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UNIVERSIDADE TCNICA DE LISBOA

INSTITUTO SUPERIOR TCNICO

INNOVATION FOR AUTOMOTIVE INTERIOR COMPONENTS:

IMPLICATIONS FOR THE PORTUGUESE INDUSTRY

Joo Verssimo Meyer

(Licenciado)

Dissertao para obteno do Grau de Mestre em Engenharia e Gesto de Tecnologia

Orientador: Doutor Paulo Manuel Cadete Ferro

Co-orientador: MSc Andrew James

JRI

Presidente: Doutor Manuel Frederico Tojal de Valsassina HeitorVogais: Doutor Paulo Manuel Cadete Ferro

Doutor Francisco Miguel Rogado Salvador Pinheiro Veloso

Julho de 2004

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Resumo

O presente trabalho analisa a inovao nos componentes para o interior automvel a nvel europeu

com base numa tcnica de Prospectiva Tecnolgica conhecida como Mapeamento Tecnolgico, a

qual foi aplicada a trs mdulos de interior automvel.

Os dados colhidos no Reino Unido e em Portugal permitiram traar linhas de evoluo numa escala

de tempo respeitantes a configurao de produto, materiais e tecnologias, para cada um dos trs

mdulos considerados.

A indstria de componentes para o interior automvel portuguesa foi caracterizada com base num

inqurito tecnolgico conduzido em 2002, o que permitiu concluir sobre a capacidade tecnolgica do

sector face s perspectivas de evoluo tecnolgica identificadas no estudo prospectivo.

Esta anlise foi detalhada num caso de estudo relativo a um mdulo assento produzido numa

empresa de componentes nacional, donde foi possvel retirar implicaes relativamente

capacidade tecnolgica e estratgia organizacional da referida empresa.

Este trabalho permitiu obter uma representao grfica numa escala de tempo de materiais e

tecnologias chave para o interior automvel da prxima gerao de veculos. Com base nesta viso

futura foi possvel identificar desafios e oportunidades para o sector de componentes para o interior

automvel portugus.

Palavras-chave:

Prospectiva, Mapas Tecnolgicos, Indstria Automvel, Autointeriores, Inovao, Gesto deTecnologia

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Abstract

The present work analyses innovation in automotive interior components on a European level, based

on a Technology Foresight technique known as Technology Roadmapping, which has been applied

to three selected automotive interior modules.

The data gathered in the United Kingdom and Portugal enabled to draw evolution paths on a time

frame for each of the three modules considered regarding product configuration, materials and

technologies.

The Portuguese automotive interior component industry was characterized drawing on a

technological survey conducted in 2002, which enabled to conclude on the technological capacity of

the sector in view of the technologic evolution perspectives identified on the Foresight study.

This analysis was extended on a case study, regarding a seat module produced by a Portuguese

automotive component company, where implications were drawn in terms of technological capacity

and organizational strategy for the company considered.

This work enabled to obtain a graphic representation on a time frame of key materials and

technologies for automotive interiors on the next generation of vehicles. Based on this future vision it

was possible to assess the challenges and opportunities facing the Portuguese automotive interior

component sector.

Key words

Foresight, Technology Roadmaps, Automotive Industry, Autointeriors, Innovation, Technologymanagement

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Acknowledgements

I would like to thank the following persons who had a direct participation on this work:

Paulo Ferro, for accepting to be my supervisor, and for his support on the structuring of this thesis.Andrew James, for accepting to co-supervise my work. I want to thank him also for welcoming me in

Manchester and transmitting me confidence to getting on with the work.

Manuel Heitor, for his permanent availability and insightful comments along my work.

Jos Ferro Camacho, for his essential contribution on the automotive industry and for his friendly

dedication to this work.

I would like to acknowledge IN+, PREST and INTELI, and all the people working there for the

institutional support and the material conditions provided for conducting my work.

Then I would like to thank the contribution of all interviewees who accepted to participate on this

research and without which, it this work would have been impossible.

All my colleges contribution was fundamental for helping me structuring my ideas and stimulating my

creativity: Pedro, Joana, Aldina, Cristiano, zcan, Lee, Rafael, Ko, Miguel.

Finally to those people who were not directly involved in this work but who supported and trusted me:

my parents, and sister and all my friends.

Paljon kiitos, Silja

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Index

RESUMO .............................................................................................................................................................II

ABSTRACT.......................................................................................................................................................IIIACKNOWLEDGEMENTS.............................................................................................................................. IV

INDEX..................................................................................................................................................................V

LIST OF FIGURES..........................................................................................................................................VII

LIST OF TABLES............................................................................................................................................. IX

ABBREVIATIONS..............................................................................................................................................X

1 INTRODUCTION ........................................................................................................................................1

1.1 OBJECTIVES AND MOTIVATION ...............................................................................................................11.2 AUTOINTERIORS DYNAMICS....................................................................................................................2

1.2.1 Industry trends................................................................................................................................3

1.2.2 Autointeriors Global Key players .......... ........... .......... ........... ........... .......... ........... ........... ........... ...8

1.2.3 Autointeriors characterisation......................................................................................................12

1.2.4 Drivers of Innovation in Autointeriors .........................................................................................14

1.3 PORTUGUESE AUTOINTERIORS ..............................................................................................................17

1.3.1 The macro level ............................................................................................................................17

1.3.2 The technological dimension ........................................................................................................18

1.4 RESEARCH QUESTIONS ..........................................................................................................................23

2 METHODOLOGY .....................................................................................................................................26

2.1 REVIEW OF BIBLIOGRAPHY ....................................................................................................................26

2.1.1 Foresight: background and definition ........... .......... ........... ........... .......... ........... ........... .......... .....26

2.1.2 Methodologies used in Foresight..................................................................................................27

2.1.3 Overview of Technology Roadmaps..............................................................................................28

2.2 METHODOLOGY FOLLOWED ..................................................................................................................35

2.2.1 Preparation...................................................................................................................................36

2.2.2 The Consultation Process .............................................................................................................362.2.3 Construction of the Technology Roadmap....................................................................................38

2.2.4 Product Segmentation...................................................................................................................40

3 TECHNOLOGY ROADMAPPING IN AUTOMOTIVE INTERIORS................................................43

3.1 THE MODULES UNDER ANALYSIS ...........................................................................................................43

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3.1.1 Door Module.................................................................................................................................43

3.1.2 Instrument Panel...........................................................................................................................47

3.1.3 Seat Module..................................................................................................................................49

3.2 RESULTS................................................................................................................................................51

3.2.1 Industry trends..............................................................................................................................51

3.2.2 Door Module.................................................................................................................................57

3.2.3 Instrument Panel...........................................................................................................................58

3.2.4 Seat module...................................................................................................................................59

4 CASE STUDY: APPLICATION OF TECHNOLOGY ROADMAPPING TO A SEAT MODULE

MANUFACTURED IN PORTUGAL...............................................................................................................60

4.1 INTRODUCTION......................................................................................................................................60

4.2 DESCRIPTION OF THE COMPANY............................................................................................................60

4.3 DESCRIBING THE SEAT S7.8 ..................................................................................................................61

4.4 APPLYING THE ROADMAP EVOLUTION TRAJECTORIES TO THE S7.8 SEAT...............................................66

4.4.1 The scenarios offered by the Technology Roadmap .....................................................................66

4.4.2 Expected evolution of the S7.8 Seat ........... .......... ........... ........... ........... ........... .......... ........... ........67

4.5 IMPLICATIONS OF EXPECTED EVOLUTION IN THE S7.8SEAT ..................................................................69

5 DISCUSSION..............................................................................................................................................75

5.1 METHODOLOGICAL ASSESSMENT ..........................................................................................................75

5.2 TECHNOLOGY ROADMAP.......................................................................................................................77

