LONDON - The huge potential for lucrative growth in cockpit modules has been driving mergers and alliances among major suppliers.
Cockpit modules have been around since the 1980s but vehicle makers have traditionally seen them as part of their core competence.
BMW, for example, still designs and assembles almost all its cockpits at its in-house BMW Kunststofftechnik division.
Cockpits are critical to the look and feel of the interior of a car. They bring together many of the key functions of a vehicle - including steering wheel and column, dashboard, wiring harness, entertainment and navigation systems, airbags and carrier, and pedals.
But vehicle makers are starting to ask leading Tier 1 suppliers to take the lead in developing, testing and even sourcing their new cockpit modules - and not just for niche vehicles.
Outsourced cockpit volumes will grow from 4 million in 2000 to around 18 million globally in 2007, according to Delphi Automotive, one of the leading participants in the sector.
The next step in both cockpit module development and cost savings will come with the integration of various cockpit functions by suppliers, according to auto industry executives.
'You need to have all the skills in this area to do the optimization,' said Jose Maria Alapont, president of Delphi Automotive Systems Europe.
Few suppliers have all the relevant technologies in-house. Even Delphi, the former GM division that is the world's largest auto supplier, does not have the all the capabilities required.
'There are areas where we need to invest in greenfield sites or look for alliances,' said Alapont.
The potential of the cockpit business has attracted a long list of suppliers from a wide range of disciplines.
The opportunities are driving many of the mergers and alliances among Tier 1 suppliers. The planned merger of Siemens Automotive and the VDO business of Mannesmann Atecs will create the world's largest supplier of cockpit modules and navigation systems, according to the companies.
Siemens Automotive already has a cockpit systems joint venture with French supplier Sommer-Allibert's SAI Automotive unit. It is called SAS Automotive Systems.
Johnson Controls bought into the cockpit business in Europe in 1998 with its acquisition of US-based interior supplier Becker Group. Becker had earlier acquired German-based instrument panel specialist Happich. Lear bought United Technologies Automotive in 1999 to strengthen the electrical side of its cockpit business.
Also in 1999, Visteon bought Plastic Omnium's interior business, and Magneti Marelli tied up with Textron and Breed to develop cockpit modules.
Meanwhile, Valeo's recent acquisition of Labinal's Sylea wiring business will boost its electrical capabilities in cockpits.
French supplier Faurecia is also looking for external growth to give it critical mass for cockpit operations.
The potential rewards for the market leaders are huge. The market for outsourced cockpits could be worth $15 billion-$20 billion in several years if growth expectations are fulfilled.
Full cockpit modules vary in cost between $700 and $1,200, according to leading industry participants.
That makes the value of cockpits second behind the engine as a sub-system within the car, said Kevin Mann of automotive consultants CSM Worldwide.
Mann said more value-added elements are being introduced within the cockpit.
'Many of the major new functions being added to cars are cockpit-based, such as navigation, safety and communications,' he said.
Mann believes the importance of electronics in the cockpit area may even result in the traditional relationship between Tier 1 and Tier 2 suppliers being reversed on future cockpits. He sees electronics suppliers taking the lead and traditional interior trim companies being reduced to Tier 2 status, at least in systems design.