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The Auto Sun is RisingThe Auto Sun is Rising

David E. ColeEmeritus Chairman

Center for Automotive Research (CAR)

Monahan Endowment Lecture

Wayne State University,College of Engineering

March 23, 2011

David is to be returned to Italy A bit of cultural news for a welcome change!

His Proud Sponsors were Fast Food Chains…

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Auto Problem

Mostly Revenue –

with Depression Level of Sales

4

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GM & Chrysler – Debt Reduction, Lean

Ford: Good & Bad News, No Bankruptcy but High Debt

All Manufacturers & Suppliers Have Been Hurt

But, The Sun is Rising Fast

5

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Across the Land – Still

Amazing Level of Ignorance on Auto Industry

6

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The Perfect StormThe Perfect Storm

7

Benefits

Hyper Competition

Competent New Players: China, India, …

Auto Industry

Tools

Materials

Policy

Money

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Auto Industry of the FutureAuto Industry of the Future

A World of

Vanishing Boundaries

8

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Economic Contribution of the Economic Contribution of the U.S. Automotive IndustryU.S. Automotive Industry

9

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Auto ManufacturingAuto Manufacturing

Manufacturers . . . . 313,000 + jobs

Parts Suppliers . . . . 686,000 + jobs

R & D Spending . . . $16 + billion

Source: BLS, NSF *includes NAICS 3361, 3362

10

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Economic Contribution Per JobEconomic Contribution Per Job

11

Auto Mfr. $329,000

Average Job $112,000

Source: U.S. Census Bureau Annual Survey Manufacturers 2005

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Economic MultiplierEconomic Multiplier

Auto Manufacturers – 10

Auto Parts Supplier – 5.7

12

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Auto EmploymentAuto Employment

2010 – modest gains

2011 – 2013 + 100,000 per Year

13

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We Have Been Swimming a River

That is Getting;

Faster, Deeper, & Wider

But!

14

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The Pot of Gold on theThe Pot of Gold on the Other Side is Getting Larger Other Side is Getting Larger

Labor Cost Reduction Household Growth Pent-Up Demand Capacity Reduction Scrappage Return of Pricing Power

15

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The Challenge:

Getting to the Other Side

But We Have Reached the Shallow Water

16

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Domestics – Unbelievable Shift from about

$2,000 Disadvantage to

$2,000 Advantage

17

PALE Meeting-March 19, 2009 18

However, Will It Come Back . . ?U.S. Light Vehicle Sales Forecast

Source: CSM Worldwide, J.D. Power

+4.4 M+6.8 M

+8.9 M+2.4 M

-9.3 M -5.2 M

-8.0 M

PALE Meeting-March 19, 2009 19

U.S. Light Vehicle Sales History and ForecastCombined J.D. Power and CSM Worldwide Forecast

2007 - 2014

16.1

13.2

10.0

11.6

15.1

16.516.1

14.1

9

10

11

12

13

14

15

16

17

2007 2008 2009 2010 2011 2012 2013 2014

Source: CSM Worldwide, JD Power, Inc.

Mil

lio

ns

Mil

lio

ns

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The New Break-even-

10-11 Million Sales

20

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Beware: The Aging of the Boomers.

21

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DemographicsDemographics

Consumer Behavior

Socio / Political

Health Care

Skilled Workers

World Issue

22

“Boomers go Boom”

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23

Auto Industry - Auto Industry -

Thousands of New Jobs – But OnlyThousands of New Jobs – But Only

for the Educatedfor the Educated

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24

““This is Auto”This is Auto”

““Building America’s Tomorrow”Building America’s Tomorrow”

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The Business Model

is Changing Fast.