5.2.1 Door module.................................................................................................................................77

5.2.2 Instrument Panel...........................................................................................................................815.2.3 Seat Module..................................................................................................................................84

5.2.4 Key technologies for Autointeriors .......... ........... ........... ........... ........... .......... ........... ........... .........87

5.2.5 Implications on the Portuguese automotive interior component companies .......... ............ ..........91

5.3 POLICY IMPLICATIONS AND FUTURE WORK............................................................................................94

BIBLIOGRAPHY...............................................................................................................................................96

ANNEX A INTERVIEW OUTLINE...........................................................................................................101

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List of Figures

FIGURE 1:COMPANY POSITIONING IN THE SUPPLY CHAIN (CONCEIO ET AL.2003).............................................3

FIGURE 2:AUTOMOTIVE INTERIORS NAFTA MARKET -VALUED AND INDUSTRY CONCENTRATION (CSM2002)...9

FIGURE 3:EVOLUTION OF MODULARISATION AND INTEGRATION IN THE AUTOMOTIVE COMPONENT INDUSTRY

(FIXON 1999) ................................................................................................................................................11

FIGURE 4:FUNCTIONAL REQUIREMENTS OF AUTO INTERIORS SUBASSEMBLIES ....................................................13

FIGURE 5:MATERIALS BY PRODUCT AREAS ..........................................................................................................13

FIGURE 6:SPECIALISATION OF THE PORTUGUESE AUTOMOTIVE COMPONENT INDUSTRY ......................................18

FIGURE 7:CHARACTERIZATION OF THE RESPONDENTS..........................................................................................19

FIGURE 8:MATERIALS PROCESSED........................................................................................................................20

FIGURE 9:NUMBER OF MATERIALS PROCESSED ....................................................................................................21

FIGURE 10:TYPOLOGY OF TECHNOLOGIES DOMINATED ........................................................................................22

FIGURE 11:POSITION OF FORESIGHT METHODS ON THE FORESIGHT TRIANGLE (ADAPTED FROM CAMERON ET AL.

1996).............................................................................................................................................................28

FIGURE 12:TAXONOMY OF ROADMAPS (KOSTOFF ET AL.2001)...........................................................................31

FIGURE 13:ROADMAPPING TAXONOMY (KAPPEL 2001) .......................................................................................31

FIGURE 14:METHODOLOGY FOLLOWED FOR THE CONSTRUCTION OF THE TRM ...................................................39

FIGURE 15:DOOR MODULE SUBCOMPONENTS......................................................................................................44

FIGURE 16:EXAMPLE OF AN INTERIOR TRIM PANEL AND HARDWARE CARRIER (GRUPO ANTOLIN).....................46

FIGURE 17:DOOR EXTERIOR PANEL (RAUTARUUKKI) ..........................................................................................47

FIGURE 18:INSTRUMENT PANEL SUBCOMPONENTS (SOFT PANEL) ........................................................................48FIGURE 19:INSTRUMENT PANEL COMPOSITION (GEPLASTICS) ............................................................................49

FIGURE 20:SEAT MODULE SUBCOMPONENTS .......................................................................................................49

FIGURE 21:SEAT FRAME (FAURECIA) ...................................................................................................................50

FIGURE 22:SECTIONED SEAT (LEAR) ....................................................................................................................51

FIGURE 23:MAIN FEATURES OF S7.8 SEAT (INAUTO-B2:ECO-DESIGN,IST)....................................................62

FIGURE 24:SEAT'S MAIN TECHNOLOGIES AND MATERIALS....................................................................................63

FIGURE 25:PROCESSES ASSOCIATED WITH THE PRODUCTION OF THE SEAT'S STRUCTURE .....................................64

FIGURE 26:PROCESSES ASSOCIATED WITH THE PRODUCTION OF THE SEAT'S FOAMS.............................................64

FIGURE 27:PROCESSES ASSOCIATED WITH THE PRODUCTION OF THE SEAT'S COVERS ...........................................65FIGURE 28:SWITCH FROM STEEL TO HIGH STRENGTH STEEL ...............................................................................70

FIGURE 29IMPLICATIONS OF A TECHNOLOGICAL UPGRADING IN THE FOAM PRODUCTION ....................................71

FIGURE 30:ADOPTION OF IN-SITU FOAM INJECTION TECHNOLOGY IN FOAM PRODUCTION.................................71

FIGURE 31USE OF VIRTUAL ENGINEERING DEVELOPMENT...................................................................................74

FIGURE 32:DOOR MODULE'S TECHNOLOGIES AND MATERIALS .............................................................................89

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FIGURE 33:INSTRUMENT PANEL'S TECHNOLOGIES AND MATERIALS .....................................................................90

FIGURE 34:SEAT MODULE'S TECHNOLOGIES AND MATERIALS ..............................................................................91

FIGURE 35:HUMAN RESOURCES QUALIFICATIONS - NATIONAL AND INTERNATIONAL COMPARISON (*-INTELI

2003).............................................................................................................................................................92

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List of Tables

TABLE 1:GENERIC TECHNOLOGY ROADMAP,EIRMA1997.................................................................................32

TABLE 2:TIME FRAME OF CONSULTATION PROCESS ..............................................................................................37TABLE 3:VARIABLES INFLUENCING PRODUCT SEGMENTATION.............................................................................40

TABLE 4:QUALIFICATIONS OF THE HUMAN RESOURCES IN CASE STUDY COMPANY (2002) ..................................61

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Abbreviations

Technical Abbreviations

ABS - Acrylonitrile-Butadiene-Styrene

CAD-CAM - Computer Aided Design-Computer Aided Manufacturing

CMF Compression moulded natural fibres or wood agglomerate

EPP Expanded Polypropylene

GFR Glass Fibre Reinforced

HHS High strength steel

HSNy - High stiffness nylon blend

HyF -Hydro-Formed

iC -in-colour

IM Injection moulding

LGF Long glass fibre

LPIM low-pressure injection moulding

NV Niche vehicle

PP Polypropylene

PU - Polyurethane

Sc Self-coloured

SMA - Styrene Maleic Anhydride

SS - slush skin

Tf Thermoforming

ThC thermo-covered

XLPO - Cross-linked Polyolefin (PP based solution)

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Non Technical Abbreviations

FDI Foreign Direct Investment

MNE Multi National Enterprises

MPV Multi Purpose Vehicle

NAFTA North American Free Trade Area

NHV Noise Vibration and Harshness

NIC Newly Independent Countries

OEM Original Equipment Manufacturer

SME Small and Medium Enterprise

TRM Technology Roadmap

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1 Introduction

1.1 Objectives and Motivation

This work analyses the technological evolution on automotive interior components. The objectives

consist of identifying possible transformations in materials used and technologies adopted in the next

generation of automotive interior components, as well as the main transformations in product

structure. It also draws implications of those changes on the Portuguese automotive interior

component industry.

The motivation for this work results from the realisation of the critical moment the Portuguese

automotive component industry is facing. It has been acknowledged the need for a transformation on

the development model followed until now (Veloso et al. 2000, Lobo et al. 2002).

The history of the automotive component industry is much connected to its consecutive stages of

development. Ever since the start of the first assembly lines in the late fifties and early sixties, it has

focused on process improvement and manufacturing and drawn on low cost labour (Fria 1999). The

most recent milestone has been the Autoeuropa project, in which Ford and Volkswagen set up an

assembly line through a joint venture. The settling of this assembly line has made a decisive

contribution to the growth and consolidating of the Portuguese automotive component sector, but

striking differences still persist between foreign and national suppliers. Presently, these Portuguese

suppliers are facing challenges from increasing competitiveness of new European accession

countries and the opening of new markets in Asia (China and India) and South America. These new

global players have typically inexpensive labour costs and often highly skilled workforce, thus

becoming very attractive option for investing companies. (Veloso et al. 2000, Selada et al. 2003)

On the Portuguese side, there has been a strong commitment by Universities, the Government,

industry associations and research and technology centres to promote activities and programs

directed at increasing the competitiveness of this industry. Recent examples of such commitment are

the constitution of the CEIIA (Centro de Excelncia e Inovao para a Indstria Automvel1), the

implementation of INAUTO Program2, and the creation of the CEDP (Centro de Engenharia e

Desenvolvimento de Produto3) in Maia.

