EXECUTIVE SUMMARY

Automobile manufacturers and suppliers will continue to face many formidable challenges in the next decade as they address environmental challenges, tough global competition, and more demanding customers. Furthermore, shortages of capital and skilled human resources and time pressures to do more, do it better, and yet faster exacerbate their challenges. The Delphi X Forecast and Analysis of the U.S. Automotive Industry: Technology identifies many issues facing the industry and provides insight as to expected industry direction. In a real sense this is a benchmarking study in that it enables any one individual or organization to compare (benchmark) their vision of the future to an industry consensus. Panelists expect rapid changes in technology and knowledge, as well as increased regulation and accelerating globalization. Increased reliance on technology to enhance design and manufacturing efficiency is anticipated. Organizations that effectively develop and implement rapidly changing technologies to reduce cost and improve customer satisfaction (increase value) will certainly have a competitive advantage.

The Technology volume of Delphi X is divided into eight sections titled Strategic Planning Factors, Engineering and Sourcing Issues, Materials, Body and Chassis Product Trends, Safety Issues, Powertrain/Drivetrain, Electrical/Electronics, and Other Issues.

I. STRATEGIC PLANNING FACTORS
Fuel prices are expected to increase steadily, but moderately, to $1.50 per gallon for regular unleaded gasoline by 2009. Electric-vehicle penetration is forecast to reach 1 percent, and hybrid electric/combustion engine vehicles 3 percent in the same time frame. Furthermore, diesel engines are forecast for 2 percent of passenger cars and 5 percent of light trucks by 2009. 

Emissions, fuel economy, and safety standards are expected to become more restrictive over the next ten years. CAFE standards are expected to increase 16 percent (32 mpg) and 26 percent (26 mpg) by 2009 for passenger cars and light trucks/vans, respectively. This is in contrast to stable passenger-car CAFE standards of the past ten years and an increase of less than 5.8 percent in the last 16 years. Increased passenger car CAFE standards are forecast to present a major challenge to domestic and European manufacturers, whereas Japanese manufacturers are forecast to more easily meet these standards, reflecting the large volume of small vehicles that they sell and their use of smaller, lightweight powertrains.

Considering the PNGV agreement between the domestic manufacturers and the federal government to pursue development of clean, super-efficient passenger cars, 53 percent of panelists forecast that the goal of 80 mpg can be achieved by the year 2010. 

Weight reduction and improved engine efficiency are forecast to make the greatest contributions to improved fuel economy with current powertrains. Hybrid powertrains and energy storage are expected to provide fuel economy benefits of 15 and 10 percent, respectively, on some vehicles by 2009. Cost, reliability, and battery technology are forecast to be the major challenges for development of hybrid vehicles.

Legislation and regulations to require changes in the recyclability of automotive materials are considered likely in several areas by 2009.

Several elements of competition are forecast to be important in 2009, including quality/ reliability/durability, safety, and cost to the manufacturer. 

II. ENGINEERING AND SOURCING ISSUES 
Panelists believe that 70 percent of 2009 product design and engineering by Ford, GM, and DaimlerChrysler for North American-produced passenger cars will be done in North America, compared with 80 percent today. Foreign-owned vehicle manufacturers are expected to conduct 30 percent of their product design and engineering for North American-produced passenger cars in North America, compared with 15 percent today. 

The Big Three vehicle manufacturers are forecast to source 60 percent of parts, components, and subassemblies from the United States, Canada, and Mexico in 2009, compared with 70 percent currently. North American production operations of Japanese-owned vehicle manufacturers are forecast to source 40 percent of parts, components, and subassemblies from Japan in 2009, compared with 50 percent today. Sourcing from North America is expected to be unchanged at 40 percent. Sourcing of components and subassemblies from Mexico by traditional domestic and foreign manufacturers is expected to expand from 15 percent and 11 percent, respectively, to 25 percent by 2009.

Outsourcing of components is forecast to increase to 50 percent for first-tier suppliers compared with 30 percent currently. Outsourcing of components from OEMs is forecast to have a more modest increase to 55 percent from 50 percent currently. Outsourcing of subsystems/modules by first-tier suppliers is forecast to increase to 30 percent from 10 percent currently. 

Panelists forecast a reduction in product-development time for a new platform for
both Japanese and U.S. manufacturers in the next decade. The Japanese advantage is expected to be reduced from 8 months currently to 4 months by 2009. Current development cycle times for the United States and Japan are estimated at 38 months and 30 months, respectively. 

Panelists believe Japan, North America, and Western Europe have similar product-technology today. Western Europe and North America are forecast to have a slight product technology lead over Japan in 2009. Japan is thought to have the best process technology, and their lead is forecast to continue through 2009. 

The proportion of vehicle-engineering activities using math- and computer-based tools (CAE, excluding CAD) is forecast to increase from 40 percent currently to 70 percent by 2009. The number of vehicle prototypes is forecast to decrease by 40 percent by 2009 as a result of improved simulation tools.

III. MATERIALS AND RECYCLING 
Panelists forecast reductions in steel and cast-iron use of 15 percent and 20 percent, respectively, and increases in the uses of aluminum and plastics/composites of 18 percent and 20 percent, respectively, in the next decade if CAFÉ increases to 35 mpg. The use of aluminum and plastic for exterior body components is expected to increase in the next decade, but steel is forecast to remain the dominant material.

Total vehicle weight reduction of 5 percent is forecast for passenger cars by 2009. The weight of light trucks is expected to be unchanged. The value of a pound of weight saved in a vehicle is forecast to escalate from $1.00 per pound today to $3.00 per pound in 2009, assuming a CAFE requirement of 35 mpg.

