The world’s Tier 1 automotive suppliers are the unsung heroes of the mobility industry. They employ millions of engineers, designers and factory workers around the world and provide automakers with crucial components and technologies.
Some, such as Bosch and Continental, are familiar because their names have been on sparkplugs and tires for more than 100 years. But most of the top mega-suppliers are not well known outside the mobility industry, even though they are playing a key role in the transition to electrified and software-defined vehicles – as well as creating a more sustainable future.
Keeping up with the megatrends changing the mobility industry is forcing these companies to move away from highly profitable ICE-related products to future ones with less certain revenue potential. It’s a bit of gamble either way and some suppliers are moving faster than others.
French auto supplier Forvia changed its name to hammer home the point it is committed to transforming.
Forvia has been known for decades as Faurecia, a major provider of vehicle seats, exhaust systems and other traditional components, but in recent years it has been expanding beyond these niches and taking big positions related to the key megatrends that will drive the mobility industry in the future: electrification, automated driving, hydrogen fueling, personalized cockpits and sustainability.
Faurecia bought lighting supplier Hella for $6 billion in 2022, spurring the name change to Forvia, and redefining itself as a bigger, broader company that now is the world’s seventh-largest automotive supplier with 157,000 employees in 40 countries. It reported revenue of more than €27 billion ($29 billion) in 2023.
In May of 2023 Forvia sold parts of Faurecia’s extensive vehicle exhaust business to Cummins for €142 million ($154 million) and it intends to sell more ICE-related assets in the future.
WardsAuto sat down with Forvia’s Nik Endrud, executive vice president-Americas, at a February event highlighting the company’s latest lighting, futuristic cockpit technologies and hydrogen storage tank designs to discuss the future. The interview has been edited for length and clarity.
WARDSAUTO: What do you see as the biggest challenges and opportunities for the next few years?
ENDRUD (pictured, below): One of the big challenges for industry is going to be the pace of the powertrain transition. Every day there are media stories coming from one end of the spectrum to the other. If the low end of the goal is 30% electrification by 2030, that’s double what we were expecting five years ago. The reality is there’s going to be more CO2-reducing alternatives that fill the gap. From a climate and societal standpoint, we’re making good progress, but not as fast as some would like.
There’s also political uncertainty about how fast the transition will be supported, at least in the U.S. The reality is, we’re going faster than any of us thought five years ago. Even so, the challenge to a supplier or an OEM is, some must make a choice between dedicated ICE investments and dedicated EV investments. We’re fortunate that we don’t have to make that choice with most of our products. Seats don’t change much because of what is propelling the vehicle. The same is true of instrument panels, headlamps and the other products we make.
There are some products on the margins in our electrical business and certainly our exhaust business. We have been in a leadership position in the North American market in exhaust systems. It’s more a question of how fast the business shrinks because we’ve invested in capacity for essentially an 18-million-unit market from a couple years ago with a 35% market share.
For us, it’s a matter of managing different problems. The longer the ICE market extends, the better it is for our exhaust business because we have the assets already in place. We as an industry must be realistic about BEV and ICE volumes in a way that enables everybody to do well, as opposed to being so ambitious it destroys the business models of certain suppliers. OEMs can pivot (between ICE and BEV products) more easily than suppliers that have dedicated businesses (and products). Some automakers have proven they can lose billions of dollars in their battery-electric vehicle portfolios and still have record earnings (from ICE vehicle sales). Most suppliers aren’t in a position to do that.
Another key issue from a macroeconomic standpoint is labor availability to produce new products, not only for factories but also tech centers. It is still a challenge for all of us. Unemployment is low. We need to think about what gets done where and in what way by using all the possible new tools. How we manage this is the hardest situation I've seen in the auto industry in 21 years. We used to take for granted that you could get 400 or 500 people in Mexico, Detroit, St. Louis or Tennessee to staff a new plant for new products and get it ramped up. You can get those numbers, but you’re going to churn through new employees three times before you get a stable workforce. That changes the economics of what it takes to launch a plant. Everybody’s going to have to take a breath and say the market isn’t really growing and the technology shift isn’t happening as quickly as we thought. We need to push for more stability. Then we can move to the next chapter.
WARDSAUTO: The industry is dialing back on BEV production but it’s not stopping. Long-term, what is going to happen to factories and workers involved with traditional ICE components such as exhaust systems? How many jobs would that cost? Mega-suppliers such as Forvia have a long history of selling off older operations to fund investments in new products and factories. Is that Forvia’s plan for the future?
ENDRUD: That’s what you saw us do with the acquisition of Hella (lighting systems) two and a half years ago. It is the latest version of that strategy. We’ve sold a billion dollars of businesses and we're going to make another billion of disposals (sales of businesses) to pay for that acquisition. We are constantly thinking about our portfolio and how to optimize it for megatrends. We look at the long-term potential of each business. The main thing our successful businesses have in common is, they tend to be powertrain agnostic. The exhaust business currently is exposed to the declining ICE business, but we are allowing that business to begin investing itself in hydrogen and becoming our primary Tech Center for our hydrogen fuel tank business in France. The people that are working on exhaust are being re-educated to work on and design hydrogen storage tanks. In this case we are going from a potentially uncertain future for the exhaust business to a certain future. The timing is still to be decided, but Forvia has been able to stay in businesses that give us strategic positioning in customer access and not being dependent on major market and technology shifts outside of our control. That allows us to focus on innovating, having the right products, executing well.