1 Centre for Excellency and Innovation in the Automotive Industry

2http://inauto.ceiia.com

3 Centre for Engineering and Product Development

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Due to this joint commitment, the present moment is also of an opportunity to launch the industry into

another stage of development and implement a new strategy with increased focus on collaborative

research, towards the conception and development of more complex and added value products

through design and integration of technology and a stronger presence on foreign markets.

The present work results from the participation on two activities of the INAUTO Program. The firstactivity - Autointeriores, analysed the automotive interior industry, namely major innovation-driving

forces, new developments in materials and technologies and product structure evolution. The second

activity - Keyteckaimed at studying and applying Foresight methodologies to the automotive interior

industry, in order to assess possible evolution paths in automotive interior components, which could

be relevant for the strategic positioning of the Portuguese automotive interior component industry.

This work analyses possible evolution paths in automotive interior components and the implications of

such changes in the Portuguese automotive components industry. These evolution paths are drawn

based on key technologies and materials that have been identified, following a technology foresight

methodology.

This technology overlook has not the prophetic intention of determining the future of autointeriors and

its technologies and materials, but contribute to define the positioning of the Portuguese suppliers

and shed light onto the main challenges and opportunities that result from that evolution.

1.2 Autointeriors Dynamics

This section explores the main issues influencing the automotive industry on a global scale and

considers possible implications of such influence on the Portuguese automotive interiors componentssector.

As consequence of the global status that the automotive industry has achieved, technological

strategic choice of companies should be consider not only in its supply push dimension, but also

including other dimensions, often exogenous to its self, such as political and regulatory constrains,

shifts in economic and social values or increasing competition on a global scale.

These issues are essential to understand dynamic aspects of the automotive components industry,

made of choices that often seem irrational from a strictly technological perspective. The major trends

in the automotive components industry should provide inputs to prevent possible threats and explorenew opportunities for the Portuguese autointerior component sector.

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1.2.1 Industry trends

Characterizing the Supply chain

Modern vehicles are in general very complex systems and presently, most manufacturers are

reluctant to handle the whole production process. Instead, they prefer to keep the development andproduction of core products and other strategic activities, and turn to external suppliers for

strategically less important components. The industry is therefore organized into rather complex and

long supply chains, constituted by OEM (Original Equipment Manufacturers); the several tiers of

suppliers, including system integrators, component assemblers and component manufacturers; and

raw materials suppliers, whose features are worth highlighting here.

At the top level, OEM focus their activities on design, product development, part of the final assembly

stages and marketing, leaving most of the production and labour intensive stages of the process to

sub-contractors. OEM are therefore obliged to deal with a great number of suppliers - raw materials,

first- tier, second tier, and so forth4.

First tier suppliers work often in close relationship with OEM, and participate in development

activities, thus supplying subassemblies and components of considerable complexity and integration.

At a lower level of the supply chain operate the commonly called component suppliers, who take on

the most labour intensive stages of production, focusing on simple manufacturing processes involving

a reduced number of parts and families of materials.

Component Subassembly ModuleSystem

2nd + Tier 1st Tier

Differentiated

Commodities

Rear View Mirror

Fuel Injector Steering Column

Medium Value Added Grey-Box Design

Commodities

Small Stamps Small Injected

Parts

Low Value Added Build to Print

Development

Components

Door

Dashboard ABS

High Value Added Black-Box Design

Growth Strategy

Figure 1: Company positioning in the Supply Chain (Conceio et al. 2003)

4 Although second tier may not supply OEM directly, they are often chosen by them. For this reason, OEM must

be aware of the capacity and technological resources of second or third tier suppliers, in order to control the

selection stage.

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Important to emphasize is the fact that the greatest added value activities are those which involve

development in design and engineering, occurring in a more intensive way on the upper levels of the

supply chain (Figure 1).

A sustained growth strategy aims therefore towards a scaling up of the supply chain. In order to

remain competitive companies should be able to continuously add value to their products by offeringinnovative solutions. This can consist of gathering different techniques to produce a more complete

assembly, where style and design can be applied and systems can be integrated as differentiating

features. This transition - from component to subassembly manufacturing - involves a risk taking

commitment of companies to invest in technological upgrading. There are several factors critical for

being able to take this step. Some of them endogenous to the company, like the culture, the size, the

human capital or the technological capabilities (Veloso and Kuhmar 2002), but also exogenous

factors related to competition or inter-firm relations (Meyer 1999).

Competition

The competitive nature of the industry has, among other effects, originated recently a wake of

mergers and concentrations at a global scale. The automotive industry has become increasingly

concentrated and there have been consolidation trends pointing towards a significant reduction on the

number of first tier suppliers (PWC 2000). It has been estimated that the number of 2500 first tier

suppliers that existed in 1995 may be reduced to 1500 by 2005, (MacDuffie 2001). As a result OEM

have been focusing on development and marketing activities, leaving to their suppliers the burden of

most production and assembly work. Consequently, it has also been observed an increase on the

manufacturing and assembly business in general, and the emergence of a number of 1st tier

suppliers5, with considerable dimension and engineering capacities, comparable to OEM its selves.

First tier suppliers are able, due to their dimension, to focus on the development of complex modular

assemblies, which are then supplied to OEM. The supply of components to different OEM has also

enabled to benefit form scale of production. In fact, modular construction in autointerior components

enables the sharing of some components throughout different products (non-differentiating

components such as structural parts, cables and harnesses, or HVAC units). First tier suppliers

typically offer high production volume solutions, and due to their market domination, make it difficult

for other smaller dimension suppliers (such as the Portuguese autointeriors suppliers) to ascend in

the supply chain.

On the other hand customers expectations have been evolving influenced by the instability of shorter

social and economic cycles. Faced with a mature product, costumers are now more aware of their

5 most originating from spin-offs of OEM like the case of Faurecia from PSA group, Delphi form GM or Visteon

from Ford

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needs and aspirations, demanding increasing variability and customisation of their vehicles. If some

components in the autointeriors can in fact be shared, there are others that play a crucial role in

differentiation between brands and segments, thus originating a huge variety of solutions. This

pressures the industry to diversify its offer, reduce development time and increase the rate of product

renewal.

Therefore, the dynamic pace of the industry and the constant demand for differentiation create also

opportunities for new comers proposing niche solutions that mainstream suppliers are not prepared to

deliver, thus further intensifying competition. The Portuguese suppliers, due to their reduced

dimension should therefore focus on development activities based on collaborative work pursuing

innovative solutions, seeking and creating market gaps left by bigger-dimension players.

Demand Changes

The geographic distribution on the demand for automobiles has also been shifting. Existing mature

markets are becoming saturated and at the same time new markets have been coming into playshowing high growth rates of car ownership. A definition proposed for the production locations of

automakers, offers, per se, a good insight for understanding the market issues being discussed

(Veloso et al. 2000).

Accordingly, the author defines Large Existing Market Areas (LEMAs) such as NAFTA, Europe

(except Iberian Peninsula) or Japan, as markets with high income and vehicle per capita ratio, but

where sales growth is stagnant of negative.

