Suppliers ride the mpg wave as saving fuel brings soaring profits

ERJ staff report (LMH)

Charles Child, Automotive News

Detroit, Michigan - Petrol at $4 a gallon and government-mandated fuel economy targets are creating vast opportunities for many big global suppliers.

In North America, those suppliers are selling turbochargers, direct injection, stop-start equipment, eight-speed transmissions and many other systems that save fuel.

"If you bring a real idea to an OEM to improve fuel economy or lower emissions, they will seriously listen," said Tim Manganello, CEO of BorgWarner Inc., a top maker of turbochargers.

The trend is particularly beneficial for large global suppliers with major operations in Europe, such as Robert Bosch GmbH and ZF Friedrichshafen AG. In Europe, home of $8 a gallon petrol, those companies have been developing fuel-saving technology for decades.

While top European suppliers are thriving in North America, nearly all top suppliers enjoyed a good year in 2011. Most posted solid increases in revenue last year as vehicle sales continued to bounce back from the recession, according to the annual Automotive News ranking of top suppliers of original-equipment parts to automakers in North America.

Demand for fuel-efficient parts is a boon to ZF, a German supplier that produces transmissions and other parts.

The company's North American arm, ZF Group NAO, posted sales of original-equipment parts last year in North America of $2.68 billion, up 47 percent from 2010. The company is No. 17 on the list of suppliers to the North American auto industry.

ZF is supplying fuel-saving eight-speed transmissions to Chrysler Group from plants in Kokomo, Indiana, and Germany. The transmissions are available in the Chrysler 300 and Dodge Charger. In the autumn, they will be installed in the re-engineered Ram 1500 pickup.

The eight-speed transmission boosts fuel economy at least 6 percent vs. ZF's six-speed automatic, ZF says.

ZF says demand for its electric power steering also is strong. Electric power steering eliminates the hydraulic power-steering pump, which reduces weight and drag on the engine.

Meanwhile, North American automakers are snapping up turbochargers, which save fuel by capturing waste energy in exhaust gases and using it to force more air into the engine.

And because turbos boost engine output, a turbo-equipped inline-four is roughly equivalent in horsepower and torque to a V-6 without a turbo. This allows automakers to downsize engines, saving weight and fuel.

Honeywell Turbo Technologies says a car with a turbocharged inline-four is about 20 percent more fuel efficient than a comparable vehicle with a heavier V-6.

Last year, about 10 percent of new vehicles in North America were sold with turbos, says Tony Schultz, vice president for the Americas for Honeywell Turbo Technologies (No. 87 on the list). In 2016, he expects that number to reach 23 percent. Honeywell and BorgWarner (No. 28) dominate North America's market for turbochargers.

But Germany's Continental AG is seeking a piece of the action with its family of turbochargers built by affiliated supplier Schaeffler Group of Germany. Continental Automotive Systems U.S. Inc. is No. 3 on the list, while Schaeffler Group USA Inc. is No. 59.

Continental won the contract to supply turbos to Ford Motor Co.'s three-cylinder engine, which went on sale this spring in Europe. Ford plans to offer the engine with a turbo in the spring of 2013 on an as-yet unidentified vehicle or vehicles in North America.

Also, a turbo-making joint venture of Robert Bosch and Mahle GmbH, Bosch Mahle Turbo Systems, is knocking on automakers' doors. The joint venture, founded in 2008, has said it has production contracts with six global automakers and expects to produce 1 million turbochargers annually by 2013.

Read the full article on our sister publication Automotive News.

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Article from Automotive News