IV. BODY AND CHASSIS PRODUCT TRENDS 
The integral body/frame is expected to remain the major passenger-car platform through 2009. Space-frame and separate body/frame construction are forecast to be used in 5 percent and 2 percent, respectively, of passenger cars in that same timeframe. 

For sport utility vehicles, separate body/frame construction is forecast to be used in most vehicles (60 percent) by 2009, but use of integral body/frame or unibody construction is expected to increase. Integral body/frame construction is forecast for most minivans (89 percent) in 2009, a modest increase over current applications.

MacPherson strut front suspensions are expected to continue their dominant position in passenger cars (75 percent in 2009), but increased penetration of twin A-arm is forecast. Rear independent suspensions in passenger cars are forecast to increase from 60 percent currently to 70 percent in 2009. Electrical/electronic power steering and hydraulic power steering with electronic control are expected to achieve penetrations of 20 percent and 15 percent respectively by 2009. Passive-driver selected suspensions are forecast to attain penetrations of 19 percent by 2009. 

Antilock-brake penetration on passenger cars is forecast at 80 percent in 2009, while traction control is expected to see an application rate of 40 percent in the same time frame. Four-wheel antilock brakes are expected on 85 percent of light trucks in 2009 compared with 67 percent today.

By 2009, panelists expect a growing application of tire failure sensing devices (20 percent), puncture-resistant/self-sealing tires (20 percent), and run-flat tires (30
percent).

V. SAFETY
Side airbags are forecast for 35 percent of passenger cars and 20 percent of light trucks by 2009. Passenger-side airbags are forecast on 90 percent of light trucks in 2009. Limited use of rear-seat-occupant airbags is also expected in passenger cars but not on light trucks. Knee-bolster airbags are expected to see limited application in the same time frame. It was assumed that all passenger cars would have airbags for the driver and front passenger and that all light trucks would have driver-side airbags.

Other safety features such as in-vehicle message systems, adaptive cruise control
and collision warning systems are envisioned in 15 to 20 percent of new vehicles by 2009.

VI. POWERTRAIN/DRIVETRAIN 
For passenger cars, eight-cylinder engine usage is forecast to decline to 7 percent by 2009, with four-cylinder engine penetration increasing slightly. Six-cylinder engine penetration is forecast to be unchanged. Similar trends are forecast for light trucks, but with eight-cylinder engine usage at about five times that of passenger cars.

Following trends of recent Delphi forecasts, nearly half of today's engines are forecast to be fundamentally redesigned during the next decade. This will certainly require a major commitment of both financial and human resources.

Port fuel injection is forecast in 85 percent of passenger cars with spark-ignited engines by 2009, with the balance utilizing direct cylinder injection (gasoline direct injection). A similar trend is forecast for light trucks.

Turbocharging and supercharging of passenger car engines are expected to see minimal application of just 1 percent and 3 percent, respectively, by 2009. On the other hand, four-valve-per-cylinder engines are expected on 50 percent of passenger car engines, compared with 39 percent in 1998. The increase in multivalve engines is certainly a factor in the low expectations for turbochargers and superchargers. 

From 1998 to 2009, push-rod valve-actuation penetration is expected to decrease from 56 percent to 40 percent in engines with a "V" configuration, while single- and dual-overhead cam penetrations are forecast to expand to 22 percent and 37 percent respectively. For "in-line" engines, push-rod valve actuation is expected to decrease from 8 percent in 1998 to 3 percent in 2009, with single- and dual-overhead-cam penetrations representing 45 percent and 51 percent, respectively, in 2009. Variable valve timing in passenger car engines is forecast at 25 percent in 2009 compared with a current estimate of 5 percent.

The use of distributorless ignition systems on spark-ignited engines is expected to increase to 90 percent in passenger cars and light trucks by 2009. In the same time frame, knock/adaptive control is forecast for 70 to 73 percent of passenger cars and light trucks. By 2009, cylinder pressure control and individual cylinder control of ignition timing are forecast to see modest applications of 7 to 20 percent, whereas coil-on-plug designs are forecast for 30 percent of passenger cars and 20 percent of light trucks. Furthermore, features such as balance shafts, hollow camshafts, and roller lifters are all expected to achieve wider application in the next decade.

The use of aluminum in cylinder heads and blocks in passenger car engines is expected to increase to 95 percent and 50 percent respectively by the year 2009. The use of aluminum in cylinder heads and blocks in light trucks is forecast to increase also. Several applications of plastic engine components (intake manifolds, valve covers, fuel rails, throttle bodies, oil pans) are expected to see significant use by the year 2009.

Electrically heated catalytic converters and start-up converters are expected to be
required in some applications to meet both federal and California emission standards over the next decade. Panelists forecast that the cost of meeting tier 2 emission standards may be as high as 7 percent of total vehicle cost by 2009. 

The five-speed manual transmission is expected to be the only manual transmission for passenger cars with any significant volume in the next decade. The decline of the three-speed automatic transmission is forecast to continue in favor of four-speed designs, with only 2 percent three speeds forecast for 2009. Five-speed automatic transmissions are forecast to emerge in upscale vehicles (5 percent). Continuously variable transmissions are forecast in 8 percent of passenger cars by 2009. In that same timeframe, sequential shift automatic transmissions and automatic transmissions without torque converters are forecast for 10 percent of passenger cars.

Transmission configurations for light trucks are forecast to be very similar to those of passenger cars in the next decade. 

