Articles | About PSI Repair New Breed of Suppliers Answers Big 3 Call Five innovators earn Pace awards Automotive News Magazine A new breed of supplier is reshaping the North American automotive industry. Tested by the challenge from Japan and the Big 3's standards, the new breed is tearing up the rule book. The success stories are the best of global methods, Yankee ingenuity and a fresh appreciation for the power of individuals, even those on the shop floor. To honor this new source of innovation in the automobile industry, Automotive News and the consulting firm Ernst & Young bestowed their first PACE awards Sunday night in Dearborn, Mich. The winners were:

Phillips Service Industries Inc. of Livonia, Mich. Gentex Corp. of Zeeland, Mich. AP Technoglass Inc. of Elizabethtown, Ky. Spicer Driveshaft Division of Dana Corp. in Toledo, Ohio. Johnson Controls Automotive, Johnson Controls Inc. of Plymouth, Mich.

The winners demonstrated that innovation can arise from many different sources. Gentex, for example, mastered a new branch of science- electrochromics- to produce self dimming mirrors. Dana Corp.'s Spicer division,on the other hand, found ways to improve an old and low-tech device, the universal joint. At Phillips Service Industries Inc., innovation was driven by a new generation of the Phillips family. The new-blood put computers and bar coding to use to build upon the traditional strengths of their company. AP Technoglass Inc. innovated by breaking away, in a sense, from its parent, Japan's Asahi Glass Co. Ltd. Finally, Johnson Controls Inc. was inspired by customer Toyota Motor Manufacturing USA Inc. to develop just-in-time and just-in-sequence delivery of seats. The Crisis Factor But while innovation can spring from many different sources, a sense of crisis is often a necessary ingredient, said Michael Smitka, an associate professor of economics at Washington and Lee University in Lexington, Va. "There is usually the sense that we either change the organization or we die," Smitka said. "There's a sense of crisis that gets senior management involved." Why is crisis often necessary to drive change? "Innovation is very hard, risky and costly," he said. "If it doesn't work, you're often worse off than if you do nothing." Many of the innovations bearing fruit at auto suppliers today were prompted by the twin crises of the Japanese automotive challenge of the 1980s and the recession of the early 1990s. Dana Empowers Dana Corp. is an exception to the crisis rule among the PACE winners, Smitka said. By empowering workers to take control of their jobs and holding managers strictly accountable for results. Dana innovates without crises. Dana's Spicer Driveshaft Division was a co-winner in the large-company category for its improved universal joint for light trucks. Dana's global reach spotted the technology of a company called Presta Forge in the European country of Liechtenstein. Dana hired Presta Forge to produce an improved cross piece of the U-joint. The cold-forged piece requires a minimum of machining before assembly, eliminating various steps formerly done at Spicer. Hiring Presta Forge was not a simple matter of outsourcing a part, said Tom Hachiya, a PACE judge. First, Dana decided not to try to duplicate Presta Forge's technology. Second, "the people doing the machining (at Spicer) had to go find something new to do," he said. By redesigning other parts of the U-joint, Spicer also devised a better seal, reducing the need for lubricants. It also lowered vibration, which automakers are crying for as they make light trucks more carlike. "The mantra of being a low-cost provider has made it all the way down to the shop floor. It's not just a slogan," said Hachiya, executive director of the Research & Technology Institute in Grand Rapids, Mich. Phillips Services In recent decades, Phillips Service Industries built a solid business repairing and servicing production machines on factory floors. A new generation of family members developed a way to expand sales by using computers and bar coding. The company created a program called RAC, or Repairable Asset Control, to track, find and certify critical parts, such as electric motors and controllers, for production machines. Phillips assigns a person to a customer's factory; this person gathers a huge data base on the parts of the factory's machines. When a part is needed, Phillips can find it quickly on the factory's shelf or elsewhere. The company also tracks warranties on electric motors and other equipment, which factories rarely bother with. "At one Ford plant, warranty awards rose from $150,000 in one year to $750,000 in the next," said William Klag, a PACE judge. At no charge, Phillips also tests and certifies parts on factory equipment, such as controller boards. The extra service minimizes lost production time, said Klag. He is president of the consulting firm Technical Memory Consulting Inc. in Grosse Pointe Farms, Mich. Gentex Researches Rather than fine-tuning an existing business, Gentex has harnessed pure science to build sales. A Ph.D.- laden research and development department is continually looking for solutions to expand the market for its electrochromic mirrors. The mirrors sandwich a light sensitive gel between two pieces of glass. The gel darkens when exposed to glare, producing a self-dimming mirror. Gentex built a significant business building interior mirrors in the 1980's, but was stymied on exterior mirrors. Ultraviolet light broke down the electrochromic gel. The company finally found and additive that protected the gel but didn't alter its properties, said Jim Haeffner, a PACE judge and first vice president at Comerica Bank in Detroit. Gentex launched the exterior mirror in 1991 and since sold about 350,000 units on 14 models in North America and Europe. "As innovative as Gentex is, they are very conservative financially and customer driven," Haeffner said. The company uses computer simulations to speed development time and readily becomes a Tier 2 supplier when necessary, he said. "They are continually seeing how they can best attack the market," he said. Johnson Listens Johnson Controls Inc. has devised innovative ways to listen to the market. To strengthen its sales pitch to automakers, the company surveys car buyers to learn exactly what they want. This research helps the company work with the automaker to choose the best type of seat for a model's target market, said PACE judge Robert Tuttle, a retired chairman of automotive supplier SPX Corp. Johnson Controls also astutely learned just-in-time and just-in-sequence production methods from Toyota by supplying seats to the Japanese automaker's North American operations. Johnson Controls adapted the methods to its other customers, allowing the company to cut cost and boost market share. Technoglass Stretches AP Technoglass, the American subsidiary of Asahi Glass, pushed itself to master new techniques to satisfy Saturn Corp. "They stretched the previous limits of what you could do with angles, bends and contours, " said PACE judge Ken Stork. AP's contributions allowed Saturn to use glass as a significant styling element, he said. AP didn't rely on Asahi for the new techniques. Nearly all the innovations were home-grown, he said. Stork called AP a "very gutsy operation" for investing heavily in North America, trusting that its technological know-how would win contacts form entrenched North American competitors. Moreover, AP made a particularly bold decision to collaborate with Saturn, he said, given General Motors' reputation for ruthlessly shopping contracts.

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