In July 2006, Matthew Beecham talked with Kevin Frailey, Senior Director, Business Strategy, ArvinMeritor Light Vehicle Systems, Emissions Technologies, Robin Willats, Chief Engineer of NVH for ArvinMeritor Light Vehicle Systems, Emissions Technologies, and Peter Kroner, Director CoC Emissions worldwide, ArvinMeritor Light Vehicle Systems, Emissions Technologies, about the current market and technical trends in automotive emission technologies.
ArvinMeritor Inc serves light vehicle, commercial truck, trailer and specialty original equipment manufacturers and related aftermarkets. ArvinMeritor was formed in July 2000 following the merger of Meritor Automotive Inc and Arvin Industries Inc. The company’s business activity is divided into two main groups: Light Vehicle Systems; and Commercial Vehicle Systems.
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ArvinMeritor’s Light Vehicle Systems’ Emissions Technologies business supplies a complete line of exhaust system components for the OE market, including mufflers, exhaust pipes, catalytic converters and exhaust manifolds. This business employs 8,000 people at 23 manufacturing plants in 19 countries. It generated value-added sales of over US$1.4 billion in the financial year ended 2nd October 2005, equivalent to 29% of ArvinMeritor’s Light Vehicle Systems turnover.
ArvinMeritor has a long history in developing emissions-control technologies, starting with the catalytic converter introduced in the 1970s. Its latest innovations include a hydroformed and fabricated diesel engine manifold, gasoline engine maniverter and manifold, and diesel fuel vaporiser.
Just-auto: Could we start by asking you for your opinion about some general observations of the forces driving the automotive exhaust systems industry and how ArvinMeritor LVS is responding?
Kevin Frailey: First, there are trends impacting the exhaust industry that move in lock-step with trends felt all across the overall automotive industry: the on-going globalisation of competition, the amazing rise of automotive ownership in China & India, the difficulties that some North American-based customers are experiencing, and of course, the Eastern movement of automotive activity in Europe.
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By GlobalDataOf course, each of these trends creates its own risk, as well as its own opportunity. We must have an answer for both. It goes without saying that each exhaust player must have a programme that addresses increased competition, the need for a growing Asian presence, and pressure to locate in Eastern Europe, not only in serving Eastern European customers, but likewise in providing components back to Western mother plants to address the competitiveness issue.
Second, there are powertrain and legislative trends that layer on top of the overall automotive forces at work above. OE customers are demanding powertrains that are more fuel-efficient, and more refined in terms of noise and vibration. Next, governments are forcing them to ask more of the exhaust and emissions industry to get emissions levels down.
In summary, on a worldwide basis, we see the addressable market in which we participate growing as much as 20% in the coming five years. Some people find this to be counter-intuitive, given the overall malaise in automotive markets around the world.
Just-auto: What role does ArvinMeritor LVS play in the process of meeting the new emission targets?
Peter Kroner: To make an exhaust system work, it is not sufficient simply to put different components together in a row. All components interact with each other and system integration is the crucial part of the work, especially for more complex aftertreatment systems. The best catalyst will not work properly, if necessary temperatures are not reached or flow distribution is poor. As a manufacturer of exhaust systems, ArvinMeritor is deeply involved in integrating a complete system, working closely not only with OEM’s, but also with catalyst and substrate manufacturers. Based on the requirements — especially space constraints — we develop a complete exhaust system which meets emissions limits. This includes temperature and flow distribution over the whole exhaust system, positioning of components, e.g. the dosing unit [for SCR] or the vaporizer [for DPF regeneration] and system optimization.
Just-auto: As we understand it, with increasingly stricter emissions regulations forecasted, the emissions control content per light vehicle will rise over the next few years as a result of the introduction of multiple catalytic converters per vehicle and heat exchangers. To what extent do you see OE exhaust content rising through this decade?
