 - 30
Automotive Engineering - March 2024 - 31
Automotive Engineering - March 2024 - 32
Automotive Engineering - March 2024 - 33
Automotive Engineering - March 2024 - 34
Automotive Engineering - March 2024 - CVR3
Automotive Engineering - March 2024 - CVR4
https://www.nxtbook.com/smg/sae/24AE05
https://www.nxtbook.com/smg/sae/24AE04
https://www.nxtbook.com/smg/sae/24AE03
https://www.nxtbook.com/smg/sae/24AE02
https://www.nxtbook.com/smg/sae/23AE12
https://www.nxtbook.com/smg/sae/23AAVE11
https://www.nxtbook.com/smg/sae/23AE10
https://www.nxtbook.com/smg/sae/23AE09
https://www.nxtbook.com/smg/sae/23AE08
https://www.nxtbook.com/smg/sae/23AAVE07
https://www.nxtbook.com/smg/sae/23AE06
https://www.nxtbook.com/smg/sae/23AE05
https://www.nxtbook.com/smg/sae/23AAVE04
https://www.nxtbook.com/smg/sae/23AE04
https://www.nxtbook.com/smg/sae/23AE03
https://www.nxtbook.com/smg/sae/23AE02
https://www.nxtbook.com/smg/sae/23AAVE01
https://www.nxtbook.com/smg/sae/22AE12
https://www.nxtbook.com/smg/sae/22AVE11
https://www.nxtbook.com/smg/sae/22AE10
https://www.nxtbook.com/smg/sae/22AE09
https://www.nxtbook.com/smg/sae/22AE08
https://www.nxtbook.com/smg/sae/22AVE07
https://www.nxtbook.com/smg/sae/22AE06
https://www.nxtbook.com/smg/sae/22AE05
https://www.nxtbook.com/smg/sae/22AVE04
https://www.nxtbook.com/smg/sae/22AE04
https://www.nxtbook.com/smg/sae/22AE03
https://www.nxtbook.com/smg/sae/22AE02
https://www.nxtbook.com/smg/sae/22AVE01
https://www.nxtbook.com/smg/sae/21AE12
https://www.nxtbook.com/smg/sae/21AVE11
https://www.nxtbook.com/smg/sae/21AE10
https://www.nxtbook.com/smg/sae/21AVE09
https://www.nxtbook.com/smg/sae/21AE09
https://www.nxtbook.com/smg/sae/21AE08
https://www.nxtbook.com/smg/sae/21AVE07
https://www.nxtbook.com/smg/sae/21AE06
https://www.nxtbook.com/smg/sae/21AE05
https://www.nxtbook.com/smg/sae/21AVE05
https://www.nxtbook.com/smg/sae/21AE04
https://www.nxtbook.com/smg/sae/21AE03
https://www.nxtbook.com/smg/sae/21AVE03
https://www.nxtbook.com/smg/sae/21AE02
https://www.nxtbookmedia.com