AUBURN HILLS, MI – The European debt crisis may have darkened Italy’s economic outlook, but auto parts supplier Magneti Marelli is following the strategy of parent Fiat by making hay where the sun shines in other parts of the world.
Fiat’s ownership stake in Chrysler and its operations in other world markets have offset huge losses at home, and Magneti Marelli is finding similar success in North America, particularly with its Automotive Lighting division.
In May, Automotive Lighting will open a new plant in Pulaski, TN, to produce forward lighting for the upcoming Jeep Liberty replacement, as well as lighting for Cadillac and Mercedes Benz. The plant is expected to employ 250 people to start and eventually about 800, says Stéphane Védie, president and CEO of Automotive Lighting in North America.
The Pulaski plant, which will run two shifts on four assembly lines, is necessary because the primary lighting plant in Juarez, Mexico, which employs 3,000 people, has reached capacity.
Three years ago, Magneti Marelli moved its metro Detroit headquarters from Farmington Hills, MI, to spacious digs here in Chrysler’s hometown, and a year ago those offices, dedicated mostly to sales and research and development, were expanded.
There’s talk of more growth potentially coming to the offices. About 150 people work for the supplier here, and one-third is dedicated to lighting.
Magneti Marelli posted 2012 global sales of €5.8 billion ($7.6 billion), and the biggest revenue generator was the lighting business, which accounted for €2.1 billion ($2.7 billion).
By 2015, Védie predicts lighting revenues will reach €3.1 billion ($4 billion) based on 100 new contracts starting production in each of the next three years. Most of the new business is in North America and Asia.
Several trends are driving Automotive Lighting’s growth.
Headlamps and taillamps increasingly are used as stylistic elements and even for branding purposes. Auto makers always want fresh product in the marketplace, and new headlights have become common with mid-cycle enhancements.
But the biggest shakeup in lighting comes from the migration from conventional halogen lamps to light-emitting diodes, which can be 10 times the price but burn longer and brighter, consume less energy and are easier to package.
In addition, they are small enough to be arrayed in a particular pattern for dramatic effect, as seen in numerous vehicles already in production.
The penetration of LEDs remains low, for now. In 2012, Automotive Lighting produced 22 million headlamps, and 5% of the associated annual revenue came from LEDs. By 2017, some 40% of forward lighting revenue is expected to come from LEDs, Védie says.
Government mandates calling for reductions in fuel consumption and carbon-dioxide emissions also are driving growth for most lighting suppliers.
An automotive halogen lamp generally projects less than 10 lumens per watt to the road ahead. Meanwhile, an LED is capable of producing between 50 and 100 lumens per watt, says Kamislav Fadel, vice president-research and development for Automotive Lighting.
That means auto makers can get the brightness they need for new vehicles from LEDs that weigh less and require less energy.
All exterior lighting on a vehicle, from headlamps and blinkers to the license plate and brake lights, generate CO2 emissions of about 3 gm/km. Many of those light sources are halogen, but Fadel says converting them all to LEDs could reduce CO2 emissions to about 1 gm/km.
Cost remains a hurdle, but simple LEDs are on the way that will make them only five times more expensive than halogen lamps, Fadel says. LED forward lighting also remains more expensive than bi-xenon high-intensity-discharge headlamps, but he says cost parity will be achieved in the near term.
“Bi-xenon headlamps continue to have a future until 2020, but at that point LEDs win out,” Fadel says.
The outlook for automotive halogen is less upbeat. “Halogen lamps are condemned to disappear,” Fadel says. “The question is when.”
In 2014, global auto production is expected to reach 85 million vehicles, and about 4% of them are expected to have exterior LED forward lighting. By 2018, vehicle production should grow to 100 million units, of which 16.5% should rely on forward LEDs, Fadel says.
Efforts to make front and rear lighting more aesthetically pleasing add complexity. For instance, the halogen headlamp for a ’96 Mercedes C-Class required 28 parts.
The new Mercedes CLS550 coupe, which starts at $72,000, comes available with the world’s first all-LED active headlamps that swivel to illuminate curves and continuously vary the pattern of the high beam to reduce glare for oncoming traffic. All that functionality requires 50 LEDs and a lot of moving parts – 353, to be exact.
Still, Védie says auto makers are willing to pay extra for the technology because it helps sell the car. He also admits LED headlamps are less profitable than bi-xenon lights, which have been popular in luxury vehicles for a decade.
Automotive Lighting has come a long way since the 1800s, when Italian company Carello made candles to light the way for stagecoaches. When the first European automobiles hit the road at the turn of the century, Carello began supplying them with battery-operated lamps.
Magneti Marelli acquired Carello in 1988, and in 1999 the operations were folded together with Robert Bosch’s lighting business to form Automotive Lighting, a 50-50 joint venture.
Magneti Marelli bought out Bosch’s share in 2003.
Since then, the supplier has delivered several breakthroughs, including the industry’s first LED headlamp on the Audi R8 supercar in 2007.
Automotive Lighting also supplies headlamps for vehicles such as the BMW X5, Volkswagen CC, Cadillac XTS, Lincoln MKX/Ford Edge, Audi A4, Honda Civic and Fiat 500.
Vehicles using Automotive Lighting taillamps include the R8, BMW 7-Series, Peugeot 308 RCZ, Mercedes B-Class, Alfa Romeo MiTo, Kia Sorento, Dodge Dart, Opel Astra and Toyota Aygo.
The world’s No.1 lighting supplier by volume is Japan’s Koito, with about 19% of the market in 2012. Automotive Lighting says it is No.2 with 13%, but that share is expected to reach 19% by 2016, Védie says.
Other significant lighting players in 2012 included Valeo/Ishikoh (13%), Hella (10%), Stanley (7%) and Visteon/ACH (4%).
Automotive Lighting focuses exclusively on exterior lighting, and Védie says the supplier has no interest in expanding into vehicle interiors.
“We’re already busy enough with exterior lighting,” he says.