Countries like Portugal, Spain, Mexico, Eastern European countries, on the other hand, are usually

referred to as Periphery of Large Existing Market Areas (PLEMAs). Their main feature is having lowcost labour where LEMAs can turn for supplies. Their proximity enables OEM in LEMAs to implement

complex logistics at a competitive cost.

The third group of countries is the Big Emerging Markets (BEMs). Countries like Brazil, China or

India, highly populated and with high growth rates and low vehicle per capita ratio, have a potential

increase in demand for vehicles. This imbalance in demand and supply has been originating a wave

of relocation of production units from mature markets (where they originated) towards emerging ones.

Several reasons can be pointed to justify the re-location of production units (Camuffo 2002):

Models produced on matured markets often fail to address emerging markets customersneeds.

Governments of emerging markets often introduce constrains to trade in order to reduce import

rates and create incentives to attract foreign direct investment.

The location of production units near target markets favours marketing sales and logistics

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Cost differentials (particularly in labour) often justify per se the process of relocation

Considering this structure, it is easy to understand the motivation for a re-location of OEM factories to

countries where the demand for new vehicles is high and growing (BEMs) or in countries where low

labour cost and geographical proximity make it attractive (PLEMAs).

The relocation of production units, not only alters the geographic distribution of supply of automobiles,

but also induces important organizational changes. In recent literature (Camuffo 2002) it has been

observed that in the process of re-location, OEM tend to reduce the scale of the assembly plant. The

main reasons are as follow:

Reducing investment costs

Distributing risks throughout a number of suppliers

Increasing flexibility in the case of sudden changes in supply

Shortening equipment upgrading and product restyling

Minimizing job impact in case of crisis

This has decisive effects on local economies. Not only it opens up opportunities for local companies

to access more demanding customers, but may also trigger important spillovers such as innovative

business practices and technology transfer.

The relocation can constitute an opportunity for local suppliers to access the supply chain and this

may boost local technological capabilities as local companies try to access.

On the other hand, relocation can have a negative impact in countries that cannot remain competitive.

Considering the particular case of the Portuguese industry, the expansion of the European Union can

motivate the relocation of existing production units to new accessing countries due to their highly

skilled labour force, lower salaries and proximity to LEMAS like Germany and France.

After a period of inflow of production units to Portugal due to its privileged conditions, the attention of

OEM has drawn other actors such as the new accessing countries as well as China, India and Brazil.

The implications to the Portuguese industry can be of two natures. For one, relocation processes are

becoming increasingly agile, which means that more countries can now compete with Portugal in

attracting production units. This means that the Portuguese supply industry has to be able to become

more competitive and differentiate itself from new players. On the other hand, the type of production

unit originated by these relocation processes is changing, requiring more capability and commitment

from the local supplier base.

It is therefore needed to define Portugals position in the group of relocation receivers, namely since

other competing countries are coming into play, and the nature of relocation is changing.

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Political Intervention

In view of the potential for knowledge creation, technology transfer and economic growth, public

policies play a key role in attracting the relocation of production units.

The broadness of the auto industry entails the possibility to reap very important spillovers, through

synergic interaction among different sectors. Hence, the interest of governments on creating

conditions through special regulatory frameworks in order to attract Foreign Direct Investment (FDI)

and promote trade. This has been demonstrated by the Autoeuropa project, which attracted the

largest amount ever of FDI in Portugal and enabled to create conditions for fundamental upgrading

of the sector (Veloso et al. 2000).

In the present work, it is important to emphasise on the other hand, some challenges and barriers that

may arise in the presence of governmental incentives to promote trade and attract FDI.

The influence of FDI incentive policies can do more than spicing up local competition. They can also

cause distortions and asymmetries, which pose additional challenges to local suppliers. In an analysisof the MNEs influence on Eastern European Countries, Meyer (1998) points out some factors that,

due to the nature of the countries under analysis, are of particular relevance to Portugal.

When an OEM establishes an assembly plant on a less developed country, there is a process of

selecting the suppliers integrating the supply chain. The local government is usually particularly

committed in involving national suppliers to participate, through the promotion of total or partial

acquisitions and incentives to technological upgrade or quality certification. A number of the best

ones manages to adapt to the new level of demand (costs, quality, on-time delivery, etc.) either

supported by their own dimension, or through mergers and partial acquisitions with MNE.

The smaller ones however, seem to experience difficulties to adapt to the new circumstances. OEM

tend to prefer the long lasting business relationships, since they foster relationshipspecific human

capital. This closeness is self-enhancing since the costs of transaction tend to diminish over time

(Meyer 1998), giving incumbents an increasing competitive advantage over new entrants (a sort of

switching cost at a corporate level). So instead of turning to local suppliers, the establishing OEM is

usually followed by their long lasting suppliers, who enter like was said before, either directly, or

through acquisition.

Moreover incentive to investment may offer special benefits to incoming firms such as more flexible

hiring and firing policies, (Blomstrom 1996). This creates inevitable market competition distortions.

Meyer (1998) goes further on claiming that most studies show that foreign-owned firms and firms with

non-equity cooperation with foreign partners outperform purely domestic firms.

This influence of foreign owned companies is also noticeable on the Portuguese context, considering

their importance on the automotive components sector. The biggest eight foreign companies out of a

total of 180 (national, foreign and mixed), accounted for 45% of turnover in 1999 (Basauto 2000). In

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spite of constituting a positive influence on the way they spiced up internal competition, the presence

and dominance of multinational players constitutes a strong challenge for Portuguese companies

even when operating in their own market. This has happened with the Autoeuropa case and is bound

to happen with any other OEM that may move to invest in Portugal in the future.

Political incentives should also consider the technological dimension. The Autoeuropa project hasundoubtedly contributed for an upgrading of the sector, but the reality is that there are still great

differences between local national suppliers and multinational ones. Now that the certification process

has been overcome, it is essential for national suppliers to develop a to the future attitude based on

informed knowledge of the evolution in their businesses and start being aware of the major innovation

trends, in order to adopt a move proactive approach.

1.2.2 Autointeriors Global Key players

There is not a definition of automotive interiors, but observing solutions proposed by the major firsttier suppliers can contribute to a characterisation. In 2002 the biggest European-level suppliers were

Faurecia for the Instrument Panel and the door module and Johnson Controls Inc (JCI) for the Seat

module. Occupying leading positions both at European and Global-level were also Visteon, Delphi

and Lear.(Autointeriors 20026)

Each supplier specialised in the following types of systems:

Faurecia: cockpits, door panels, insulation, IPs, seats/seat parts, trim

JCI: door panels, electronics, headliners, IPs, seats/seat parts, trim

Visteon: door panels, electronics, glass, HVAC7, IPs

Delphi: door panels, IPs, safety restraints, steering wheels

Lear: door panels, IPs, electronics, headliners, seats/seat parts

From the list above it is possible to notice the predominance of systems such as the door panel, the

instrument panel or the seats, as well as sub-systems in a different aggregation-level as is the case of

electronics, insulation, trim and HVAC.

6 Leading European Suppliers Model 2001, downloaded from www.autointeriors.com in 2002

7 Heat Ventilation and Air-Conditioned

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The interiors Market

Considering the automotive interiors market the focus of the present work , a recent study on the

automotive interiors NAFTA Market shows the relative importance and distribution of each

subassembly.

Figure 2: Automotive interiors NAFTA market - Valued and industry concentration (CSM 2002)

For the different subassemblies or modules, it is observable different realities. Whilst in the restraining

and acoustics systems, the concentration is much more significant, due probably to a trend towards

standardisation and scale related issues, on the cockpit, door and seat modules, the number of

suppliers is much greater and so is the distribution among them. One could say that there is not so

much propensity for standardization, since the range of possible solutions is much wider.

