Hybrid & Electric Vehicle News!

... more news

DETROIT -- To keep up with U.S. demand for hybrid vehicles, Detroit's Big Three may have to look beyond the U.S. supply chain for parts and innovation.

General Motors Corp., Ford Motor Co. and DaimlerChrysler AG's Chrysler Group are planning for a hybird shoot-out as more customers are expected to move toward fuel-efficient vehicles due to high gas prices and environmental concerns. Hybrid vehicles combine a battery-powered electric motor with a combustion engine, reducing the amount of fuel required.

The verdict is still out on the readiness of Detroit's traditional supply base, however.

"The (U.S.) supply chain is immature for hybrids," said Larry Nitz, executive director of GM's hybrid program. "It's going to take a number of years to get the supply chain completely mature."

Nitz cited three crucial parts -- batteries, electric motors, and power inverters -- as items the automaker needs from suppliers.

In 2006, GM will start selling hybrid vehicles that compete with those sold by Ford and Toyota Motor Corp.

However, the cost of hybrid technology, estimated at more than $3,000 a car, and the limited number of companies with technological competence to produce them, make the venture into alternative vehicles a pricey proposition.

Profits from hybrids will remain elusive for the balance of the decade, analysts say.

GM, the world's largest auto maker, won't bide its time while U.S. suppliers catch up to help cut costs and further the technology, Nitz said.

"GM is a global company with a supply chain that crosses all borders and we'll continue to be that way," he said. "We look for companies that are in the automotive business that want to be suppliers that work to invest like we are in this new technology area (and) that can deliver quality parts on time and meet all our cost and quality objectives."

GM's urgency is fueled by a recent pact with DaimlerChrysler and BMW AG to develop hybrid vehicle platforms. Although the cooperation stretches across the Atlantic, the venture will be headquartered in Troy.

It will emphasize capturing a share of U.S. hybrid sales, which are expected to represent 3.5 percent of the market by 2012, according to consumer research firm J.D. Power and Associates.

Right now, Japanese suppliers turn out most of the world's hybrid parts. Matsushita Electric Industrial Co.'s Panasonic brand and Sanyo Electric are major players in the battery field, said Lindsay Brooke, an auto market analyst with CSM Worldwide Inc. in Farmington Hills.

A handful of other Japanese suppliers, tied to the country's large automakers, are investing in other hybrid technologies on the guarantee of future business.

Brooke said there are a few players in the United States that have taken initiative in hybrid development, including Orion.-based Cobasys LLC.

Cobasys, a hybrid battery joint venture between Chevron Corp. and Energy Conversion Devices Inc., completed a plant in 2003 that has the capacity to build as many as 2.4 million batteries annually, chief sales officer Scott Lindholm said.

Johnson Controls Inc., based in Milwaukee, is seen as an emerging threat to Cobasys in the battery sector.

Brooke said battery development is the top area where competition is needed because of the high cost of the components and concerns about durability, but uncertainty is keeping U.S. suppliers from committing capital to an emerging market.

Only one automaker, Ford, has invested in U.S. hybrid production and its current predicament demonstrates the hardship of relying on foreign suppliers for components.

Ford began building hybrid SUVs in Kansas City last year and receives most of its hybrid components from non-U.S. suppliers, including Sanyo. Continental AG, based in Germany, suppliesthe braking system that is essential to recharge the battery. The most crucial hybrid partnership Ford is managing is with Aisin Seiki Co., which is closely affiliated with Toyota, but supplies transmissions to Ford that are designed to run hybrid systems.

Ford spokesman Said Deep points to the Aisin transmission relationship as a kink in the hybrid supply chain that needs to be ironed out. The automaker has seen significant demand for its Escape Hybrid vehicle in 2005, but is limited to building only 24,000 copies annually. Aisin's inability to supply more transmissions is a major reason for the constraint.