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    Features

    The Automotive Coatings Market: Going Global

    As auto manufacturers expand their businesses globally, so too are coatings manufacturers. No matter the size of the coatings firm, every R&D department is developing new technologies to answer the needs of car manufacturers that demand better systems at

    Christine Esposito08.09.05

    Leaders in the market are merging, creating manufacturing empires. Companies are opening new plants or expanding their facilities in regions that hold potential. Question: Do the previous statements describe car manufacturers or paint suppliers? Answer: Both. The big keep getting bigger-and more global-in the automotive business. Daimler-Benz joined forces with Chrysler, creating a worldwide automobile manufacturing empire. More recently, Ford announced plans to acquire Volvo for $6.45 million. Many automotive manufacturers are opening plants or expanding their facilities in growing markets such as South America. Judging by recent announcements, it appears that automotive coatings manufacturers are playing follow the leader. A New Giant The big news in the automotive coatings market in 1998 was undoubtedly DuPont's decision to acquire Herberts, the automotive coatings division of Hoechst AG. The accord was first announced in October, 1998, and was finalized just last month. The combined business-known as DuPont Performance Coatings-is now the largest automotive coatings supplier in the world with sales of more than $3.8 billion.

    DuPont targeted Herberts because the business was a perfect complement to its own and would provide DuPont with a truly global presence, according to John Lewis. Mr. Lewis, former DuPont vice president, automotive OEM finishes, has been named vice president and general manager, Europe and Asia, for DuPont Performance Coatings.

    "Herberts was an extremely well respected coatings company worldwide, but particularly in Europe," said Mr. Lewis. "DuPont was well respected worldwide, but especially in North America." Herberts joined the DuPont family on the heels of a record year. Herberts closed out 1998 with its best results in the company's history-sales rose nine percent and operating results rose 28%.

    Mr. Lewis spoke to Coatings World from the U.S., however his new post requires him to relocate to Europe. From there he will report to Louis F. Savelli, who has been named president, DuPont Performance Coatings. Additionally, Edward J. Donnelly, former director of planning, has been named vice president and general manager, DuPont Performance Coatings-Americas with global responsibility for the refinishes and industrial coatings business. He will operate out of DuPont's facilities in Wilmington, DE.

    But not all of the leadership team assembled to lead the new $3.8 billion operation is from DuPont. Herberts personnel have also been tapped to lead the firm into the new millennium. For OEM automotive coatings operations, Horst Hoelzlein, former president of Herberts Automotive Systems, has been named vice president of automotive systems�Europe and Asia and will operate from Wuppertal, Germany. Marty M. McQuade, former director of automotive OEM coatings, Europe, will relocate from Germany to the U.S. as vice president of automotive systems�Americas. Gerd Petzinger will continue to lead the powder coatings business. Formerly president of Herberts' industrial powder coatings, his new title is global vice president of powder coatings. Mr. Hoelzlein, Mr. McQuade and Mr. Petzinger will report to Mr. Lewis.

    The refinish business will be headed by Jon Killingstad, former president of Herberts Industrial Coatings. Mr. Killingstad will serve as vice president of refinish�Europe and Asia. Douglas L. Moore has been named vice president of refinish�Americas and will transfer from Belgium to Wilmington, DE. Both men will report to Mr. Donnelly. Additionally, Dieter Engel, president and CEO of Herberts automotive systems�Americas, has been appointed global technical director, DuPont Performance Coatings.

    Juergen Ritz, former chairman and CEO of Herberts, retired at the end of March as did Vollert Halkjaer, former president of Herberts automotive finishes. According to DuPont, both men have been retained to provide counsel for the integration.

    Just how smoothly the integration of DuPont and Herberts goes will become apparent in the coming months. According to Mr. Lewis, with the international staff picked to lead the new business, DuPont is already heading in the right direction. "We're very hopeful and expect that we will spend more time trying to help our customers," Mr. Lewis said. "It's a rare opportunity to bring together two companies that have these capabilities."

    "The colleagues we've met at Herberts are very talented, entrepreneurial businessmen, so the merger should reflect the talent," Mr. Lewis said. When asked if there were any foreseeable businesses that might be sold or sites that would be shut down due to overlapping interests, Mr. Lewis described the two operations as "very complementary" both in OEM and refinish.

    In addition, he said that the acquisition of Herberts bodes well for DuPont's established joint venture operations-DuPont-Kansai Automotive Coatings Ltd., formed in 1997, and Renner DuPont S.A., formed in Brazil in 1995.

    "By combining DuPont's and Herberts' products, DuPont is in a number one position to work with any OEM with a combination of products," Mr. Lewis added.

    DuPont isn't the only U.S. company that has expanded or may soon expand its business globally. In February, PPG Industries expanded its operations by acquiring the commercial transport refinish coatings business of Sigma Coatings B.V., a subsidiary of Petrofina. The acquired business includes heavy-duty truck finishes in Belgium, The Netherlands and the UK.

    "This acquisition is another step of measured expansion of our vehicle refinishes activity in Europe," Douglas C. Hepper, PPG's general manager of automotive refinish coatings, said in a statement.

    "In general, Sigma was on the acquisition radar screen for a while," added Richard Zahren, vice president, automotive coatings, PPG.

    Red Spot, an Evansville, IN-based industrial and automotive coatings firm with sales of just under $100 million, is looking into the South American region. The company will most likely announce new developments there within the next few months.