Modularisation and integration

The international Motor Vehicle Program (IMVP) in MIT has been concerned with modularisation and

outsourcing issues, namely its implications on automotive assembly. Through the use of specific

cases studies on the door module and instrument panel they have been investigating the extent of

these trends in the auto industry and the implications for the role of automotive assembly and

structure of the industry.

A common feature to various practices of modularisation has been identified: It [modularisation]entails having larger units in subassembly and also often involves outsourcing these subassemblies

to suppliers (as most frequently observed in the European auto industry) (Takeishi et al. 2001).

The increasing trend towards the production of modular units as a way to optimise the production

system has influenced both the hierarchies in production systems (and how they are organised) and

inter-firm relationships (between OEM and their suppliers). The nature of modularisation presents

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significant variations depending of many aspects including industrial culture or product strategy. The

general belief is that an increasing responsibility is being given to suppliers. It has been reported that

the turnover associated with manufacturing and assembly in the auto industry has increased five fold

in 2002 (ADM Press 2003). This can be attributed to modularisation and the increasing role attributed

to suppliers (inter-firm relationships), but also to a certain extent to the increasing number of

variations, which increased the business volume (production systems).

On a more global perspective, there has been a trend towards a growing importance of the interiors

as part of an automotive. More specifically, on the interiors market, it has been observed a growing

participation of n-tier suppliers on product development. The value chain has been expanding

together with the lean-thinkingness of OEM. Due to the new division of labour, it is natural that

suppliers try to add more value by supplying subassemblies with more integration. In view of

increasing demand for variability OEM have been trying to rationalise products structure by pushing

the concept of platforms and modular construction. This consists of developing standardised

components that can be shared throughout different models of vehicles, thus seeking to obtain acertain degree of diversity while maintaining scale related benefits. It has been accounted along the

90s an increase of 33% in the production volume for each platform of vehicles sold in the European

market at the same time as an increase on the number of vehicle body types (Sako, et al. 1999). So

in spite of a greater number of vehicles sharing a same platform, the number of vehicle body types

has increased. Within the same platform it has been possible to share components and at the same

time maintain product diversity.

On the other hand, modular development allows certain autonomy in the development of different

areas of the automotive, which may ultimately lead to the development in outsource. Helper et al.

(1999) have presented three scenarios for the evolution of modularity and outsourcing on the

automotive industry.

The first is similar to what has been occurring on the computer industry. It represents the paradigm of

modular production. Components are standardized offering common interfaces. OEM outsource each

component and all the activities related to its fabrication development, production and testing. They

keep some core technology development in-house, as well as the marketing and sales strategy.

Commoditisation is present due to the little differentiation between products and therefore suppliers

are under a lot of pressure to reduce costs and be the first to market in order to try and reap profit

from fast declining prices.

The second corresponds to the opposite situation, where OEM refuse to accept undifferentiated

products that might attenuate or even eliminate their distinctive look. They refuse to move to

modularity due to the great variability that exists between brands and models. Modular production has

also the risk of information leakages, particularly when suppliers work with more than one OEM.

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Finally, the third scenario points to a milder hybrid version of the previous two: modularisation

occurring on some modules, but not all OEM controlling critical modules and outsourcing non-

modular structures, or modules of little strategic significance.

Fixon (1999) clarifies this point by presenting a scenario for the evolution of modularity and

integration in automotive components (Figure 3). Accordingly, it is expected that interior productsevolve from a fragmented to a more integrated structure with a decrease on the number of

components per module (dashed curve). Simultaneously, it is expected a consolidation of

components into modules in the mid run followed by a decrease on the number of modules as a

result of the integration trend (uninterrupted curve).

Figure 3: Evolution of modularisation and Integration in the automotive component industry (Fixon 1999)

Considering the current product structure in automotive components, MacDuffie (2001) has

underlined the difference that still exists between the products computer and motor vehicle. The

differences are clear and the evolution trend seams to point towards a hybrid scenario on

modularisation, according to the description above. Further he systematised the forces driving

modularisation in the automotive industry. These are related with Product Strategy (increasing

complexity, integration and multidisciplinary nature of products), Financial Strategy (leanness in

organization for increased flexibility and risk reduction), Technology Strategy (integration of design

and concept competition) and Marketing Strategy (increased focus on customer through variability,

differentiation and customisation)

The impact of these drivers on suppliers is not yet fully understood. As it was said before, within the

auto industry it is possible to find different contexts of production systems. While the European auto

industry has been interested mainly in modularisation in inter-firm system, the Japanese has focused

on modularisation in production. Neither of them has addressed modularisation in product

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architecture. However, this is at the moment an inevitable consideration8 since it has been affecting

products, both technology and materials choice, and industrial relations. It is determinant for suppliers

to be aware and consider modularisation in their strategic positioning when approaching their

customers (both OEM and other suppliers).

In the context of this work it is pertinent to consider modularisation in view of the possible changesinduced on product configuration and also inter-firm relation particularly in what the Portuguese auto

components companies are concerned. It is clear that modularisation has strong conceptual links with

outsourcing in a way that there has been a shift of responsibility towards suppliers. Modular supply

involves dealing with increasing complexity of outsourced components, competence in design,

integration of systems, request for innovative solutions and technologies addressing current

requirements in style, differentiation, safety or environment.

1.2.3 Autointeriors characterisation

Automotive interiors are a set of components and subassemblies included in the vehicles passenger

compartment. Many classifications and configurations have been adopted throughout the industry, so

it is always a challenge to make an attempt to draw the boundaries of this product. Considering

automotive interiors as a set of integrated systems or modules can be a first step towards that

division. Consequently, the following modules can be found in most passengers vehicles: Seat

module, Door module, Instrument panel, Overhead module and Floor module. Being part of a bigger

system (the vehicles interior) these subassemblies have certain functional requirements. A possible

systematisation is offered below (Figure 4).

8 there is clearly a modular architecture in certain systems (safety and comfort systems, for example) and

components (door interior trim panel)

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Figure 4: Functional requirements of Auto interiors subassemblies

It can be seen from the figure above that many modules share functional requirements. These

functional requirements correspond to particular product areas, such as a structure or a cover. As a

result, a further systematisation can be made considering the materials used for a particular

functionality (Figure 5).

Figure 5: Materials by product areas

It can be noticed that the automotive interiors are complex product composed by a significant amountof different subassemblies, which are not always connected in a harmonious way.

There are also different functionalities and requirements that autointeriors have to satisfy, and for

each function, several options in terms of materials and technologies.

Materials

Structure Covers (skins) Upholstery Panels Knobs & switches

SteelsAluminumMagnesiumCompositesHybrid

LeatherTextilesPolymers:PVC, PU, PP,TPO, ABS...

ABS, PP,PE, PA,PVC...

Flexible PU,TPO Foams

PolymericComposites (fiberglass, Woodstock,Natural Fibers...)

Functions in Interiors

Seats Instrument Panel Overhead Door Panel Floor Module

ErgonomicsStructuralSafetyAestheticsComfort

AestheticsSupport forintegrationErgonomicsInsulationSafety

Support forintegrationInsulation

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Figure 5 also evidences the wide knowledge base required to produce such components due to the

diversity of materials and technologies necessary to master and also the great challenge from an

organisational point of view to put together each subassembly.

This factor stresses the importance of the technological dimension in the autointeriors and the need

to develop methodological tools of technology forecasting to understand and gain insight into futuredevelopments in this industry.

1.2.4 Drivers of Innovation in Autointeriors

The recent evolution of autointeriors allows concluding on the major innovation driving forces that

have been and are still thriving change, both on product structure, materials or manufacturing

technologies. These driving forces are based on trends and innovations observed on recent evolution

of automotive interiors components.

Innovations in autointeriors have been driven by market issues, regulatory framework, and even by

the evolution of the supply chain management.

