American companies linked to the auto industry are changing radically as the automakers are swept by the revolution stemming from energy crises, competition from imports, sags in the national economy and government regulation.
Although these forces have put the auto industry and many of its traditional suppliers--notably steelmakers--into a skid, they have not hurt all of the industry's suppliers. Changes in technology and needs for new, and often lighter, materials are helping some of them.
"I think there is a revolution going on in the industry," says James F. Bere, chairman of Borg-Warner Corp., a major producer of transmissions and a variety of other automobile equipment.
"There have been some rather dramatic changes," says Peter F. Connor, manager of the market development division of Inland Steel Co., which ships about 26 percent of its output to the auto industry, principally General Motors Corp. "Historically, change in Detroit is evolutionary rather than revolutionary."
The revolution has two themes: a sharp drop in demand for Detroit's products as a result of the lagging economy and competition from abroad; and down-sizing.
The market for the Detroit-made automobile has shrunk drastically in recent years. Industry analysts estimate that 5.75 million domestic cars were produced and sold in 1982, marking the industry's worst year since 1961, when 5.5 million U.S. cars were sold, and a far cry from the industry's peak of 9.7 million cars produced in 1973. Domestic manufacturers produced and sold 6.2 million cars in 1981.
The shrunken production figures translate into smaller orders for the auto industry's suppliers, which are seeing demand for their products shrink for another reason as well: The fat American car is losing weight, shaping up for battle with the smaller, faster-selling imports that were expected to account for 30 percent of the domestic auto market in 1982.
In 1978, the average net weight of American cars was 3,360 lbs. That dropped to 2,750 lbs. for 1983 models and is expected to fall to 2,500 lbs. by 1985, according to James E. Harbour and Associates, an industry analysis firm in Berkeley, Mich. Nearly all the raw materials that go into a car--steel, glass, rubber--go down in direct proportion when the weight declines, Harbour says.
For example, in 1978 steel mills shipped an average gross weight 2,800 lbs. of steel to make one car. For 1983 models, the mills were shipping an average 2,100 lbs., gross weight, to make a single auto.
Steel industry shipments to the auto industry are down a total of 40 percent in the past five years, and cutbacks in the industry have added 165,000 steelworkers to the 263,000 autoworkers on indefinite layoffs in the United States. "Our folks are doing nothing but standing in line these days," says a United Steel Workers spokesman. "Soup lines and bread lines and unemployment lines."
The average amount of glass used in a car dropped from about 93 lbs. in 1978 to about 74 lbs. this year and is expected to go down to about 67 lbs. by 1985. "They are using thinner glass and less of it," Harbour says. And most American cars will be rolling on 13-inch tires by 1985, instead of the 15-inch ones popular in 1978.
The old, heavy V8 is being replaced by four-cylinder engines and small V6s, leading to a significant drop in the amount of cast iron used in cars (not to mention fewer spark plugs and a variety of other components).
In sum, bad news for the steel, rubber and glass manufacturers. But other suppliers of raw materials and parts are not faring so badly.
In the rush to thin the American automobile, automakers are using greater amounts of lighter materials. Aluminum, for example, accounted for an average 110 lbs. of a car's weight in 1978, but this year rose to about 135 lbs. By 1985 it is expected to account for about 140 lbs. of the weight of an average U.S. auto.
All is not gloom for the steelmakers. They are selling to the automakers lighter, stronger--and more expensive--steel and sometimes make up in cost for the loss in tonnage. Connor says that some inroads made by plastic and aluminum in past years have been reversed because steel proved a better value in the long run.
Materials are not the only area seeing massive change. A host of technological developments and adoption of new mechanisms--notably front wheel drive and fuel injection--are helping suppliers whose parts automakers have decided to buy after formerly making the parts themselves.
As the needs for parts and materials are changing, so are the automakers' relationships with their suppliers. Whereas once an automaker would spread orders of a component among several companies, to keep any one firm from becoming too strong, General Motors is now taking the lead in the concept of "dedicated" suppliers, giving most or all of a parts requirement to one company.
At the same time, suppliers are specializing more, a philosophy that goes hand-in-hand with the dedicated supplier concept.
There are those who believe that the auto industry's production cutbacks are permanent, that Detroit's output won't increase much in coming years, as imports capture more and more of the market.
Many industry executives look with great skepticism on General Motors Chairman Roger Smith's prediction of a leap in domestic car and truck production to 14 million units in 1984 (1973's 12.7 million figure is the only time the industry ever came close to that level).
The possibility for an upturn was given some credence by a small surge in auto sales at the end of 1982, when interest rates on new-car loans had fallen to 10.9 percent from about 17 percent earlier in the year.
Harbour believes that the permanently down-sized car does not mean a permanently down-sized domestic industry, depending on how well manufacturers match their foreign competitors in quality and production. But he is skeptical about the ability of the U.S. companies to take back any significant share of the market.
"The Japanese have taught Americans that they can get Mercedes-Benz quality in a $5,000 car," he says, adding that the customer loyalty created by that lesson is hard to undermine.
Even if the industry rebounds, few believe that the loss of auto and related jobs will be restored fully, mainly because of increased factory automation. "It's safe to say that a number of our people will never get their jobs back," United Auto Workers President Douglas Fraser said in a recent interview.