The Ultimate Outsource Suppliers building engines? It's possible Let's say you're a major automaker. Your vehicles aren't bad, but customers aren't exactly buying them for the engine.

It doesn't matter to the buyer if the people designing or building the engines work for your company or another. If the car can be less expensive because someone else builds - and maybe even designs - the powertrain and it works just as well (or better), then consumers probably would consider it a no-brainer.

Suppliers are doing more underhood as carmakers have given them unprecedented responsibility for engineering and modules throughout the vehicle.

So it's conceivable to imagine this scenario: A big automaker launches an all-new low-volume niche vehicle. The OEM has an outdated engine plant, having invested recently in a state-of-the-art facility. The OEM proposes handing off the old plant to a group of suppliers with the following orders: design, validate and manufacture a few thousand engines for this niche vehicle.

The challenge then becomes whether the supplier industry can handle the whole job - lock, stock and barrel. The vision calls for one powertrain engineering supplier (for example, AVL List GmbH, Ricardo Inc., FEV Engine Technology, Lotus Engineering, Porsche Engineering, Cosworth or McLaren Engines) to take the lead. They engineer and, in some cases, build powertrains already; now they'd have to work with a group of top suppliers to get the job done.

But before you do that, you have to give your engine a brain. You need software - an engine control module that tells your engine what to do and when to do it. Your choices include Siemens Automotive, Delphi Automotive Systems, Robert Bosch GmbH, Motorola, Denso Corp. and Magneti Marelli SpA.

Now it's time to get your hands dirty.

Castings: The choices for engine blocks and cylinder heads include Teksid Group and Intermet Corp. There's also a small private outfit in Canada near Windsor that machines iron and aluminum engine blocks and cylinder heads. It's called Dart Machine Ltd., and McLaren Engines is in the process of purchasing it.

"This acquisition is expected to enhance McLaren's engine business by enabling the company to undertake programs that require volume-manufacturing capability," the company says in announcing the deal.

Another possibility is Nemak, Ford Motor Co.'s aluminum casting joint venture with ALFA of Mexico. Last spring, Ford gave up majority ownership of two Canadian aluminum casting plants in Windsor, Ont., to Nemak. The move reinforces the trend of automakers outsourcing powertrain and transmission work, a strategy Ford and others seem to be pursuing (see WAW - Sept. '00, p 65).

Cylinder heads: As a module, it's tricky. You have multiple suppliers involved in the valvetrain (valves, springs, seats, rocker arms), and the OEMs tend to keep camshaft production close to the vest. Eaton Corp., which produces 300 million automotive valves a year, wants to put all of this technology together as a fully assembled cylinder head module and has made significant moves for several years as part of that strategy.

In 1997, Eaton and Italy's Amtec SpA formed a joint venture to produce cylinder head units in Brazil. The following year, Eaton acquired Amtec outright. Last year, Eaton formed a strategic alliance with Teksid to design and manufacture cylinder head systems outside North America.

And just last month, Eaton launched yet another joint venture - this time with part of Uni Boring, a machining specialist with expertise in cylinder heads. Cyltec LLC will be a minority-led joint venture producing cylinder heads for North American automakers.

Eaton's new senior vice president of automotive, Stephen Buente, notes that 98% of cylinder heads in North America are produced in-house by automakers. "But increasingly they are looking for high-quality cylinder head suppliers who can offer the flexibility that is necessary to improve productivity and shorten vehicle launch times," he says.

In January, Eaton will begin producing cylinder heads for Ford's DOHC V-6 Duratec engines as overflow from Ford's Cleveland engine plant No. 2, Ward's has learned. Eaton will build the units to specification, but it hopes to earn more responsibility in future projects with Ford. The work will be done at Eaton's Saginaw, MI, plant. Eaton has the contract for the life of the engine, at volumes of about 150,000 cylinder heads per year.

But it's not all Eaton. TRW Inc., which tried unsuccessfully last year to sell its valve business, announced a 50-50 joint venture earlier this year with machining specialist Linamar Corp. to design and manufacture cylinder head modules. The venture has an automaker customer.

Pistons: That's easy. Piston suppliers (Mahle, Federal-Mogul Corp. and Kolbenschmidt Pierburg AG) already are winning huge contracts for fully assembled (and fully engineered) modules that include the piston, connecting rod, rings and all the necessary hardware.

Air Intake: You'd need a full-service supplier to do it all. Your choices include Delphi, Siemens, Bosch, Denso, Magneti Marelli and Visteon Corp. - largely the same companies involved in engine control. They all can supply air/fuel modules integrating everything you need to get from the fuel tank to the point of combustion.

Seals: Federal-Mogul, Freudenberg-NOK General Partnership, Dana Corp. and Southland Technologies can fully seal an engine. It used to take more than a dozen suppliers to seal an engine. These companies may not produce every seal, but they will buy what is necessary. In the past year, Freudenberg-NOK has won six contracts for fully sealed engines or transmissions.

OK, so the list isn't complete. Didn't mention crankshafts, cylinder linings or - perhaps most important - the labor issue. As a business plan, you may have seen better on a cocktail napkin. Still, I'd bet a fleet of loaded Brinks trucks that these discussions go on at the highest levels of the industry.

Suppliers love to talk about all the great things they could do for their customers, if only given a chance to think "outside the box." This would be their big chance. Are they up to the challenge?

With the danger of rollover accidents fresh on the minds of sport/utility drivers, Autoliv Inc. says its new rollover sensor will be installed in more than 1.2 million North American vehicles beginning in model year '04. Using three sensors and integrated software, the new system monitors vehicle speed, lateral and vertical acceleration and roll velocity. It can determine that a rollover is imminent and deploy the inflatable curtain for head protection (another Autoliv product) before the rubber has left the road. A key to the system is Autoliv's new silicon-based gyroscopic angular-rate sensor, which can be manufactured at low cost. The Swedish safety system supplier also teams with Volvo Car Corp. to create "Volvo On Call," a roadside assistance service and ostensible competitor to General Motors' OnStar and ATX Technologies, which supplies a similar service for Ford, Mercedes-Benz and Nissan vehicles. With wireless technology from Ericsson, the system automatically alerts authorities after a crash and provides pinpoint location.

American Axle & Manufacturing will supply driveline systems for a new, next-generation four-wheel-drive vehicle of a major North American automaker. AAM will provide front and rear axle assemblies and propshafts for the vehicle with new technology to provide enhanced traction, stability and handling. ... Dana Corp. will close its structural products manufacturing facility in Reading, PA, eliminating 682 jobs. Dana has been closing the plant for the past two years since it lost General Motors' fullsize pickup frame business to Magna International Inc. The company is negotiating a closing date with union leaders. The move should result in a third-quarter pre-tax charge of up to $75 million.