There's room on the road.

Smaller molders who pick the right niche can cruise with the big guys in automotive composites.

At a time when automotive composites use is surging ahead, the molder base has undergone rapid consolidation. The number of automotive SMC and RTM molders has fallen by more than half in the last four years. The result is a two-tier market, with a very few large molders and several small ones.

What caused this shake-up, and is there room for giants and smaller guys in this new environment? Economic pressures have channeled the the high-volume body panel business into the hands of the few biggest molders, but a number of niche markets have opened up to provide ample room for smaller processors.

The Automotive Composites Alliance (ACA), Troy, Mich., says SMC use during the last five years has grown 55% from 156 million lb in 1993 to 237 million lb this year. And the next five years will see a 30% additional rise in consumption to 315 million lb of automotive SMC in the 2003 model year.

While the market was growing, the number of players was shrinking. The SMC automotive market, once served by as many as 16 molders, today is dominated by perhaps four big molders, according to Don Kossak, ACA chairman and director of exterior sales at Cambridge Industries, Madison Heights, Mich. Cambridge itself has about 51% of the SMC market. Since 1994, Cambridge has bought up the SMC molding operations of Eagle-Picher, Goodyear Tire & Rubber, Rockwell International, and GenCorp Automotive. Cambridge also acquired RTM capacity from Rockwell and purchased two other RTM operations: Livingston Molded Products, a supplier of hoods and body panels for heavy trucks, and APX International, which molds body panels for the Dodge Viper.

High cost of doing business

The remaining players in automotive composites must accept new ground rules. "It's no longer sufficient for a molder to just build to print," according to Mike Dorney, manager of North American sales and marketing for Budd Plastics Div., Troy, Mich., another of the biggest surviving molders. Automotive OEMs today require molders to be full-service suppliers - providing engineering, program management, product design and development, and part testing, he says.

OEMs today have shifted the responsibility - and cost - of design engineering from themselves to the molders. According to Hamid Kia, senior staff research engineer at General Motor's R&D Center in Warren, Mich., engineering support from suppliers is a must today. "There was a time when we would go for the lowest cost and highest quality, and would not emphasize engineering support. Now customers rely on the molders for consultation from the get-go and modifications later on."

This additional cost burden on the molder lies at the heart of the consolidation trend, says Al Trueman, international director of MFG Companies, Ashtabula, Ohio, another large molder. A molder has to be big enough to spread the overhead of design engineering, tooling costs, and quality systems over a sufficient volume of molding business. "The complexity of the business and the demands of the customer say you have to be of sufficient size and scope to be viable," says Trueman.

Consolidation and closer working relationships with customers could result in beneficial productivity improvements, says Trueman. He expects to see fewer engineering changes, lower-cost programs, and tooling cost savings resulting from early participation of molders, allowing parts to be designed at the same time as the entire vehicle system.

Capacity in balance

While molders were being asked to shoulder additional cost burdens, huge overcapacity was squeezing profits, making it less attractive to stay in the business. Surviving molders say the excess SMC molding capacity has shrunk somewhat compared with several years ago. One indication of this is that used presses are harder to come by, observes one molder.

MFG's Trueman believes that some of the molding overcapacity was a natural outcome of the strides that occurred in improving cycle times and part quality. Over the last 10 years, typical cycle times have declined from 3-5 minutes to l-1.5 minutes today, he observes. The result has been a leap in productive capacity for each press. Effective capacity has also increased with improvements in quality that drive down rejects, resulting in more good parts per hour. Trueman believes that those productivity increases outstripped the growth in demand, with adverse effects on profitability.

David Hearn, marketing and technical-service manager of Ashland Chemical Co., Columbus, Ohio, estimates that the excess in SMC molding capacity was as high as 4050% four to five years ago. This forced some molders to quote jobs at break-even prices. In his view, the capacity overhang has dropped to 10-15% today. He says the surviving SMC molders now are financially stronger as a result.

Cambridge Industries has shuttered only one of its acquired facilities - the former GenCorp plant in Ionia, Mich. - and has moved much of its molding capacity to other locations. (GenCorp's Marion, Ind., plant was not purchased by Cambridge but no longer does SMC molding.) Cambridge also mothballed the former Eagle-Picher plant in Huntington, Ind., which Cambridge's Kossak expects to be reopened when new automotive SMC programs come on line.

Still a bumpy road

The new playing field can be a rough one for smaller composites molders. Comprehensive engineering services could be difficult for a smaller shop to absorb. Consequently, smaller molders with limited capabilities may be relegated to a Tier Two position, where they must work in conjunction with a Tier One molder.

Restructuring at the OEM level may also knock some molders farther down the supply chain. One relatively small SMC molder of automotive structural parts found itself in that position when its customer, Ford Motor Co., segregated its assembly plants from its "feeder" plants, placing the latter under the umbrella of Visteon Corp., a newly created Ford profit center. "Where we used to be suppliers to Ford's Milan plant, now the customer is Visteon," says the president of this molding company.