WARDSAUTO: So, you can retrain people and repurpose factories dedicated to ICE vehicles to do new things?
ENDRUD: If we have facilities that are no longer needed, we think about if there is something else that could go in there before we take the hard step to close them. The benefit of being part of a big business group should be opportunities that cross different businesses.
WARDSAUTO: Forvia is doing fascinating things with sustainable materials and modular seat designs. According to Wards Intelligence global surveys, Europe is pushing hardest for more sustainable vehicle interiors, the U.S. comes in second and China is last. How do you see it?
ENDRUD: It depends on what you consider sustainability and taking holistic care of the environment. China is the most aggressive in EVs and alternative powertrains in part because of serious air pollution issues and public health concerns in China. There are different motivations in Europe.
Europe is holistically more concerned about not only CO2 emissions, but also the full scope of sustainability that includes a cradle-to-grave circular economy. There is a bit of a political pushback going on now in Europe, but it is much further ahead than we are in the U.S.
WARDSAUTO: If you look at the issue of totally recycling vehicles, the secret seems to be the interior. The metals in vehicles, steel, aluminum, copper, already are being recycled and have been for decades. The problem is automotive shredder waste: the remains of seat cushions and interior plastics that are difficult to recycle and end up in landfills. Forvia is working on modular seats and recyclable seat cushion materials that could make a big difference in the future recyclability and sustainability of future vehicles. How receptive are OEMs and the marketplace to what Forvia is doing with new sustainability strategies?
ENDRUD: There’s been a huge reception in the market. Some of the strongest interest has been in MATERI’ACT (a new Forvia brand that develops, sources, produces and sells unique advanced materials with low and ultra-low carbon footprints offering up to an 85% CO2 reduction compared with current materials.)
What we’re doing there is a strategy to bring a lot of that under one umbrella. To be honest, it will take time for implementation, and it’s not cost-neutral. Until something is legislated (related to sustainable vehicle interior materials in the U.S.) it may not happen.
One of the reasons Forvia is so far ahead is because we’re a European company where (more sustainable cockpits) are going to be legislated. As a consequence, we’re working on things that aren't necessarily required yet in the U.S. But it’s coming. We believe we are a leader, and we believe our customers will be asking for it soon.
WARDSAUTO: What are the businesses and technologies that are going to be the most profitable for Forvia in the next couple of years in the Americas?
ENDRUD: The good news is, all our businesses are expanding in the Americas region. We see a lot of momentum behind some of the lighting and electronics technologies, both legacy Hella lighting technologies and Faurecia Clarion Electronics technologies (cockpit electronics, display technologies and advanced driver-assistance systems). The complexity and challenge of integrating more electronics into surfaces is one of the big challenges that has everyone wondering if it is better to let the surface experts worry about the integration or have the electronics experts do it. Different methodologies are involved with doing those two things.
Fortunately, we can use both methodologies. If you compare Forvia with typical interiors suppliers, we have an advantage. And if you compare us with electronics suppliers, we also have an advantage. We’re driving harder and faster to bring the value proposition of integration.
There are only so many companies that can do what we do. All our businesses are doing well. There has been a huge reception for our lighting, business and our electronics businesses as well as our interiors.
WARDSAUTO: When you talk about integrating electronics and materials, you are referring to what’s commonly called smart materials, correct?
ENDRUD: Not quite. It seems simple to integrate a display into an instrument panel, but there’s a lot going on: It requires understanding the packaging requirements, thermal dissipation requirements, glare, how the interior material behaves, how the electronics behave. It's something that very few companies have mastered.
WARDSAUTO: I write a lot about how vehicle cockpits are going to look very different in the next couple of model years. We’re already seeing some amazing new concepts for screens and instrument panel designs. Forvia has introduced several dramatically different design concepts in recent years. Could the industry be moving too fast in this area?
ENDRUD: Some designers think we’ve hit max screen and it’s time to go back the other way. And then you have others that say one screen to do everything is the way to go. What you see in the market is the need to have smart integration and give flexibility because in the end, the customer must decide what the right theme should be. We need to bring different solutions to those themes. A central touchscreen display like Tesla uses isn't going to be right for everybody.
But look what BMW is doing now with the one long curved display (on its Neue Klasse EV models), it’s beautiful. It’s still one display, but it is completely different than the way Tesla executes screens.
It’s bigger – and probably costs more as a consequence – but the BMW screen is also new and interesting, but still kind of traditional. And it gives users flexibility in how to manage the information being displayed.
What we’re trying to do with screens is recognize that our customers are going to expect choice. They’re going to expect us to put value where the value has to be and not everywhere. Not everybody can afford a pillar-to-pillar display. But if we can make a display with connected small displays that looks like a pillar-to-pillar display, that’s pretty good.