In the opinion of our panelists, front engine, front drive will continue to be the dominant drivetrain configuration in passenger cars, at 91 percent penetration. 

VII. ELECTRICAL/ELECTRONICS
Combined electrical and electronic cost, as a percent of total vehicle cost, is forecast to expand from a current estimate of 20 percent to 32 percent in 2009. Vehicle electronic content is expected to continue to grow, from a 1998 estimate of 10 percent of total vehicle cost to 20 percent by 2009. Vehicles with at least one major multiplexed power system are forecast to expand from a current market estimate of 0.5 percent to 4 percent by 2009. Cost, packaging and weight reduction are the important potential advantages of multiplexing.

Application of electronic/electrical features such as antitheft, CD player, electronic keyless entry, and onboard diagnostic via expert systems is expected to increase significantly in the next decade. Increased systems voltage is forecast for up to 30 percent of vehicles in the next decade. The number of electric motors in a vehicle isanticipated to increase approximately 35 percent by the year 2009. 

Telematics are forecast to be used in most luxury vehicles by 2009, and as many as 30 percent of nonluxury vehicles. These features are forecast to cost from 3 to 5 percent of the cost of the vehicle.

Panelists identify numerous applications of microelectromechanical systems (MEMS) that will be developed in the next five years. 

VIII. OTHER ISSUES
The following vehicle maintenance features are forecast for 75 percent or more of
passenger cars by 2009: 100,000-mile maintenance-free engine (except oil filters);
chassis lubed for life of vehicle; 10-year body corrosion warranty (perforation);
50,000-mile/5-year coolant; 100,000-mile maintenance-free transmission (including fluids). 

Skilled-labor-supply deficiencies are identified for the near and long term. Management of human resources is expected to be a critical challenge for the industry over the next decade.
 

TABLE OF CONTENTS

I. STRATEGIC PLANNING FACTORS 
1. Gasoline price forecast 
2. CAFE standards, regulatory forecast for light-duty vehicles 
3. CAFE standards, reasonable expectations for light-duty vehicles 
4. Fuel economy improvements, source of improvements 
5. Achievement of 80 mpg vehicle (PNGV) 
6. Alternate energy sources or power plants, passenger car and light-truck production 
7. Electric-vehicle battery type 
8. Combustion engines in hybrid electric/combustion engine vehicles 
9. Electric-drivetrain cost vs. gasoline-engine automatic-transmission vehicles 
10. Greatest challenges of developing hybrid powertrains 
11. Electric motor voltage in electric and hybrid vehicles 
12. Federal legislation activity, ten-year trend 
13. Recycling regulatory potential 
14. Elements of competition 

II. ENGINEERING AND SOURCING ISSUES 
15. Product design and engineering, traditional domestic-vehicle manufacturers in North America versus offshore 
16. Worldwide sourcing of North American production operations 
17. North American sourcing within North America 
18. Outsourcing of components and subsystems/modules by first-tier suppliers 
19. Product-development cycle timing 
20. Product-and-process technology leadership 
21. Percentage engineering using computer-based tools (CAE) 
22. Impact of math-based engineering on cost and timing in product development 
23. Source of reduction in product-development time 
24. Prototypes reduction 
25. Systems engineering 
26a&b. Cost reductions due to component sourcing in modules 

III. MATERIALS
27. Vehicle weight, forecast change 
28. Material usage, percent change 
29. Material usage, steel, plastic, and aluminum body panels 
30. Weight reduction, value per pound 

IV. BODY AND CHASSIS PRODUCT TRENDS
31. Passenger car and light-truck construction, unibody, space, or separate frame 
32. Suspension features of North American passenger cars 
33. Ride/handling and steering features of North American passenger cars
34. Brake features and traction control, passenger cars and light trucks 
35. Tire feature trends for passenger cars 

V. SAFETY
36. Airbag penetration, passenger cars and light trucks 
37. Vehicle safety systems penetration 

VI. POWERTRAIN AND DRIVETRAIN
38. Engines, number of cylinders, passenger cars and light trucks 
39. Six-cylinder engine configuration, passenger cars and light trucks 
40. Valves per cylinder for passenger car engines 
41. Valvetrain configurations for passenger car engines 
42. Engine technical-features penetration 
43. Engines, percentage undergoing major redesign 
44. Fuel management-systems penetration, passenger cars and light trucks
45. Turbocharging/supercharging penetration, passenger cars 
46. Ignition system design features, passenger cars and light trucks 
47. Aluminum-cylinder-head-and-block material penetration, passenger car and light truck 
48. Lean-burn-engine penetration, passenger cars 
49a. New hardware/technology required for tier 2 emission standards
49b. Total cost of hardware/technology needed to meet tier 2 emission standards 
49c. Percentage vehicle cost attributable to tier 2 standards
50. Challenges in meeting the proposed tier 2 emission standards 
51. Plastic-engine-component penetration, passenger cars 
52. Transmission configuration, passenger car and light truck 
53. Transmission-features penetration 
54. Drivetrain configurations, passenger cars 

VII. ELECTRICAL AND ELECTRONICS
55. Electrical/electronics, percentage of total-vehicle cost 
56. Multiplexed power subsystem utilization 
57. Microelectromechanical systems (MEMS) applications 
58. Telematics penetration rates, percentage of vehicle cost 
59. Electronic-features penetration, passenger cars 
60. Electrical-system voltage 
61. Electric-motor usage per vehicle 
62. Electric-motor-driven accessories 

VIII. OTHER ISSUES
63. Maintenance/durability features penetration 
64. New technologies impacting vehicle systems 
65. Critical human-resource skills, supply deficiency 
 

MATERIALS VOLUME
EXECUTIVE SUMMARY & TABLE OF CONTENTS

EXECUTIVE SUMMARY
The North American Automotive industry faces a decade of challenge and change. The 2000 Delphi X Forecast and Analysis of the North American Automotive Industry: Materials volume identifies many of the challenges and opportunities facing industry participants. In doing so, the Materials volume presents an opportunity for companies to benchmark their vision of the future against that of an industry consensus.

