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Dozens of less-polluting cars, including hybrids powered by batteries and others with clean-burning diesel technology, will hit the market in the next several years, but the auto industry’s new wave is bypassing most American auto suppliers.
As many as 1.8 million hybrid and advanced-diesel new cars and trucks could be sold in the United States within five to eight years, say researchers at the University of Michigan. Some suppliers in southeast Wisconsin, however, are gearing up for the industry transformation, with research under way to develop batteries for hybrid cars that toggle between gasoline and battery power.
They’re also laying the groundwork for more futuristic technology — cars powered by fuel cells.
Hybrids have been on the road for several years, starting with the introduction of the Honda Insight and Toyota Prius in 1999. With hybrid sales soaring, Toyota is doubling production of the Prius, and other manufacturers are embracing the technology. Ford last fall introduced the first hybrid sport utility vehicle, the Escape, and the total number of hybrid models is expected to grow to 17 by the 2006 model year, which begins this fall, said David Leiker, automotive analyst at Robert W. Baird & Co. in Milwaukee.
On the new-diesel side, Volkswagen has led the way, and Chrysler’s Jeep Liberty diesel is the first clean-diesel offered by a domestic carmaker.
The shift away from gas guzzlers toward gas sippers and even teetotalers is being driven by high gasoline prices, the United States’ dependence on foreign oil and concerns about emissions of greenhouse gases. The growing popularity of the models comes as political and business leaders prepare for potential laws curbing such emissions.
An international climate change treaty designed to reduce emissions of carbon dioxide took effect last week. Though the United States has not signed the treaty, Democrats in the U.S. Senate have said they will not support new clean-air legislation that fails to limit carbon dioxide releases. To date, Japanese and European companies have taken the lead in developing the new technologies. In Wisconsin, researchers at Johnson Controls Inc. and Modine Manufacturing Co. are in the race.
Johnson Controls Inc., an industry leader in the production of car batteries sold under brand names such as Diehard, is preparing for the shift. It acquired a European battery maker two years ago and said last month that it hopes to develop a hybrid-compatible battery within a few years.
An empty space within its Battery Technology Center in Glendale is being transformed this year into a lab devoted solely to hybrid battery technology, spokesman Glen Ponczak said.
Johnson Controls is tapping its expertise in energy management — which goes back to its founder’s invention of the room thermostat in the late 1800s. The company sees growth potential in vehicle energy management — ways to minimize the amount of power needed to run the array of electronics found in vehicles today.
In Racine, Modine is working on technology for fuel cells — including advanced fuel cells being developed by industry leader Ballard Power Systems. Among its core products, Modine is developing new air coolers that emit less carbon dioxide, nitrogen oxide and other pollutants. More stringent regulations, expected in both Europe and the United States, will restrict emissions of pollutants such as nitrogen and drive the industry toward cleaner options.
U.S. falls behind
These companies are the exception rather than the rule: A new study conducted at the University of Michigan found that the domestic auto supply industry could lose tens of thousands of jobs, given the lead offshore suppliers already have in producing 21st century vehicle power trains.
A new report concludes that the U.S. auto industry could lose 38,000 to 207,000 jobs in its supply base over the next several years, as the number of hybrids and related cars sold grows.
As many as 1.8 million hybrid and advanced-diesel new cars and trucks could be sold in the United States within five to eight years, researchers at the University of Michigan’s Office for the Study of Automotive Transportation concluded. That’s in line with a forecast earlier this month by the industry consulting firm J.D. Power & Associates.
"Given Japan’s substantial technological and production lead in hybrids and Europe’s lead in smaller displacement diesels, offshore-based automakers and suppliers are likely to make the majority of these vehicles and their power train components outside the United States," the researchers said.
The number of jobs lost will depend on how big the market share for hybrid and advanced-diesel vehicles becomes.
"There’s still time to catch up, but how long the window remains open is speculation, but you worry that as the technology development proceeds faster and faster and faster, you worry that the time to catch up gets shorter and shorter and shorter," said Mike Flynn, director of the Michigan think-tank.
Investing in new technology
The new report encourages adoption of a tooling tax credit that would provide a financial incentive to manufacturers to invest in the new technology. The recommendation was part of a package of proposals unveiled late last year by a bipartisan panel, the National Commission on Energy Policy, after several years of research. The commission developed the recommendations to help the nation address its energy needs and climate change at the same time.
The impact on Wisconsin’s manufacturing sector isn’t clear. Wisconsin isn’t as heavily focused on automotive manufacturing as three other Midwest states — Michigan, Indiana and Ohio — but vehicle and parts assembly remains an important segment of the state’s factory base.
There has been very little impetus to invest in new technologies because so few of the hybrids and other forms of fuel-efficient vehicles have been made. At an industry conference last summer, experts said the industry’s inability to "pick a winning technology" has left suppliers hamstrung and unsure of how to proceed.
The current technologies include hybrid-electric vehicles, which use both a conventional gas engine and electricity from a battery to run the car.
But European car companies have strong hopes for advanced diesel, a next-generation and less clunky form of diesel than appeared on this side of the Atlantic in the 1980s.
Though Japanese and European suppliers are leading the effort, some U.S. suppliers are busy developing products to help vehicles increase their fuel efficiency. Others are betting on technologies for the long-term, such as fuel cell and hydrogen-powered vehicles.
‘Moderate’ exposure
An analysis this month by Baird’s Leiker concluded that BorgWarner, Tenneco and Delphi Corp., all based outside Wisconsin, are the best-positioned for alternative power train technologies. Modine and Johnson Controls are grouped with five other companies that have a "moderate" exposure to the new technologies.
"Hybrid vehicles are starting to successfully penetrate the market, but production levels may be five years away from being significant enough to materially impact suppliers," Leiker wrote. Including Modine, "several suppliers are doing work in the areas of fuel cells and hydrogen, but payback for current investment in these technologies will not likely occur for many years."
The University of Michigan report says most job losses are likely to be centered in the Michigan-Indiana-Ohio corridor of automotive manufacturing. Most vulnerable are the factory jobs of workers who make conventional engines and transmissions.
Old batteries not gone yet
Even though it’s growing, the market share of hybrids will still be a fraction of conventional gasoline-powered vehicles for some time. The most optimistic projection says 1.8 million hybrids will be sold by dealers in 2009, and that would be just 11 percent of the new-vehicle market, the Michigan group found.
That’s why Johnson Controls, the largest maker of car batteries in North America, continues to focus on improving conventional batteries while researching hybrid-electric batteries, Ponczak said.
For Johnson Controls, the hybrid opportunity is great because those cars contain not one but two batteries: The new-technology battery runs the car when the gasoline-powered engine isn’t, and the conventional 12-volt battery is still needed to start the engine, turn on headlights and run power windows and rear-seat DVD players.
Panasonic and Sanyo make all of the engine-powering batteries found in hybrid cars on the road today. But Johnson Controls is optimistic that its technology will be ready to start equipping hybrids with batteries before the end of the decade, perhaps in 2007, Ponczak said.
"In a couple years, we fully expect to be a leader in providing batteries to hybrids," he said. "But we know that we’re going to continue to invest in improving lead-acid batteries because they’re going to be around for a very long time."
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