Suppliers see opportunity as auto industry shifts to mobility

DETROIT – The automotive industry landscape is changing via rapid advancements in technology. So much so, that suppliers are joining their manufacturing customers in a whole new industry — mobility.

Three top auto supplier executives spoke to the Detroit Economic Club in a meeting Tuesday about mobility, their place in it and Detroit’s competitiveness. American Axle CEO David Dauch, Lear CEO Matt Simoncini and BorgWarner CEO James Verrier are navigating their companies through a transformation.

“We’ve got to be agile; (mobility) is no one thing,” Verrier said to the sold-out crowd. “We have to be anticipating those trends, understanding them and building a value proposition around them to be successful.”

That success comes in various ways. BorgWarner Inc. is doubling down on its propulsion technologies for use in autonomous and connected cars. Lear Corp. is investing in startups that focus on software it can integrate into seats. American Axle Manufacturing is diversifying its products for use in electric vehicles and other alternative systems.

Simoncini said mobility presents a major business opportunity.

“Ride sharing is what our customers are investing in and it creates a huge opportunity for production,” Simoncini said. “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 believes mobility is also a big opportunity for the region and city — Lear opened an innovation center in the city in October.

“It is a competition,” Simoncini said. “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…”

Verrier takes a different, more collaborative approach.

“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.”

The conversation, moderated by Detroit Free Press columnist Carol Cain, quickly turned to policies of the Trump administration.

Dauch said the entire industry is in a “wait-and-see mode” until the administration decides what it’s going to do with free trade, fuel economy standards and tax policy.

Taxes and CAFE

“We need the best tax policy to compete,” Dauch said, referencing the need for a reduced corporate tax rate, which is currently at 35 percent. President Donald Trump campaigned to lower it to 15 percent and the Republican-led House has floated bills reducing it to 20 percent.

Verrier, however, wants the administration to ignore the expected demands of automakers regarding Corporate Average Fuel Economy standards.

“Do not slow down the pace of CAFE standards,” Verrier said. “Don’t go back. Let’s be thoughtful and careful that solving one problem doesn’t create more problems.”

BorgWarner and other suppliers have benefited from strict fuel economy standards as they’ve been able to develop more expensive, higher margin products. Automakers, on the other hand, have stated the standards are not supported by market trends, such as low gas prices that have driven sales of less fuel efficient trucks and SUVs.

It’s time for the White House to give real direction, Simoncini said.

“Develop your strategy along the border,” Simonci said, 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…”

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