The Materials volume is divided into six sections addressing Strategic Planning Factors,
Strategic Materials Considerations, Total Vehicle, Powertrain/Drivetrain, Body/Chassis and Recycling. This summary is intended to highlight key results from the 200 Delphi X materials volume.

I. STRATEGIC PLANNING FACTORS
The panel forecasts the price of regular unleaded and premium gasoline to increase annually at an average rate of 6.3 percent and 5.8 percent respectively during the next decade (MAT-1). The forecast indicates the panelists generally do not expect a significant disruption in the supply of oil in the coming decade. Panelists forecast reformulated gasoline to account for 50 percent of all gasoline sold by 2004, and 70 percent of all gasoline sold by 2009 (MAT-3).

The automotive industry enters the 21st century amid much talk of a new powertrain paradigm. The internal combustion engine, which has been the driving force for the first 100 years may be obsolete within the coming decades. Panelists forecast diesels, and electric-hybrid powertrains to see slightly increased application in the coming decade. Panelists indicate that propane, natural gas, and electric appear to offer little short-term potential application. Although each of these alternative power sources has seen limited success in fleet applications, there appears to be little likelihood that they are viable in mass markets (MAT-5).

The industry and society face many difficult challenges in the coming decade. The development of safer and cleaner vehicles is a top priority for both industry and government. Panelists forecast that alternate fuel/power source, occupant restraint/interior safety, vehicle emission standards, fuel economy standards, and vehicle integrity/crashworthiness regulation will all be much more restrictive by 2009 (MAT-6).

II. STRATEGIC MATERIALS CONSIDERATION
Panelists forecast that federal legislation or regulation is extremely likely for the disposal 
of automotive fluids, the disposal of used tires, and the establishment of uniform identification/coding standards for materials to facilitate recycling. Federal legislation/regulation for all listed areas is viewed as at least somewhat likely by 2009 (MAT-7).

Panelists forecast that cost of raw materials and their processing (1.2) will be the most
important material selection criteria in the coming decade. Weight, design/styling requirements, formability, safety considerations, warranty costs, and field experience will also be very important selection criteria in the coming decade (MAT-8).

III. TOTAL VEHICLE CONSIDERATION
Panelists forecast a reduction in vehicle weight of 3.5 percent in passenger cars and 3.0
percent for light trucks by 2004. They forecast a 10 percent weight reduction for both passenger cars and light trucks for 2009 (MAT-13).

The panel was asked to forecast passenger car and light truck material changes in the coming decade. For passenger cars, the panel was given one CAFE level for 2004 and two for 2009 and for light trucks, the panel was given one CAFE for each year, 20.7 for 2004 and 24 for 2009 (MAT-14).

The two passenger car CAFE scenarios for 2009 present evidence that the panel expects
mass reduction through material substitution. For the 30 mpg scenario, the panel forecasts low carbon steel and cast iron to decrease by 10 percent and 12.5 percent respectively. Aluminum and plastic are forecast to increase by 17.5 percent and 10 percent respectively. For a 35 mpg CAFE in 2009, low carbon steel and cast iron are forecast to decrease by 15 percent and 20 percent respectively, while aluminum and plastic are forecast to increase by 35 percent and 20 percent respectively. For light trucks in 2009, the panel forecasts a reduction of 15 percent and 20 percent for low carbon steel and cast iron respectively, and a increase of 25 percent for aluminum and 12.5 percent for plastics.

Panelists predict substantial growth for Polypropylene (20 percent), TPO (17.5 percent), and Polyester thermoset (12.5 percent) in the coming decade. Polyester thermoplastic and polyethylene are also forecast to increase by approximately 10 percent. According to the panel, ABS (-4 percent) and PVC (-10 percent) are expected to see decrease usage by 2009 (MAT-15).

IV. POWERTRAIN/DRIVETRAIN
 Panelists estimate that 95 percent of passenger car cylinder heads and 70 percent of cylinder blocks will be made from aluminum in 2009. The panelists forecast 85 percent of light truck cylinder heads and 35 percent of cylinder blocks will be cast from aluminum by 2009 (MAT-19). Panelists forecast that by 2009, 80 percent of aluminum engine blocks will be sleeved, 14 percent will unsleeved and coated, and 5 percent will be unsleeved (MAT20).

The automotive industry continues to substitute lightweight materials for cast iron and steel in many engine applications. As components made from alternative materials approach
manufacturing scale economies, these materials may more rapidly become the industry
standard. Panelists forecast as moderately likely that steel will reach 20 percent application rate for camshafts by 2009 and that steel/powdered metal camshafts will reach 25 percent application rate by 2009 (MAT-23). Panelists forecast as moderately likely that steel will reach 55 percent application rate for crankshafts by 2009. According to panelists, performance and durability characteristics of steel crankshafts are drivers of the shift from cast iron to steel (MAT-24).