The Drivers of Innovation express the pressures subjected to automotive interiors components on a

technological level, and were used to assess possible transformations on existing products during the

present work. The following drivers have been identified.

Cost reduction

Weight Reduction

Environment

Comfort

Customisation/ variability

Safety

Product Architecture

These were thought to be the drivers, which could be generalised to the whole industry. There might

be other factors (technological path dependence, surrounding industrial environment) influencing the

auto interiors industry in a localised way, at corporation level, or country level9, but those were notconsidered.

9 An existing expertise in a certain technological process or long term contracts with suppliers may be such

factors to influence the choice of technology in a given company

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Cost reduction

This driver concerns the costs in the activities related to the beginning of the products life cycle

conception, development and production. It can be translated in the use of alternative less expensive

raw materials, technological improvements, improved assembly processes and all assembly related

stages. The reduction of cost or the decrease in the ratio cost vs. benefit is an implicit requirement forthe introduction of innovations on an industrial context. But cost reduction can also be a reason per

selike the use of PVC covers to replace leather on seats and interior trim areas.

Weight Reduction

Weight reduction is an important goal, which relates to cost reduction and environmental

performance. Reducing a vehicles weight by 100 kg may reduce fuel consumption by approximately

0.8 liters per 100 km (HypoVereinsbank 2001). From the suppliers point of view, a weight reduction

can reflect its self on savings in raw materials and improved handling and distribution (Faraday

Advance 2003). Although the average cars weight has increased slightly in recent years (from 1015kg in 1990 to 1 132kg in 1998) (APME 1999), this was due to increasing safety concerns and

comfort requirements and has been attenuated by the increase of plastics utilization.

Environment

The environmental issues are linked with the recent EU directives concerning ELV (ELV directive

2000), establishing a minimum limit for the recycling of these products (EU Directive on ELV). This is

particularly important for the automotive interiors. Not only the share of interior components in total

vehicle weight is increasing in modern vehicle - meaning that, in order to comply with the limits of

recycling, it is no longer enough to separate the ferrous metals -, but it also poses some serious

challenges when it comes to sorting out the expanding myriad of different materials present

(Environmental Defence 1999, Net composites10). Many OEM (particularly the higher volume ones)

are working with their suppliers to find environment friendlier solutions design for disassembly or

mono-material constructions (Shah et al. 2000).

Another issue considered in this trend is the reduction of VOC (Volatile Organic Compounds), which

can be released from some plastics used in car interiors (e.g.: PVC) when exposed to high

temperatures and which can constitute a serious threat to human health.

Comfort

This trend is related with increasing demand from customers of new features and functionalities. Most

companies are aware of this and try to gain some extra competitive edge by offering a more

10http://www.netcomposites.com/news.asp?1644

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complete pack. Some of the issues addressed are human comfort (improved ergonomics, thermal

management systems), NVH (Noise, Vibration and Harshness), connectivity though telematics,

fatigue countermeasure systems, amongst others.

Customisation/ variability

This driver relates to satisfying the customers need for variability11 and differentiation. The interior is

one of the most important sources of differentiation and automakers have been trying to provide it

through product segmentation and allowing a certain personalisation by offering optional features.

With the outsourcing of some of those components, it has been possible to offer some differentiation

whilst maintaining scale related benefits12.

Safety

Road accidents are still one of the major causes of casualties in developed countries13. In spite of

continuous efforts of European countries to reduce this number, this was still the cause of death of

about 41.000 EU citizens in 200014.

In-vehicle safety has been one of the issues addressed to fight this problem. Nowadays vehicles

include more safety features and the tendency is to increase. It has been observed that many of the

safety features only present in top class vehicles are becoming more common in the lower categories

as well. Further, due to the increasing presence of telematics, new features are being proposed with

focus on accident prevention, through sensors technology.

Product Architecture

Current interior architecture is going through a period of undecidedness (Mercer 2003).

In an initial phase, the outsourcing of some components to assemblers and suppliers has favoured

modular construction. This allowed reducing the number of parts and optimising the assembly

process. From the perspective of improving coordination and optimising the assembly process, an

11 On variability see Article of Just Auto: Automotive Product Development, conquering complexity -

https://autoassembly.mckinsey.com/html/knowledge/article/ProdDev.asp

12 In the case of a seat frame, for example, vehicles of the same segment belonging to different brands canshare it, as long as the brands distinctiveness is assured though the shape of the foams and the type of seat

cover.

13 ACEA

14 CARE for EU data, http://europa.eu.int/comm/transport/home/care/index_en.htm; For U.S. data:

http://grouper.ieee.org/groups/1616/37StatisticsShowSafety.pdf

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expected trend would be to continue to integrate, ideally having the suppliers supplying the whole

interior rather than each component separately (MacDuffie 2001). This would allow a further reduction

on the number of parts, and at the same time a more integrated interior where the different modules

would fit together in a more harmonious way. Current challenges faced by OEM are: an imperfect

integration (variation in module boundaries), the risk of losing brand differentiation and the risk of

giving up too much responsibility to suppliers. The first, pushing towards an increasing integration,

and the second and third, to rethinking the supply chain management.

1.3 Portuguese Autointeriors

1.3.1 The macro level

Having considered the main factors associated with the dynamics of the automotive industry and the

major trends in autointeriors, this section intends to frame the present work on the Portugueseindustry, by offering a characterization of the Portuguese automotive interior component sector. The

characterization will be made in view of the threats and opportunities mentioned above and also in

view of the crucial role that technology and innovation plays on the automotive industry.

The Portuguese automotive industry is constituted by five Original Equipment Manufacturers (OEM)

supplied by around 180 component manufacturers. The automotive component sector is constituted

by a few large multinational corporations and a series of nationally owned Small to Medium

Enterprises (SME) most of them having less than 500 employees, (INTELI 2000).

In recent years there has been a growing convergence of the national components sector towardsautomotive interiors components. As Figure 6 shows, interior components have outcome Electric

Components and systems and Engines Brakes an transmissions to become the most important

product area in the Portuguese automotive components industry when measured in turnover.

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Turnover by product area

0

500

1000

1500

2000

25003000

3500

4000

4500

Inter

iors

Electric

Com

pone

ntan

dsys

tems

Engines

,bra

kesa

ndtras

miss

ions

Bod

ycom

ponents

,Sus

pens

ionan

dCha

ssi

Buss

esTir

es

Othe

rs(M

oulds

,tools

,etc)

Total

MEuro

19921995

1998

2000

Figure 6: Specialisation of the Portuguese automotive component industry

Considering the distribution along the supply chain, the Portuguese companies are typically

positioned on the lower levels, operating as component manufacturers or manufacturers with

assembly capacities, with more than half of the components produced being supplied at a first tier

level, but with a significant amount being also supplied at a second tier level (Veloso et al. 2000). The

organizational structure is characterized by a focus on production process and reduced product

improvement, supplying mostly simple components with a low degree of integration (Selada et al.

2003).

1.3.2 The technological dimension

A survey conducted between April and June 2002 as part of the activities in the project A8

Autointeriores of the INAUTO Program, allowed acquiring newer and more specific information of

capabilities and challenges faced by Portuguese companies (Camacho 2003). The sample included

companies whose activities addressed automotive interiors products or whose technology expertise

could be directed to that market. A total of 42 companies were contacted, and a rate of response of

43% has been obtained. The sample represents a total turnover of 594 M , corresponding to around

52% of the total turnover in the components sector for automotive interiors. The following distribution

of company size was obtained based on sales volume in 2001:

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Sales in 2001

0% 5% 10% 15% 20% 25% 30% 35%

100

M

Number of Companies

Average: 33 M

Standard Deviation: 48 M

Figure 7: Characterization of the respondents

The picture evidences a predominance of medium sized companies. This sample has on average

greater dimension companies with around 35% of the companies being situated above the 25

million Euro level , when compared with recent statistics for the automotive component companies in

Portugal (INTELI 2003). It also shows a heterogeneous distribution, consistent with the asymmetries

in company size pointed in the same source.