Peter Kroner: For diesel engines, oxidation catalysts and particulate filters are state of the art. Coming into full focus right now are more stringent NOx limits — especially US Tier 2 Bin 5, as well as Euro 6 — that will require additional NOx reduction. Two different technologies, LNT and SCR, are currently under development, and both present their own advantages and disadvantages. SCR, coming into production now for truck applications, seems the more probable solution at the moment. Furthermore, additional devices to support and improve the performance of the whole system will be integrated. An example would be our vaporiser, a technology developed by ArvinMeritor to assist the regeneration of DPF, which gives additional benefits such as preventing oil dilution, reducing additional fuel consumption and allowing the use of filters of lower-cost volume or construction.
Just-auto: It is said that the average price (to the carmaker) of an exhaust system for a diesel light vehicle could quadruple when the new emission standards come into force. Given that around two-third the value of an exhaust system is centred on the hot-end, what do you see happening to price (trends)?
Kevin Frailey: Because every exhaust and emissions system is custom-fit for a particular vehicle, and there is such a wide discrepancy in cost, size and complexity depending on the vehicle’s size, market purpose, etc., I would like instead to look at the overall addressable market. This view gives the same information, but in a macro view.
First, ArvinMeritor focuses on emissions hardware, before adding in the cost of platinum group metals and some of the costs of the monoliths contained inside our overall product. We define that as the value-added part of the exhaust and emissions business for players like us.
Ignoring upward trends in PGM content and value, we still see our value-added addressable market in diesel emissions/exhaust tripling from perhaps a US$500 million market in 2004, to a market of US$1.5B or above in 2010. This market growth takes into account not only increased diesel engine penetration in the world, but likewise the incorporation of new after-treatment devices.
Of course, these trends are so well-publicised, that purchasing and engineering departments inside our customers are shining a brighter light on these increased costs. Therefore, there will be an immense focus on trying to find ways to mitigate these large cost increases. This is why ArvinMeritor is pushing so aggressively to help automakers take cost out of the emissions system of the future by making that regeneration as efficient as it possibly can be.
Just-auto: With the ever popular diesel-powered engine in Europe, the market for particulate filters is growing exponentially. How do you see the particulate filter technology evolving?
Peter Kroner: Particulate filters, especially wall-flow filters with a very high efficiency will be mandatory for passenger cars to reach PM legislation limits. Therefore, we will see a DPF penetration rate grow from perhaps, 20% of all European diesel cars today, to 100% in the next few years. In that light, we will see a change in materials for wall-flow filters in order to optimise weight and cost. Open filter systems showing a much lower efficiency will be used for retrofit applications as they do not require extensive changes in engine calibration. There may be other technologies in the future like a particulate electro-filter but they first will have to prove their functionality.
Just-auto: In the longer term, could you see vehicle makers overcoming the particulates problem without filters?
Peter Kroner: Of course, there will be further improvements to the internal combustion engine, but a ‘perfect’ diesel combustion without formation of any particulates is extremely difficult to achieve, if not impossible. Meanwhile, the use of bio-fuels will also have an impact on particulate emissions. In addition, additive residues from the fuel and/or the engine oil will still be present in the exhaust gas. In order to get rid of fine particulates, filters should still be necessary in some form in the future. Only alternative concepts like electric or fuel cell driven vehicles will not need any filter.
Just-auto: For some time, we’ve seen how manufacturers have focused on acoustical engineering of exhausts to help OEMs differentiate individual brands. What is ArvinMeritor doing in this respect?
Robin Willats: Acoustic differentiation is an issue of varying importance depending on market segment. Take the sports car segment. Here, tremendous value is placed on acoustic refinement and sound signature, resulting in elaborate development efforts both on the track and in the computer. To that point, ArvinMeritor received very good feedback for the sport sound-tuning of the latest Ford Mustang V8 system. Likewise, there is considerable attention paid to acoustics engineering in the North American premium truck and SUV market. Here again, ArvinMeritor received positive reviews for its new Cadillac Escalade acoustic package. This premium vehicle was reviewed as obtaining significant character from a combination of engine performance with a suitably aggressive exhaust character. In Europe, premium automakers show a keen interest in benchmarking sound quality, and setting exhaust level targets which reflect preference data coming from this research.