Panelists forecast increased application of ceramics in all listed components. Connecting rods (60 percent) and valve seat inserts (60 percent) are components where powdered metal is forecast to see the highest application. However, the wide interquartile ranges indicate a great amount of uncertainty or disagreement among panelists regarding the future application of powdered metals in these engine components (MAT-29).

The panel forecasts plastic to be the dominant fuel tank material by 2009. Stainless steel is also expected to see initial application. The panelists indicate that further development of plastic fuel tank layering materials and strategies, and sealing technologies are necessary to meet increasingly stringent emission regulation (MAT-31).

V. BODY/CHASSIS
Panelists forecast little change in frame construction for passenger cars and minivans in the
coming decade. However, they forecast a significant increase in unibody frame construction for sport utilities. The sport utility market continues to undergo significant change. Many of the initial entries (MAT-34) were engineered from existing pick-up truck platforms. However, many new entries—specifically in the subcompact, midsize and luxury segments—are unibody designs. In fact, although many of these new vehicles are considered sport utility vehicles, they are often more similar to passenger cars than the traditional body-on-frame SUV. Steel is forecast to remain the dominant frame material for unibody construction in the coming decade. However, aluminum is forecast to see application as a frame material (15%) and space frame material (20%) by 2009 (MAT-35).

According to panelists, steel is expected to continue to be the dominant material for body
panels. However, aluminum is expected to see increased application for hoods (22.5 percent) and decklids (17.5 percent). Plastics are forecast to see increased application for fenders (15 percent) and doors (10 percent). The panel also forecasts increased usage of high strength steel for quarter panels (15 percent), hoods (15 percent), doors (20 percent) and decklids (10 percent) (MAT-36).

For light trucks, aluminum is expected to see significantly higher penetration rates for hoods (30 percent), and rear hatches (17.5 percent). Plastic is forecast to see significant growth in truckbed applications (20 percent). High strength steel is forecast to see increased usage for doors (17.5percent), hoods (10 percent), and truckbed/liftgates (10 percent).

Panelists rate steel as having an advantage over the other listed materials in the raw material costs, component processing and assembly stages of the vehicle life cycle. The panel rates thermoplastics and thermosets as slightly more advantageous than aluminum in the design stage (MAT-37)

The panel forecasts little or no application of polycarbonate as an alternative window material by 2004. However, the panelists do forecast limited penetration of polycarbonate for side and rear window applications by 2009. Special coatings and interlayers to reduce solar load are forecast to continue to see increased application in the coming decade. Special coatings and interlayers that provide defrosting capabilities are also expected to see increased application in the coming decade (MAT-55).

Panelists forecast aluminum wheels to account for 88 percent of styled wheels for passenger cars, and 82.5 percent of styled wheels for light trucks in 2009. Steel is forecast to see slightly reduced application rates for both passenger car and light truck styled wheel application in the coming decade. Hybrid—steel and plastic—(5 percent), magnesium (3.5 percent) and plastic (0.5 percent) are forecast to see limited application for passenger styled wheels. The panel forecasts no usage of plastic styled wheels for light trucks (MAT-56).

The panelists forecast increased application in the coming decade of lead-free electrocoat, and increased powder and water-borne primer surfacer. They also forecast increased usage of water-borne top-coat/base-coat and powder based clear-coat. The panel forecasts initial application of powder and water-borne clear-coat in the coming decade (MAT-57).

VI. RECYCLING
Panelists expect the recyclability of thermosets and, to a lessor extent, thermoplastics to
continue to present significant challenges to the industry. The panelists expect closed loop
recycling of thermosets to present an extremely severe challenge. Conversely, the panel does not expect the recycling issue facing ferrous and nonferrous metals to present significant challenges in the coming decade (MAT-61). Panelists expect manufacturers to take action restricting the number of plastics in the vehicle and pass through recycling requirements to suppliers (MAT-62).

Summary: The 2000 Delphi X Forecast and Analysis of the North American Automotive
industry: Materials Volume presents many challenges and opportunities for the industry. The materials panel has identified several factors that will likely drive the material selection process during the coming decade. Standing out among those factors is the challenge to continue to drive cost reduction throughout the vehicle. Yet it is also clear that the panel believes that the trend toward lighter-weight materials will continue in the coming decade.
 

TABLE OF CONTENTS

I. STRATEGIC PLANNING FACTORS 
1. Fuel prices, U.S. retail per gallon 
2. Fuel prices, percent of increase due to taxes 
3. Reformulated gasoline sales 
4. Alternative fuels, federal legislation 
5. Alternative fuels, North American-produced passenger vehicles 
6. Federal regulatory and legislative activity 

II. STRATEGIC MATERIALS CONSIDERATIONS
7. Recycling, regulatory areas of interest 
8. Materials issues, decision criteria 
9. Aluminum issues, challenges, and opportunities 
10. Structural composites issues, challenges, and opportunities 
11. Magnesium issues, challenges, and opportunities 
12. Steel issues, challenges, and opportunities 

III. TOTAL VEHICLE CONSIDERATIONS
13. Total vehicle weight, percent change 
14. Material, percent change by type 
15. Plastics, percent change by type 
16. Magnesium, applications 
17. Emerging materials, technologies, and applications 
18. Automotive fluids, emerging developments 

IV. POWERTRAIN AND DRIVETRAIN
19. Engine head and engine-block materials 
20. Aluminum engine-block sleeve technology 
21. Aluminum engine-block sleeve materials 
22. Internal engine component materials 
23. Camshafts, materials 
24. Crankshafts, materials 
25. Fuel rails, materials 
26. Front covers, materials 
27. Intake manifolds, materials 
28. Ceramics, engine component applications 
29. Powdered materials, powertrain applications 
30. Engine oil cooler, heater cores, radiator, transmission oil coolers, materials 
31. Fuel tank materials, gasoline fueled passenger cars and light trucks 
32. Material selection; transmission gears 
33. Material selection; transmission rotors 