The materials processed by a firm can constitute an indication of the technological areas that it

controls. The following graphic compares the percentage of companies whose main activities involve

processing a certain type of material:

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0

2

4

6

8

10

12

14

Steel Aluminium Cork Rubber Foam Fibres/

Fabrics

Nat. Leather Plastics

Type of material processed

Numberofcompanies

0

50

100

150

200

250

300

350

400

450

500

Salesvalue[M

]

Number CompaniesSales value

Figure 8: Materials processed

Data presented in Figure 8 provides a description of the materials preferably supplied in Portugal for

automotive interior components (both considering companies and their sales). It can be noticed a

strong presence of plastics producers as well as fibres and fabrics, steel and foams.

Rearranging the data, it is also possible to obtain the degree of specialization of firms, considering the

array of materials processed. As it was shown in section 1.2.3, an automotive interior product is a

complex one constituted of several subassemblies of different materials. A wide array of different

types of materials processed is an indication of an equally wide array of technology expertise and

potentially of increased complexity of the products produced.

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0%

10%

20%

30%

40%

50%

60%

1 2 3 4

PercentageofComp

anies

0

10

20

30

40

50

60

70

AveragesizebasedonS

ales[M

]

Percentage of CompaniesAverage size based on sales

Figure 9: Number of materials processed

The majority of firms integrate a reduced array of different type of materials into its products, with half

of the firms considered processing a single type of material, as represented in Figure 9. This fact

demonstrates the low degree of complexity concerning automotive components produced in Portugal,

as already referred above. Still in Figure 9, a similar kind of comparison was made, in order to

account for company size. The group of companies who processes only one material has a very

small average company size, whereas the group of companies who processes two materials a much

greater average size. The remaining groups have a medium average size. This relationship between

company size (given by sales volume) and diversification (given by the number of materials

processed) seams to suggest (at least for the sample considered), that a focus on a few array ofmaterials is the best compromise between specialisation and diversification, as supported by

extensive literature (Anupindi et al. 1998)

Another indication of the degree of specialisation of firms operating in Portugal can be assessed by

the type of technologies used. Based on the array of technologies that the firms inquired claimed they

dominated, these were divided into four groups. Figure 10 presents the results for each group.

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0

5

10

15

20

25

30

35

Simple Forming/

Shaping

Welding/ Joining Surface Treatment Simultaneous

processing

Type of Technology

Figure 10: Typology of technologies dominated

Forming and shaping this group includes basic manufacturing technologies based on

mono-material processing in simple production steps. Some examples include steel sheet

stamping, tube bending, machining, plastic injection, fabrics cutting and sowing, among

others

Welding and joining this includes assembly processes with additional complexity requiring

the capacity to integrate different parts into an assembly. Some technologies include different

types of metal welding (spot, Mig/ Mag), aluminium brazing, plastics friction welding, hot-meltbounding.

Surface treatment this group of technologies can be associated with a stronger focus on

aesthetics, design and styling, areas where the greatest added value of the component often

resides. These include painting, surface treatment, embossing, soft paint of plastics, laser

engraving.

Simultaneous processing it involves production processes with increased complexity, that

often agglutinate a series of steps into a single stage. Some examples are low-pressure

injection moulding over a cover, pour-in-place foam injection, in-mould assembly, bi-injection of plastics (two different materials). It demonstrates a higher technological capacity

due to the increased complexity of the process.

Figure 10 demonstrates a predominance of simple processes and a low focus on integration of

components, as well as a reduced emphasis on appearance and sensorial aspects, so important in

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automotive interiors. It also demonstrates a limited use of complex production technologies involving

the simultaneous processing of different materials and one-shot processes.

1.4 Research questions

The strategy followed so far by Portuguese automotive suppliers is threatened by the increasing

global competitiveness of the industry. Newcomers challenge the Portuguese industry to differentiate

itself from its competitors, moving up on the supply chain and participate on those highly profitable

and technologically advanced activities involving conception, development and production of complex

assemblies making use of innovative materials and technologies. Selada et al. (1999) have

suggested four strategic paths that could foster these changes:

stronger inter-company cooperation in order to take advantage of synergic interactions

increase of the added value, both upstream and downstream of production

evolution on the complexity of products, going from simple component production towards

modular assembly

demonstrate technological and organizational capacity in order to attract the attention of OEM

and promote an image of innovation and competence at an international level

According to the description of the Portuguese autointerior component industry, there are a number of

limitations in terms of technologic capacity. Section 1.3 has shown that the majority of the Portuguese

companies, when analysed autonomously, are focused on a reduced array of technologies and

materials (Figure 9), producing parts of limited complexity, and with a technology portfolio orientedtowards process with limited focus on complex assemblies and product differentiation technologies

(Figure 10). The focus on process hampers the capacity to integrate different technologies in order to

produce complementary components on a modular construction basis.

However, it is also possible to notice in the Portuguese automotive component industry an increasing

focus and competence building around autointerior components. When put together, Portuguese

autointeriors manufacturers hold most technologic capabilities that it takes to produce an interior

module.

Considering the technological aspects, it becomes critical for Portuguese companies to be aware of

the perceived evolution of automotive components at a product level. This includes different product

configurations, their constituting components, technologies and integrated systems. Having a vision

of such evolution will enable to reduce the uncertainty caused by the fast pace of innovations in the

automotive industry, and the intense competition among its actors.

In order to move from a reactive to a proactive attitude, companies must be capable of mastering

information about future developments in their businesses, beyond the normal planning framework.

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They should have the knowledge about the whole product and not just remain attached to the

process they dominate. Proactivity involves being aware of future needs in terms of market in the

case of Portuguese automotive components companies, the needs of their customers: OEM and First

tier suppliers and being able to anticipate those needs.

It is therefore critical for the Portuguese automotive interior component sector to be informed aboutmajor innovation trends and possible development pathways in this sector. The first research

question for this thesis is:

What are the key technologies and materials for the future of the automotive interior

components industry?

In this dissertation a Foresight technique known as Technology Roadmapping was used with the

purpose of gaining insight into the future of automotive interiors. The role of Foresight in the context

of the present work aims at obtaining an extended vision into the future developments of automotive

interior components. By identifying the key technologies and materials, it was possible to draw

evolution paths and introduce the discussion of the implications for the Portuguese autointerior

component industry.

The hypothesis pursued is that the roadmaps will indicate the future evolution in autointeriors for the

modules considered, and that that future vision is consistent with the trends observed in the previous

scanning process. The Roadmaps will also reveal evolution trajectories that can followed the

Portuguese industry.

Having perceived an evolution for the autointerior components, it becomes critical to assess its

implications on the Portuguese industry, in view of their technological capability. This has led to the

second research question:

What are the implications of that vision, for the Portuguese automotive interiors industry?

These implications have been analysed at two distinct levels: firstly, concerning the industry ingeneral, based on the results of a technology survey done in 2002 described in section 1.3; secondly,

through a case study performed in a Portuguese automotive interior component manufacturer

presented in section 4, where the general trends are applied and validated.

From the description of the dynamics of the automotive components industry and the innovation

drivers of autointeriors there are, for a number of reasons, challenging opportunities for Portuguese

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companies to position themselves with innovative solutions, particularly on niche markets. This

relates, on one side to the volume of production involved (usually substantially smaller) and on the

other, on the choices in design and materials (preferably dissenting with existing mainstream

solutions). There is, in this case, a combined effect of volume and technology that may discourage

global tier one suppliers (the volumes of production are too small) and open up opportunities for

smaller dimension players relying on niche technologies.

