The correlation between maximizing shareholder value at an automaker and manufacturing engine blocks is hard to understand at first, but one look at an old-fashioned powertrain machining line makes it clear. These giant "transfer lines," which seem to stretch the length of a football field or longer, cost $100 million to $150 million apiece. Make mistakes with a few of these babies, and as the saying goes, it starts to add up to real money - even to an automaker.

Transfer lines are specialized machining systems that transform raw metal castings into precision components such as engine blocks and heads. Until recently their layouts hadn't changed much since the Ingersoll Milling Machine Co. invented them in 1924 to make engines for Henry Ford's Model T.

Now rapid technology shifts and automaker demands to lower the risk and capital costs associated with building these gigantic machine tools is shaking the industry to its core. Instead of spending huge sums on lines that can produce only one engine with great precision for 10 years, automakers want to hedge their bets and produce numerous engines on the same line. Of course, they also want to reduce the cost of the machinery.

This emphasis on flexibility is the same philosophy automakers are pursuing with most of their vehicle assembly plants, but it is having a major impact on suppliers of big machining systems. It's not a wholesale change, of course. Old transfer lines aren't scrapped until a brand new engine design comes along, and that typically happens every 8 to 12 years.

Nevertheless, tougher environmental and fuel economy legislation and more discerning consumers have auto-makers replacing old engines at an increasing rate. Insiders say there has been more change in the engine block machining business the past five years than in the previous 20 or 30.

The supply base for these gigantic systems already has consolidated dramatically, leaving just two major U.S.-based players - Lamb Technicon Machining Systems and Ingersoll Milling Machine - plus a handful of mostly European suppliers.

Many of the companies that died or were consumed in consolidation were highly respected names in the machine tool business. They just couldn't keep up with the pace of change, says Roger W. Cope, vice president of Business Development at Lamb Technicon. Unova Corp., an industrial conglomerate once known as Litton Industries, owns Lamb. Ingersoll is a privately held company formed in 1887.

That doesn't mean the survivors are sitting around with thousand-yard stares. "We have big signs hanging up all over that say 'Change is good,'" says Mr. Cope.

The makeup of workers at these companies has changed drastically, too, adds Mark Tomlinson, vice president of engineering at Lamb Technicon. Ten or 15 years ago they employed lots of draftsmen with good technical skills. Now most have engineering degrees, including some with PhDs and masters in engineering.

This higher level of sophistication is reflected in the products. Transfer line designers used to just make machines and fixtures more massive to make them stiffer and more precise. Now they increase precision with high-tech adaptive controls such as laser-guided boring tools that turn at 6,000 rpm and can make minute cutting changes as they measure bore tolerances 30 times per revolution.

One of the biggest issues now among automakers and their transfer line suppliers is balancing the conflicting demands of flexibility, machining precision and cost.

A conventional transfer line consists of an array of dozens of machine tools lined up sequentially to perform a large number of specific operations, such as milling surfaces flat, drilling holes and cutting cylinder bores. They work very quickly, machine to extremely precise tolerances and typically produce 400,000 or 500,000 components annually.

After each operation is completed, the part is automatically moved to the next operation down the line. The process works perfectly when there's a steady demand for the same engine for years, but sudden shifts in the marketplace can spell disaster because traditional lines are inflexible and completely dedicated to one engine design.

In pursuit of flexibility, some automakers have almost completely abandoned the transfer line concept for big arrays of complex computer numerically controlled (CNC) machines. Looking like the machine-tool version of a Swiss Army knife, they act almost like robots, constantly repositioning the part at one station and performing many operations with multiple cutting tools and spindles, rather than constantly pushing a part down a long line. They can be programmed to handle almost any type of engine, but critics say the constant to-and-fro movement of their cutting tools and fixtures makes them less precise and more susceptible to wear.

Many new machining systems try to combine the best aspects of transfer line and CNC machine strategies, sacrificing unlimited flexibility for lower costs. At Ford Motor Co.'s Windsor, Ont., engine plant, for instance, a Lamb machining system can process three different variants of V-8 and V-10 engine blocks and their heads in batches as small as one. That means it can switch from one of the three engines to another without a pause, but it can't manufacture Ford's entire engine lineup.