Scholl sees urgent need for lower cost parts
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What are the biggest changes in the European auto industry that have taken place in the last decade?
First, the widespread acceptance of diesel engines. Second, the efforts made by the industry to reduce fuel consumption to meet the voluntary CO2 goals set by ACEA for 2008. The third one is – you might be surprised to hear this from me – the more cautious attitude toward fuel cells. There needs to be a more realistic view of the introduction of fuel
cell-based electric drives in light vehicles. At present there are no acceptable solutions for building up a supply chain, for producing hydrogen without generating CO2 and for storing hydrogen in the fuel cell vehicles.
What is slowing the process?
There must be a reasonable economic incentive for establishing new technologies. Look at diesel engines as an example. They grew because diesels offer a big reduction in fuel consumption compared with a gasoline engine. And, it is nice to drive a modern diesel. Those aspects drive the acceptance of new technologies. The question is: Who is ready to invest billions of euros in hydrogen systems?
So that means that further reductions in emissions for the next 10 to 30 years will come mostly from improvements to the combustion engine?
Yes.
What issues will automotive suppliers face in the next decade?
I see two main areas. One is that we suppliers urgently need products and systems for cars priced below E7,000 or even E5,000 – not just in Asia but also in Europe. That means we need to develop equipment for these cars at a 20 percent to 50 percent lower cost level, depending on the product. For this reason, and because of the increasing market share of low-priced vehicles, we decided to start product development especially for this segment. I believe that in the future in China a considerable share of cars will be in the price range of E7,000 or below.
The second issue is completely different from the first. I think there will be more sensors monitoring the environment around the car. This will improve vehicle safety by giving a warning to the driver before an emergency and even directly interact with the driver by influencing the car’s brakes or steering if the system shows that a crash is unavoidable. We are not talking about an autonomous system driving the car but about a system taking over some control of the car in emergency situations.
We already are beginning to see some of that?
Yes. Our driver assistance systems, Predictive Brake Assistant and Predictive Collision Warning, are the first steps in this direction. We have a lot of people working in this area as car companies have shown a great deal of interest in those systems. I think most companies in Europe have established road maps to determine how they will go forward with such systems.
Bosch passed Delphi last year to become the biggest supplier in the world, based on sales. Was becoming No. 1 a stated goal when you were head of Bosch? And now that you are No. 1 does it mean that you have to look over your shoulder more?
It was not a primary goal within Bosch. The goal was to grow faster than the market. I think we achieved that over the last two or three decades. Being No. 1 is nice. But our primary goal is to satisfy our customers, to establish a solid, long-term business and to make money.
Would Bosch be where it is today if it hadn’t acquired common-rail diesel technology from Fiat? How important is common-rail in terms of your sales?
We did not acquire the concept of the common-rail from Fiat. It came from a company called Elasis, a government-financed research institute in which Fiat had a stake. At that time our diesel division and our advanced engineering group were working on several electronically controlled, high-pressure systems such as unit-injector
fuel management systems and also common-rail.
Our entrepreneurial achievement was to go into the common-rail business at the right time. Our technological achievement was to complete the development of the system and to establish the innovative manufacturing technologies needed to produce the system.
I would say 10 percent to 20 percent of the job was done. Bosch took care of the other 80 percent by industrializing
the system.
We saved time by getting the license from Elasis and we gained a head start on our competitors. There is no question that this provided an additional boost to the total sales of the Bosch group.
Do you think diesel will finally have a chance in the US?
We think there is a good chance. Diesels could reach a share of about 15 percent of newly registered light vehicles in the US within the next 10 years.
Diesel will be in strong competition with hybrids.
Why did Toyota beat Bosch to the market with a hybrid?
When I was in charge of Bosch’s electrical business in the early 1970s we were working on electric drives based on battery storage. We had experience in that area because we were also a supplier of electrical equipment for battery-driven forklifts.
At that time we decided that an electric car based on battery power would never succeed. Therefore we reduced our work on electric drives substantially.
In the 1980s and 1990s, we had several hybrid projects with OEMs in which we had test fleets of about 20 to 50 cars. But none of those projects proceeded past the testing stage.
At that time the battery storage technology that is used today by Toyota was not available. Toyota was first to merge the gasoline engine and the electric drive successfully.
What kind of future do you predict for diesel hybrids?
In the long term, I would give the diesel hybrid a better chance of succeeding than the gasoline hybrid because you start with the diesel as the base engine. You end up with even lower fuel consumption than with the gasoline hybrid.
How have supplier and automaker relations evolved in the past decade?
With the exception of a few OEMs, the automotive industry has been earning too little for a number of years now. This has led to even more pressure on automotive suppliers’ prices because components are the largest portion of the total cost of a vehicle. Supplier content accounts for about 65 percent of the manufacturing cost of an automobile. This number is still growing and could reach 75 percent in the future.
Is price driving most automakers’ purchasing decisions?
In general this is not true. But in some cases today’s purchasing decisions are driven more by price than by technology considerations. I am not talking about quality.
But purchasing that is too price-oriented can lead to functional deficiencies, for example to navigation systems, which are difficult for the customer to operate.
And sometimes an OEM finds out too late that it does not have the right supplier for the job.
Looking at our own purchasing department, 20 years ago, we used to be primarily price oriented. That has changed a lot. First of all, the number of people in our purchasing departments who have a technical background has increased from about 20 percent to 50 percent. We also have established a technological cooperation with many of our suppliers. I have always said that if we do not treat our suppliers well then we cannot expect to be treated well by our own customers.
What have suppliers such as Bosch done since the second half of the 1990s to improve the way they develop, test and produce automotive electronics?
We have taken three major steps. First, we have significantly improved the hardware of our electronic controls. We have done this by using carefully selected, high-quality components, by establishing a very strict release procedure for these components, and by improving our manufacturing and testing processes. Second, we have systematically improved our software quality by providing our software engineers with internal training courses and by undergoing external audits that show that most Bosch divisions have reached CMMI [Capability Maturity Model Integrated] level 3 or even higher. [Level 5 is the highest in this assessment of an organization’s software and systems engineering, program management and organizational management capabilities.]
I think that is a very encouraging result.
And third, we are doing more application work and test procedures internally, independent from the carmaker, to ensure that our systems interact well with other in-car systems.
You can reach Douglas A. Bolduc at dbolduc@crain.com.