The hypothesis is that the existing capacity of the Portuguese autointeriors industry is not prepared to

address future technological needs. In a more detailed way, there is a lack of strategic areas in the

application of new materials, an evolution in product structure towards a more modular construction,

and the clear demand for niche solutions, which represent market needs that are not being currently

addressed by incumbent players, and that can therefore constitute an opportunity for the Portuguese

automotive component sector.

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2 Methodology

This chapter addresses Technology Roadmapping as an activity within the field of Foresight. In the

first section, a brief overview of Foresight will be made. The second section will present an overview

of the Technology Roadmapping methodologies done in recent years. In the last section, themethodology followed in this work will be presented, including the definition of the consultation panel

and the description of the procedures adopted during the consultation process.

2.1 Review of bibliography

2.1.1 Foresight: background and definition

Futures studies have achieved growing recognition in the 50s and 60s from public initiative to assist

on managing complex and far reaching military projects. The need for such approaches was mainlydue to the following realisations:

The awareness that the expenditures with research had to be managed with a greater

efficiency and prioritisation couldnt be avoided

Technologies were becoming increasingly multidisciplinary and hence the need to bring

together actors that normally would not interact

The pace of technological change was increasing, requiring a longer vision planning of policy

making and research activities

Helmer-Hirschberg and Resch (researchers at Rand) have established in 1958 the philosophical base

for forecasting in The Epistemology of the Inexact Science (Helmer-Hirschberg, O. et al. 1958).

Accordingly,...in fields that have not yet developed to the point of having scientific laws, the

systematic use of expert judgement and pseudo-experimentation can be used as a valid source of

knowledge, as long as methodologies are defined, which take that into account. This intrinsic

characteristic implies the definition of suitable methodologies that can enable appropriating this useful

but sometimes spread and unstructured pool of knowledge.

Since their first applications, foresight studies have gained increasing importance in other sectors of

activity form governments to industry associations, to direct their strategic action, promote the

construction of shared visions or prioritise actions.

A recent definition of Foresight is offered by Miles et al. (2002): Foresight is a systematic,

participatory process, involving gathering intelligence and building visions for the medium-to-

long term future, and aimed at informing present-day decisions and mobilising joint actions.

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Analysing the key words in the definition above, the following points should be emphasised. A

systematic process should have two basic characteristics: it should be dealt like a broad and inclusive

system constituted by other subsystems; on the other hand, the process should follow an ordered

approach, drawing on a predefined methodology. Several acronyms are often used to define the

kinds of information that should be considered in Foresight studies. A common approach draws often

on the STEEPV acronym (Social, Technological, Environmental, Economical, Political, Human

Value). The subsystems considered are characterised by having strong interconnections and

interdependencies with each other.

The process should also involve a minimum critical mass of participants, representing the interested

parties (government, industrial associations, academia). These different actors should be involved

in working together to build a shared vision. It should be created an environment that promotes the

interchange of opinions and knowledge. The discussion should inform present policymaking of future

needs, challenges and opportunities.

The recent rationale for organising foresight studies when compared to the first initiatives in the 60s,

draws on the growing evidence that technologic actions cannot be detached from their implications in

society from a social equity and sustainable development perspective (Castells 1998). Hence there is

an increasing need for tools which enable multidisciplinary approaches and the analysis of complex

realities.

The networking aspects have been equally relevant since the knowledge base required for current

technologies is both extent and diversified. The subject under analysis the automotive interiors

clearly illustrates that.

2.1.2 Methodologies used in Foresight

The systematic nature of Foresight Processes implies the use of appropriate methodologies and tools

for collecting, structuring and analysing data. Some of these methodologies consist of Delphi surveys,

Cross-impact Analysis, Trend analysis or Scenario analysis, as well as Technology Roadmaps, the

later being described in more detail on the next section.

As Loveridge (1996) refers, the choice of methods should be eclectic. There should not be a strict

application of one or other technique, but rather the attempt to pursue the benefits offered by each of

the available techniques.

Foresight methodologies can be broadly divided into (i) Quantitative and (ii) Qualitative; the first

drawing heavily on past and current data, such as Trend Extrapolationor Simulation Modellingand

Systems Dynamics, whilst the later with a more future-oriented vision. Miles et al. (2002) make an

additional distinction within the qualitative methods. A further division between methods for eliciting

expert knowledge to develop long-term visions and scenarios (Expert Panels, Brainstorming, Delphi

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Method, Cross Impact Analysis) and on the other hand those methods for identifying key points of

action to determine planning strategies (SWOT Analysis, Critical / Key Technologies).

Another classification draws on the relative importance of three different kinds of activities (Cameron

et al. 1996): Different methodological emphasis can be organised in a triangle like in figure 1.

Methodologies with strong focus on the expertise of the participants like Panels should be placed onthe apex of Expertise, while science fiction writing, should instead be place next to the Creativity

apex, and so on.

Figure 11: Position of Foresight Methods on the Foresight Triangle (adapted from Cameron et al. 1996)

2.1.3 Overview of Technology Roadmaps

In this section it will be described the tool utilised in this methodology. First, a definition will be offered

based on recent publications, followed by a description of the most commonly used frameworks and

steps to be taken. Then there will be given an overview of processes where the methodology has

been applied.

Technology Roadmaps (TRM) are one of the tools available in Foresight studies to assist on

gathering, structuring and analysing data collected. One of the main elemental characteristics of

Technology Roadmaps is to map an evolutionary path of technology, product development, R&D

needs or other strategic issues on a time frame.

Galvin (1998) has defined Roadmaps as an extended look at the future of a chosen field of inquiry

composed from the collective knowledge and imagination of the brightest drivers of change in that

field. The underlying definition being: a document representing the evolution in time of a certain

theme, industry or corporation, which, was obtained with the contribution of a diversified group of

leading people, related to that theme.

Expertise InteractionAlignment

Creativity

Sciencefiction

La Prospective

Impactmatrix

ConferencesPanels

Scenario

writing

Essays

Delphi

Brainstorming

Combinationsof Methods

Workshops

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Its visual output should enable the understanding of the complex interactions and interdependencies

occurring between customer needs, technology responses and R&D programmes (Barker 1995). It

should facilitate a systemic approach to foresight studies by enabling the condensation of large

amount of information.

Benefits of Roadmapping

More recently, due to the increasing competitive environment surrounding most firms, other

organizational aspects of TRM have been emphasised. TRM have increasingly become part of an

integrated activity in some greater dimension companies and industry associations, such as the

American Glass Industry (Energetics Incorporated 1997), the Aluminium Industry (ORNL 2000),

Sandia National Laboratories (Garcia et al. 1997) or Philips Electronics (Groenveld 1997) enhancing

the exchange of knowledge between business units (Phaal et al. 1999). TRM have been seen, not

only as mere tools of Foresight processes, but also as a framework for introducing the discussion of

business trends, challenges and opportunities faced by companies governments and academia(Barker 1995, EIRMA 1997, Phaal et al. 1999, Kappel 2000). Moreover, there should be a clear

distinction between a project and a roadmap exercise. In EIRMAs words: A TRM is a living

document and is constantly evolving as circumstances change. It is quite different from a project plan

with its precisely defined milestones and objective to deliver a completely specified outcome (EIRMA

1997). In each case, the time scales are incompatible, since the uncertainty and risk between the two

are different.

The essence of building a Technology Roadmap implies the following (Probert et al. 2003):

A team engaged on building a common vision of their future and what they intend to achieve A collective learning process where members identify discontinuities and new directions of

evolution

A team developing a common language, thus improving the communication among its

members

A process where a team improves its ability to communicate their strategic vision to other

actors suppliers, customers or partners

The achievement of a evolution paths in a given sector

As it is imp