Formidable Challenges for Auto Industry.

• Position: Report predicts rapid changes - Brief Article - Statistical Data Included

Rapid changes in technology, increased regulation, and accelerating globalization are forecast for the auto industry over the next 10 years, according to a University of Michigan, Ann Arbor, study based on responses from 86 auto industry experts. "Automobile manufacturers and their suppliers will continue to face many formidable challenges in the next decade as they address growing environmental challenges, tough global competition, and more demanding customers," says David E. Cole, director of the university's Office for the Study of Automotive Transportation. "Furthermore, shortages of capital and skilled human resources and time pressures to do more, better, and yet faster exacerbate their challenges."

Fuel economy Federal standards are expected to be significantly more restrictive, with corporate average fuel economy (CAFE) projected to increase from 27.5 miles per gallon to 32 for passenger cars and from 20.7 to 26 mpg for light trucks (pickups, sport utility vehicles, and vans) in the next decade.

Cole and co-author Gerald F. Londal, a retired General Motors engineering manager, argue that CAFE--designed to conserve fuel and, more recently, to minimize global warming--creates a fundamental conflict between auto manufacturers and customers. Current gas prices notwithstanding, the cost of fuel is expected to be reasonably low in the next decade, encouraging consumers to buy less fuel-efficient vehicles that are larger and offer other advantages.

While there is no single "silver bullet" to improve fuel economy dramatically in the next 10 years, the use of hybrid powertrains and energy storage will have the greatest impact on CAFE, the researchers predict. The largest improvements in currently used vehicle systems are expected to come from increased engine efficiency and vehicle weight reduction. Almost half of the respondents believe that vehicles with electric drivetrains can reach drivetrain cost parity with gasoline engine, automatic transmission-powered vehicles by 2010.

The study forecasts that traditional domestic manufacturers will source an increasing percentage of parts, components, and subassemblies from outside North...