Several activities within the technical community of ArvinMeritor ET respond to this demand. We have employed world-class specialist engineers in North America and Europe to develop methodologies associated with specific sound quality. Activities involved cover psychoacoustics, jury evaluation methods, and quantification of targets for sporty sound. Establishment of objective targets, through consultation with our customers, is both the “Holy Grail” and a key part of the process. For example, what may sound sporty for one brand of vehicle may not fit the character of another. These new technological approaches are also mixed with the expertise of experienced tuning engineers, some of whom have 40 years specialist experience.
Complementing our home-grown expertise is a partnership with Sango Co Ltd, allowing us to conduct joint research and technology exchange to understand global requirements and preferences. Specific designs for distinct sound quality have been developed during production development projects using conventional muffler constructions carefully tuned for particular frequency content. In order to arrive at the optimal signature, ArvinMeritor designed an ‘in-house’ optimization process known as “QED” (standing for Quick Exhaust Design). This allows us to run predictive scenarios overnight simulating thousands of design iterations. When we arrive at our test centre morning the following morning, the automated process has narrowed our design options to the final few which best match specified acoustic requirements.
Advanced design technologies which help achieve sporty sound are also being pursued. Specifically, we are offering active and passive exhaust valve technology which switches between a quiet exhaust note and a more open and free flowing system for high power generation.
Just-auto: As far as catalytic converters are concerned, what do you see as the major challenge for this technology over the next five years?
Peter Kroner: The increasing number of catalytic converters leads to an increasing demand for noble metals, in particular Pt, Rh and Pd. Limited resources and correspondingly volatile noble metal prices demand the development of converters with higher efficiency and lower catalyst ageing. In addition, as the cold-start phase is responsible for a high percentage of the total emissions, light-off behaviour will have to be improved. Last, but not least the recycling of used catalytic converters will be another important challenge.
Just-auto: Despite the pace of consolidation in the exhaust sector, there are still a few small manufacturers in existence. How do you see the future for these smaller concerns?
Kevin Frailey: Let’s take the “universe” of players participating in the exhaust sector, and try to classify these participants along a few dimensions: global versus regional, full-system versus specialist, and then perhaps by ownership type, i.e. public, private, or OEM captive.. If the “exhaust Big 3” are ArvinMeritor, Faurecia and Tenneco, these are global, full-system, public companies who are called upon by large OEM’s to take on high-volume programs that may also have a global element to them. To the extent that big automakers are leveraging global platforms, and continuing to require full service or full systems, I do expect further consolidation at this level, or among the level of participants just below that grouping.
Still, however, I think there is room for specialists who focus either on a given product segment, or customer/regional segment. The question of how many of these survive in their current form is a good one. Perhaps, today there are several dozen such specialists, and fewer will survive going forward. ArvinMeritor expects consolidation in our industry to follow that of our customers.
Just-auto: We’re seeing some exhaust manufacturers close or restructure their manufacturing footprint in Europe. Is there still too much capacity in the (exhaust) industry?
Kevin Frailey: Yes, we witness the same trends. The question may not as much the overall level of capacity in the exhaust industry as its location. Yes, we compete in a highly competitive space, and movements Eastward do expose pockets of temporarily free capacity in places from which that activity was moved.
But, most companies are trying to shift capacity at the same time as they may be moving it. Some of theses shifts are dramatic, yet others are subtle but just as meaningful. To the extent that automakers keep vehicle assembly plants in Western Europe, there will remain a need to have final assembly of exhaust nearby, due to its poor pack density. Final exhaust systems are bulky, and come in very strange shapes which often rules out remote shipment of complete systems.
But, at the component level, you find some mufflers and sub assemblies or loose parts which have the right combination of labour content and pack density allowing us to source these externally and internally further afield. ArvinMeritor and others have been trying to find the right balance of Eastern component manufacturing and Western assembly that gives both lower cost and fast response. This is our strategy to deal with this trend.
RESEARCH link: Global market review of exhaust systems – forecasts to 2012