V. BODY AND CHASSIS
34. Vehicle frame construction type 
35. Vehicle frame construction, material application 
36. Body components, material application 
37. Body panels, specified stages of life cycle 
38. Corrosion issues, cosmetic and perforation corrosion 
39. Corrosion issues, panel penetration corrosive environments 
40. Bumper components, material application 
41. Seat frames, material application 
42. Instrument panel skins, material application 
43. Instrument panel cross beams, material application 
44. Instrument panel components and air bag doors, material application 
45. Interior panels and door trim panels, material application 
46. Interior components, material application 
47. Chassis components, material application 
48. Control arms, materials 
49. Front and rear springs, material application 
50. Steering assembly-knuckles, material application 
51. Stabilizer bars, material application 
52. Drive shafts, material application 
53. Rear axle assembly-differential carriers, material application 
54. Rear axle assembly-torque tubes, material application 
55. Glass, alternative material application
56. Styled wheels, material application 
57. Automotive paint technologies, penetration ratios 
58. Automotive paint oven, temperature 
59. Customer satisfaction, body, and chassis materials improvements 

V. RECYCLING ISSUES 
60. Recycling barriers 
61. Methods to recycling, challenges 
62. Manufacturer actions regarding recycling 
 

MARKETING VOLUME
EXECUTIVE SUMMARY & TABLE OF CONTENTS

EXECUTIVE SUMMARY

The 2001 Delphi X Forecast and Analysis of the North American Automotive Industry Volume III: Marketing combines the predictions of over seventy automotive industry marketing experts to describe a vision of the future of the industry.  The panelists, representing manufacturers, suppliers and automotive dealers, provide insight into the challenges and opportunities facing the automotive industry in the coming decade.

The Marketing volume of the Delphi X is divided into seven sections addressing industry structure, brand management, consumer information, car buying, order to delivery, vehicle features, and alternative powered vehicles.  This summary highlights key results form the 2001 Delphi X: Materials volume.

Industry Structure

Recent years have seen a significant amount of consolidation within the automotive industry—in both manufacturers and platform componentry.  Panelists forecast a continued decrease in the number of manufacturers and marketing divisions in the coming decade.  However, they do not forecast any significant change in the amount of models/nameplate offerings (MKT-1).  The number of models that share major content with vehicles from another market is expected to increase in the coming decade, and the number of platforms within a company is forecast to decrease in that same time period.  The number of models within a company that share major components, and the number of models from different companies that share major content, are expected to increase (MKT-3).

Although the panelists forecast little change in segmentation, their comments do indicate potential for growth in the market share for small vehicles—both passenger car and light truck—in the coming decade.  Given the recent success of many larger vehicles, the comments mark a significant shift in consumer buying trends.  There are several potential marketing trends on the horizon that may give insight into the panel’s forecast (MKT-4).

The panel forecasts many changes at dealerships and service outlets in the coming decade. They forecast significant decreases in the amount of new vehicles in dealer inventory and the number of single line dealerships.  Conversely, they forecast increases in vehicles sold per dealership outlet and the number of motor malls and multi-franchise dealerships (MKT-5).  Panelists expect independent repair shops and franchised gasoline/service stations to see significant decrease in the volume of repair/maintenance in the coming decade (MKT-6).
Several manufacturers have indicated that they intend to increasingly look downstream in an attempt to capture a larger portion of the vehicle life-cycle value stream.  Yet, panelists rate most of the post manufacturing activities as only slightly profitable by 2009.  Providing in-vehicle Internet communications access is rated as offering the best opportunity for profitability (MKT-8).

Brand Management

Recent years have seen an increased emphasis by some manufacturers on the development of brand identities for their products.  The panel indicates that such a strategy may be effective for some segments, while not as effective for others.  The panel believes that brand strategy is an effective marketing tool for luxury vehicles—both cars and SUVs—and for large pickup trucks (MKT-9).  Many suppliers are attempting to gain brand awareness with the end user.  The panel indicates that, with the exception of non-audio consumer electronics and engines, there is little likelihood of this occurring in the coming decade (MKT-10).  
Consumer Information
Panelists think focus groups, field interviews, demographic/trend analyses, and spending time with end users are the most effective means of gathering consumer information for product decisions, though no source was rated as very effective.  Manufacturers see dealer-collected information as the least effective means of gathering consumer information.  The main challenges in using these methods are using the appropriate method to make decisions and the sheer variety and number of consumers. (MKT 13-14)

Car Buying

When looking at the most important current factors in purchasing new cars and trucks, panelists report a large number of factors including:  purchase price, exterior styling, vehicle quality, previous experience with the make/model, service experience and convenience, OEM incentives and rebates, manufacturer’s quality reputation, dealer reputation, brand image, a large selection of inventory, sales tactics, dealer incentives, passenger space, interior styling, performance, and safety.  Panelists see fuel economy, safety, and vehicle technology increasing in importance in the future.  Manufacturers see dealership characteristics playing a less important role in purchasing new cars and trucks in the future, while dealers think divisional reputation will play a less important role in the future. (MKT-15-16)

Panelists think improving dealership sales personnel and service will lead to improved customer satisfaction with the dealership in the future.  They also see shorter new vehicle delivery times and Internet service appointments improving customer satisfaction.  They do not see Internet sales, home delivery of vehicles, and one-price pricing improving customer satisfaction, though manufacturers more than dealers think these sales techniques will improve customer satisfaction. (MKT-17).  

