Auto industry speeds up as competition intensifies

DETROIT—Steve Lietaert has twin strategic missions as president of the U.S. operations of German lighting supplier Hella KGaA Hueck & Co. And it's the same double mission that is whipping the rest of the global auto industry.

It's not enough to drive technological advances through a company and across the customer base, he says: You also have to do it faster.

"The customer wants to have a faster innovation cycle," said Lietaert, president of Hella Corporate Center USA Inc. "When they come up with an idea for the appearance of a headlamp or how it will function, they want to get it to market as fast as possible. It they're launching a car in 2022, they don't want what was state of the art four years ago, they want something that you can get into production in a short time frame.

"And so we have to figure out how to speed up that time frame, to speed up their innovations."

Speed is the new magic component of the auto industry business equation. All the usual considerations are still there—cost, weight, performance, quality, environmental impact. But now it's not enough to develop a new vehicle model—it has to be a model that arrives sooner than a competitor's new model to gain a leg up. It's not enough to construct a new assembly plant—it has to be completed six months faster than factories of decades past. The capital for it must come sooner. The work force for it must be trained faster. It's not enough to respond to customer orders on the timetables that worked just fine in years past—customers now want immediate responses and fast delivery. Assembly lines must roll faster. Logistics must move faster.

Traditionally, Lietaert said, a new Hella headlamp development would take three and a half to four years to move through the development pipeline, from design to production to market.

Now, he said, "We can go from release from the customer to being in the vehicle in less than a year and a half."

A world of tools

There is no magic machine that makes that possible. Rather, what's facilitating the industry's push for a faster and faster pace of business is a world of machines—networking data, factory tools with artificial intelligence, integrated engineering offices and better communications between manufacturers and customers and their various tiers of suppliers, and better communications within companies.

And a lot of investment.

Two years ago, to embrace this new industry reality, Hella stepped up investments in North America, consolidating its North American customer interface activity—which had been spread out in different locations—to a new center in Northville Township, Mich. It brought together purchasing, sales, testing and development functions, and added lab setups and additional R&D. Hella also invested in staffing up its engineering activities in Guadalajara, Mexico, as well as in India, to allow projects to work around the clock on designs and to work closer with Tier 2 and Tier 3 suppliers of lighting parts and semiconductors.

There is no piece of the equation that is being overlooked.

Coatings supplier PPG recently hit on a way to accelerate the development of new vehicle paints and colors with auto makers through digital communications. The pandemic offered PPG and its customers a chance to try it out, when engineers were unable to board planes and visit customer design centers. PPG discovered that projects move fast when both sides can share coatings via software links instead of requiring time-consuming face-to-face meetings.

Tesla's new assembly plant in Austin, Texas, had earth movers on the job clearing the new plant site before local officials had finalized the project. Tesla expects to be rolling finished vehicles out of a completed factory in barely a year.

Tesla's declared competitor Lucid Motors has accelerated the launch of its U.S. market entry through a quick capital infusion deal known as a special-purpose acquisition company. The arrangement this year will allow Lucid to pull forward about $350 million in funding it had earmarked for later construction phases of its new assembly plant in Arizona. As a result, Lucid will be able to increase production capacity for its first model and add a dedicated assembly line for a second.

In a seemingly unrelated event, Jean Marie Thrower, a business development specialist who works with auto makers in the southeastern U.S., has begun steering clients to component suppliers in Colombia in South America—not to outsource North American content, but to replace sources that are geographically farther away, just to speed up the pipeline.