SMC is not enough

A key factor in being competitive today is the ability to offer more than just one process, according to several molders. Paul yon Jankowsky, director of marketing and communications for Cambridge Industries, says the ability to select the process that best fits the part requirements confers a competitive edge. "Our customers - Ford, GM, Chrysler, the transplants - are asking what is the best process and material to use so they can get the highest quality."

Offering a range of processes is also a competitive strategy for MFG, according to Trueman. Its wide process portfolio allows MFG to start a project in a lower-volume process, and switch to another when there's sufficient volume to warrant further tool expenditures.

The ACA recently changed its name from the SMC Automotive Alliance to broaden the awareness of the wider range of composite materials useful for making cars and trucks. That range includes BMC, TMC, RRIM, SRIM, RTM, and liquid molding, as well as new technologies such as low-density SMC and low-pressure SMC.

Gary Jones, senior development engineer of materials, assembly, and recycling for Freightliner Corp., Portland, Ore., agrees that it's important for a molder to provide a broad process portfolio. However, he adds it's important for molders to attain high performance in each of the processes they aim to deliver.

Freightliner uses a range of processes for its truck parts, including SMC, liquid molding, open molding, vacuum resin infusion, RTM, and SRIM. "There are more options today, but all of those options are still not under one roof," says Jones. Freightliner sources its composite parts from seven suppliers, a slightly higher number than a few years ago. "That goes in the face of what our purchasing department wants to do because they want to reduce our vendor base." Ironically, Jones would not want to see the number of suppliers to Freightliner decrease. "Being able to integrate various technologies is easier when they are under one roof. However, competition among suppliers helps to maintain cost and fuels technological innovation." Jones would like to see the continued proliferation of technological options like vacuum resin infusion, robot-assisted vacuum-chamber open molding, and robot-assisted preforming, which are relatively new to truck applications.

More growth opportunities

Smaller molders may be able to carve out a competitive niche if they pay attention to these automotive industry trends. (Many of these trends present opportunities to large molders as well.)

* "Specialty" vehicles: The number of vehicles produced at volumes of around 100,000 or less continues to grow, according to Cambridge's Kossak. Such vehicles are often differentiated by add-ons such as roof racks, spoilers, and running boards, for which SMC is well suited.

* Heavy trucks: In this particular area of smaller-volume specialty vehicles, body panels and structural applications have driven material consumption from 20 million lb in 1993 to 60 million lb in 1998.

* Structural parts: Molders and material suppliers see faster growth in non-appearance structural parts than in body panels. This is good news for smaller molders, who can compete without installing a paint line. According to Bill Mellian, marketing specialist for Owens-Corning's composites business in Detroit, structural applications in the transportation market consumed only 13% of total SMC material usage in 1993. But this share is projected to grow to 30% in 1998.

Add in the overall growth projected for the SMC business, and structural uses could more than triple in the next five years. Mellian sees this growth in fuel-tank heat shields, valve covers, integrated front-end systems, and pickup truck boxes, as automakers look to composites for parts consolidation, corrosion resistance, heat resistance, toughness, and weight savings.

* Service parts: Out-of-production parts are a niche opportunity for small molders to serve OEMs who need to replenish their spare-parts supply, says Hearn of Ashland Chemical. Typical runs are in the 300-400 range - too few to justify the set-up costs for big molders.

* Lightweighting: Getting the weight out of vehicles has become a top priority, according to Hearn. He notes that some OEMs are concerned that the U.S. EPA may consolidate CAFE numbers for passenger cars and light trucks. This, too, is an opportunity in the structural arena: "You can save a lot more weight on a cross member than by changing a hood from aluminum to SMC," he says. An SMC cross-cab beam produced by Cambridge Industries for the Ford Ranger and Explorer consolidates 22 formerly metal parts into one. With a production run of around 900,000, the cross-cab beam is sufficiently cost-effective enough to run on several tools.

* Specialty materials: The ability to meet OEMs' need for specialty formulations is another opportunity for smaller molders to carve out a niche. Ashland's Hearn sees a niche for smaller molders who can tailor a special material - such as a high glass content - to a particular need. For example, Jones of Freightliner wants composites that contain recycled material. His company has set a goal of 25% recycled content in its parts.

Hearn sees a similar opportunity in parts requiring special molding needs: insert molding, molded-in color, and molded-in film for topcoat color.

* Partnership opportunities: While jobs with big, complex assemblies may be going to larger molders, Hearn sees outsourcing possibilities for smaller molders, particularly for shorter-run parts where big molders may not consider it worthwhile to make a tool change. Hearns also sees opportunities for joint working relationships between large molders and nimble small molders who can implement new technologies faster. "They have got to use their small size to their advantage," he says.