Dealers think they will reach acceptable (“satisfied”) levels of customer satisfaction by 2004, while manufacturers think dealers will reach these levels by 2009 and suppliers think dealers will not even reach these levels by 2009.  Price, be it for new vehicles or trade-ins, will continue to be the nemesis of improved customer satisfaction at the dealership level.  Only if dealers or manufacturers can in some way eliminate or mute this element of the sales process will the dealership experience improve dramatically.  (MKT-18)

Panelists are relatively conservative in their predictions about the future use of the Internet for purchasing financing, insurance, and the vehicle itself over the Internet.  Manufacturers and suppliers see many more potential purchases of vehicles over the Internet than do dealers.  Dealers throughout this Delphi survey are much more inclined to downplay the use of the Internet for doing almost anything involved with vehicle sales.  (MKT-19)

When looking at Internet sales themselves, manufacturers, suppliers, and dealers still offer very different views on the future.  By 2004, manufacturers see a world of Internet purchases split relatively evenly between dealer sites, OEM sites, and third party sites.  By 2009, manufacturers see OEM sites taking over share of Internet purchases from third party sites.  Dealers, on the other hand, see their sites dominating the near future and increasing their share of Internet purchases in the long term by taking share away from both OEM and third party sites. (MKT-20)

Respondents see issues dealing with improving the product as the major activities that will increase OEM customer retention in the coming decade.  These include product innovation, vehicle quality/durability/reliability, and frequent product redesign.  Manufacturers themselves also think customer relationship management programs (CRM) will be effective means of retaining customers.  Customer retention by dealers will be improved through increased services, including vehicle concierge services, better trained staff, better use of the Internet, and the development of relationships with customers—especially after new vehicle warranties expire. (MKT 21-22)

Panelists are cautious about their views of the potential effectiveness of customer relationship management activities.  They think programs such as frequent buyer discounts for new vehicles and service will be the most effective activities.  Dealers predict that Internet/e-mail reminders for re-purchase and service will be more effective than do manufacturers and suppliers.  Manufacturers think targeting households with offers based on their self-proclaimed interests will be more effective than do dealers and suppliers.  The major challenges for CRM programs is combining dealer and manufacturer customer data and tailoring the programs to meet the needs of specific subsets of the vehicle-buying/servicing population. (MKT-23)

Over the next ten years, panelists predict the Japanese manufacturers will be the most effective in maintaining relationships with customers, followed by the European manufacturers and then by the Big Three.  All dealers, except for single franchise dealers, are seen as being less effective (similar to the Big Three) in maintaining relationships with customers over the next decade.  But manufacturers and dealers also see large dealers as being effective over the next decade. (MKT-24)

Order-to-Delivery

Manufacturers and dealers see little change in where vehicles will be purchased over the next ten years.  They predict that 85-90 percent of all vehicle sales will be handled through traditional franchised dealerships.  (MKT-25)  In terms of the time customers are willing to wait for an ordered vehicle, panelists currently think customers are willing to wait 30 days for the exact vehicle they desire.  But by 2004, panelists predict customers will be willing to wait only 20 days, and by 2009, only 10 days. (MKT-26)

Panelists currently think 15 percent of vehicles are built to order, and 80 percent are delivered from inventory.  By 2004 they predict that 30 percent will be built to order, while 70 percent will be delivered from inventory.  And by 2009, panelists think 50 percent of all vehicles will be built to order and 50 percent delivered from inventory.

By 2004, dealers think 17 percent of vehicles will be built to order while 80 percent will be delivered from inventory.  Manufacturers think 25 percent will be built to order and 75 percent delivered from inventory.  By 2009, dealers think 30 percent will be built to order and 70 percent will be delivered from inventory.  Manufacturers think 42 percent will be built to order and 59 percent will be delivered from inventory. (MKT-27)

When considering the list of potential barriers to reducing build-to-order time, panelists report that the main barriers lie within the OEM/assembly plant, followed by the Tier One supplier and distribution parts of the value chain.  Within the OEM assembly plant, panelists think the barriers of information flow between the supply chain and OEM production, flexible line changes/line flexibility, and model complexity are quite severe.  They also think supplier communications, capacity management, and assembly line takt time are severe barriers.  Body shop/assembly sequencing is seen as a somewhat severe barrier.

Respondents think supply chain management by Tier One suppliers is a severe barrier to reducing build-to-order time, while component shipping logistics and component production sequencing are seen as only somewhat severe.  Within the distribution area, vehicle shipping time and shipping logistics are reported as somewhat severe barriers, while order tracking, order processing time, and dealer preparation time are seen as less severe barriers to reducing build-to-order time. (MKT-29)  Panelists consider all these challenges as at least somewhat difficult to overcome, but they consider customization and manufacturing as the most difficult challenges to overcome. (MKT-30)

Looking at how all the proposed changes in the distribution system may improve customer satisfaction, the main features that panelists think will improve customer satisfaction include mass customization, the reduction of time spent at the dealership, accurate delivery date of ordered vehicles, and reduced order-to-delivery time.  Panelists think real-time communication between OEMs and customers and the ability to track a vehicle from order to build to delivery will also increase customer satisfaction, but to a lesser degree.  Finally, the ability of customers to order vehicles directly from the factory is expected to have the least effect of customer satisfaction. (MKT-31)

Vehicle Features

New technologies offer manufacturers the opportunity to increase the desirability of their vehicles, while offering suppliers the chance to gain critical new product lines.  However, consumers do not necessarily view all new technologies as value-added.  Panelists indicate that understanding the price points for new technologies is the most critical element in any marketing strategy.  According to panelists, other important elements of successful marketing strategy include understanding the placement of new technologies between, and within, vehicle segments, communicating the advantages of new technologies to consumers, and appropriately test marketing the new technology (MKT-32).