25

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Old Business ModelOld Business Model

26

BureaucracyPaper Linear

Slow Lean

IndividualSequential

Regional

Physical Prototypes

Job for LifeKings

Talk

Competition StructuredAcquisitions

Vertical Integration

LegalisticControl

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New Business ModelNew Business Model

27

Anti-bureaucracyPaperless Collaboration

Fast Lean Agile

Teame-enabled

Global

Virtual Prototypes

People Flow Coaches

Listen

Coopetition

Parallel

FlexibleAlliances

Virtual Integration

TrustEmpowerment

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28

It’s the Team, the Team, the Team

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Global Integration-Global Integration-

Platforms

Components

R & D

Plants

Everything

29

One Company World-wideOne Company World-wide

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Value of Global Economies of

Scale are Huge

30

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Lean / AgileLean / Agile

Investment

Engineering

Manufacturing

Everything

31

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KnowledgeKnowledge

The Competitive Edge

32

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33

Customer Pull

Cars and Trucks

Productand

Process

Technology Push

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34

TimeTime

KnowledgeKnowledgeApplicationApplication

KnowledgeKnowledge

Competitive Competitive AdvantageAdvantage

InnovationInnovation

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35

Do What You KnowDo What You Know

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36

Coming Soon:Coming Soon:

“Auto Harvest”“Auto Harvest”

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37

Auto TechnologyAuto Technology

At the edge of a revolution?

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38

FunPerformance

Green Environment

Future

Cars

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39

Future Power Plants Future Power Plants

Gasoline

Diesel

Hybrid

Fuel Cell

The Answer – ?

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40

$$

TimeTime

Technological Progress—When to CommercializeTechnological Progress—When to Commercialize

ACurrentTechnology

B

Too early

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41

POWER TECHNOLOGY POWER TECHNOLOGY COMPARISON CHARTCOMPARISON CHART

TECHNOLOGY OPTIONS /

COMPARISON PARAMETERS

ADVANCEDGASOLINE

CLEANDIESEL

HYBRIDPARALLELNON-GRID

Cost +$1,000 +$3,000 +$4,000 to +$6,000

Fuel Economy +20% +30% +20% to +30% (with diesel

+50%)

Non-CO2

EmissionsBaseline Nox and

Particulate Problem

-20% to -30%

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42

““BOTTOM LINE”BOTTOM LINE”

Not enough knowledge to pick winners and losers

Different strategies for different companies

Alliances necessary to overcome challenges

Government incentives required…ultimately consumers decide

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43

Coming Fast – Plug-in, Coming Fast – Plug-in, Series HybridsSeries Hybrids

ororExtended RangeExtended RangeElectric VehiclesElectric Vehicles

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44

Future FuelsFuture Fuels

Petroleum

Bio

HydrogenNH3

The Answer – ?

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45

Future Gasoline Price –

$ 1.50 – $ 5.00 /gallon

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46

Annual Mileage 15,000

MPG

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47

Old Carbon Fuels Will ContinueOld Carbon Fuels Will Continueto be Used if they are Economicto be Used if they are Economic

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48

Improved Efficiency and New Improved Efficiency and New

Carbon Fuels – Can Slow Growth of OldCarbon Fuels – Can Slow Growth of Old

CO2 and Keep Expensive Old Carbon CO2 and Keep Expensive Old Carbon

Fuels From Being Extracted.Fuels From Being Extracted.

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49

2 Key Developments2 Key Developments

Lithium Batteries

Cellulosic Bio Fuels

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50

The Invention

is Here!

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51

Cellulosic Bio FuelsCellulosic Bio Fuels

Lower Heating Value

2010 - 2015 - $1.00/gal?

Cost Increase for E-85 Vehicle - $100

Global Impact

Development not Invention

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52

Lithium BatteriesLithium Batteries

4 x Performance Lead AcidMany ChemistriesHeat a ProblemKey to Plug-in HybridsDevelopment not InventionCost?

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53

Energy

BTU/ft³

Liquid

Compressed Gas Batteries

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54

LifeLife

Discharge LevelDischarge Level

Challenge for BatteriesChallenge for Batteries

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55

1.1. Battery EconomicsBattery Economics

Manufacturing

Materials

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56

GEN 1

GEN 2

GEN 3

GEN 4

GEN 5

$

TIME

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57

Life After the Car:

The Grid!

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58

Developments to WatchDevelopments to Watch

Vehicle/Infrastructure Integration

Auto/Utility Integration

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59

Climate Change – DivisiveClimate Change – DivisiveConservation - CollaborativeConservation - Collaborative

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60

Future DirectionFuture Direction

It’s All a Matter of Economics

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61

Success FactorsSuccess Factors Risk

Obsolete Own Products

Tough Problems

Systems

Knowledge

Collaboration

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62

World ClassWorld Class

is a Moving Targetis a Moving Target