The industry faces many challenges—and opportunities—in the coming decade.  Nowhere is that more evident than the many pending environmental challenges.  Manufacturers must balance the increasing pressure to create more environmentally friendly vehicles and manufacturing processes with the need to remain cost competitive.  The development of more environmentally friendly vehicles and manufacturing processes will likely come, at least initially, with an increase in costs.  A critical element of this challenge is what percent of any cost increases can be passed along to the consumer (MKT-37).    

Manufacturers have increasingly found that safety features can be strong selling points.  The listed features include both passive (airbags) and active (anti-lock brakes, traction control, etc.) safety technologies.  Both types of technology will be critical in developing an effective safety system.  The panel forecast side airbags and antitheft devices to experience the largest increase of the listed safety features (MKT-35).  

Alternative-Powered Vehicles

When considering consumer acceptance of gas/electric and fuel-cell hybrid powered vehicles, vehicle cost is seen as the most severe barrier, followed closely by refueling issues.  The next level of severity includes the unproven performance of the vehicles, the unproven technology, the reparability of the new technology, and the lack of consumer understanding and concerns over reliability and durability of the new technology.  The least severe barrier reported is post-warranty repairs; although this barrier is still rated as severe. (MKT-38)

It is clear that from the perspectives of point of sale and warranty, marketing hybrid vehicles will demand a higher level of customer support than is currently provided.  Be it through demonstration vehicles, technical information, well-trained staff, or longer warranties, moving to a new powertrain paradigm has the potential to change how vehicles are marketed and sold.  The overwhelming response by manufacturers, suppliers, and especially dealers that this change cannot be business as usual may offer an opportunity for the manufacturers to work with their dealers in a new way.  
In the area of distribution, panelists think the most effective methods will be marketing hybrid-powered vehicles to fleet and commercial customers and focusing on high pollution/urban areas.  They also think that focusing marketing efforts on the west and east coasts will be effective.  At the point of sale, panelists report that having demonstration models available will be the most effective method for marketing hybrid-powered vehicles, followed closely by having a well-trained staff.  Panelists think the most effective warranties for marketing hybrid-powered vehicles need to be longer and more comprehensive than current warranties, even going so far as the life of the vehicle.  (MKT-39)

Panelists think these vehicles are best positioned and advertised towards environmentally-conscious consumers.  Sellers must clearly show the advantages of this type of vehicle, as well as focus on warranty and maintenance availability.  Panelists also see these vehicles positioned to appeal to young, urban drivers, to buyers who value high technology, and to fleet buyers.  But there are some inconsistencies in how manufacturers, suppliers, and dealers view positioning and advertising these vehicles. (MKT-40)
 

TABLE OF CONTENTS
 

I. INDUSTRY STRUCTURE
 1 Industry structure U.S.
 2 Importance of product redesign in selected segments 
 3 Platform, component and nameplate sharing trends 
 4 U.S. market share by segment 
 5 Dealership network trends 
 6 Service activity, trends by type of outlet 
 7 OEM/Dealer relationships, importance of selected issues 
 8 Post manufacturing activities, potential value to OEMs 

II. BRAND MANAGEMENT 
 9 Brand management, effectiveness by segment 
 10 Brand awareness, effectiveness by model, make and manufacturer 
 11 Supplier brand management, by component and module 
 12 Consumer brand recognition of supplier components, barriers to 

III. CONSUMER INFORMATION 
 13 Consumer information sources, effectiveness 
 14 Incorporation of consumer information 

IV. CAR BUYING 
 15 Purchasing factors, importance of selected issues for passenger cars 
 16 Purchasing factors, importance of selected issues for light trucks 
 17 Customer satisfaction, dealer improvement 
 18 Dealership experience, customer satisfaction of 
 19 Internet activity trends 
 20 Internet purchase trends 
 21 OEM customer retention, effectiveness by activity 
 22 Dealer customer retention, effectiveness by activity 
 23 Customer relationship management, effectiveness by activity 
 24 Customer relationship management, effectiveness by group 

V. ORDER-TO-DELIVERY 
 25 Vehicle purchasing retail point trends 
 26 Vehicle availability, customer willingness to wait 
 27 Built-to-order/delivered from inventory trends 
 28 Strategies to reduce vehicle inventory, effectiveness 
 29 Build-to-order time reduction, barriers to 
 30 Order to delivery time reduction, difficulties 
 31 Business to customer (B2C), improvements in customer satisfaction by activity 

VI. VEHICLE FEATURES 
 32 Marketing elements for new technology 
 33 Technology features, estimated price for 25 percent penetration 
 34 Comfort and convenience features, market share 
 35 Safety features, market share 
 36 Wheel and tire trends 
 37 Green marketing, estimated customer value 

VII. ALTERNATIVE POWERED VEHICLES 
 38 Consumer acceptance of alternative powered vehicles, barriers to 
 39 Marketing alternative powered vehicles, distribution, point of sales, warranty 
 40 Marketing alternative powered vehicles, effectiveness by activity 
 

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