     

    A Wide Range of Solutions According to Mr. Lewis of DuPont, today's automotive companies are looking for a range of products. "As our customers deal with how to stay competitive and when they think of the future, they are thinking about materials and environmental friendliness."

    "The buzz words are quality, cost and environmental innovation," said Carl Weber, global customer support director, BASF Coatings.

    Manufacturers Coatings World spoke with contend that environmental issues, new materials used in the manufacturing process, low temperature cure, water-based and powder coatings are influencing their research efforts. With so many possibilities for growth, R&D departments around the industry need to be on the fast track to develop new products that will answer the future needs of the quick moving automotive industry.

    "A combination of environmental pressures and struggles with cost is driving new technologies," said Mr. Zahren. Among these new technologies are powder clearcoats, of which PPG has played a major role in bringing to the market.

    PPG supplies BMW with Enviracryl coatings, a powder clearcoat for its 5- and 7-series cars produced at the Dingolfing assembly plant in Germany. Enviracryl has been selected by R&D magazine as one of 1998's most technologically significant new products. The solvent-free product can be recycled and requires no chemical for treating waste created during the spray process, according to PPG.

    While the Enviracryl powder clearcoat is already being used in Europe, PPG is working with the Low Emission Paint Consortium (LEPC), which was created by Chrysler, Ford, and General Motors. Among other research efforts, LEPC is evaluating the benefits of powder clear coats for use by North American manufacturers. Also on the powder side, PPG is working on powder in water-based slurries that are sprayed like liquid coatings. According to Mr. Zahren, Mercedes is experimenting with the technology.

    Additionally, PPG has developed Power-Prime two coat electrocoat. The technology was unveiled for commercial application in March at DaimlerChrysler's facility at Camp Largo, Brazil. The first electrodeposition coating provides excellent corrosion resistance. The second coat replaces spray-applied conventional primer-surfacers. According to PPG, the Power-Prime system produces an exceptionally durable chemistry that combines outstanding corrosion protection with the stone-ship resistance. Mr. Zahren contends that Power-Prime may "revolutionize the industry in terms of automation with dramatic improvement for first-run-quality capability."

    Mr. Weber said BASF's integrated process of "wet-on-wet-on-wet application" has been running successfully at a Mercedes Benz A Class facility in Rastatt, Germany. The technology, according to Mr. Weber, eliminates the need for primer/oven, and provides companies with "energy, facility and manpower savings." In addition, it also enables a facility to be "truly green." The process features a lead-free e-coat and a water/powder clearcoat in a hands-free paint shop operation. More than 100,000 Mercedes vehicles have been produced with the BASF process in just two years.

    "It's appealing to the auto industry," said Mr. Weber. "Ford, DaimlerChrysler-they're all talking green. It's good not only for emissions, but also health and safety."

    Another one of BASF's new developments is Variocrom color-variable pigments, which will soon be commercialized, according to Mr. Weber. The new pigments are an updated version of the Mystic color technology BASF showcased in 1996. Today, BASF is supplying its own additive to the formulation. They offer more "pizzazz and a prism effect" and are a "more palatable cost alternative," Mr. Weber said.

     

    New Materials New directions in automotive materials-such as plastics and aluminum substrates-are also affecting research and development efforts at automotive coatings companies around the world.

    "Plastics and automobiles are made for each other," said Ron Yocum, president of the American Plastics Council (APC). According to the APC, the transportation industry used about two billion kilograms of plastics in 1996. The average automobile today is manufactured with approximately 108 kg of plastics, while some Chrysler mini-vans contain as much as 162 kg, according APC, which operates the APC Automotive Center in Troy, MI.

    The new Oldsmobile Intrigue has a plastic spoiler painted with 2K polyurethane coatings from Morton International and PPG. According to Bayer Corp., which supplies Desmodour polyisocyanates for both the PPG and Morton formulations, the Intrigue's primed plastic parts arrive at a Tier II paint shop that uses a 2K polyurethane basecoat/clearcoat system. The basecoat, which can be pigmented to any metallic or non-metallic shade, is generally applied at a dry film thickness (DFT) of 0.8 to 1.6 mils. In the final step, a 2K polyurethane clearcoat is applied wet-on-wet over the basecoat. The DFT for clearcoat generally ranges from 1.5 to 2 mils, according to Bayer.

    The growing popularity of sport utility vehicles (SUVs) has created some challenges for manufacturers of interior coatings. According to Mr. Storms of Red Spot, more work is being done to improve the durability of coatings for interior applications. Today's active consumers are more likely to use their SUVs for a drive to the beach or for a camping trip. The lotions and sprays they don to protect their skin can rub off onto the seats and instrument panels. Therefore, today's interior coatings, he said, need to be more resistant to chemicals ranging from common cleaning products to sunscreens and insect repellants.

    Mr. Storms also noted that work is being done in the area of new coatings technologies for laser-etch buttons such as heater controls and instrument panels as well as waterborne in-mold coatings. Among Red Spot's newest products SRC, its trademarked UV-curable scratch-resistant coatings for headlights.

     

    Cost, Consolidation and Expansion "Our customers have real cost-affordability issues which are passed onto the suppliers," said Mr. Zahren. "That's a real challenge." Coatings companies are looking at more of the total system as a way to reduce costs rather than "narrowing in on the cost of the gallon of paint," Mr. Zahren added.

    "All companies are all looking to reduce the cost of painting a vehicle," said Mr. Weber of BASF Coatings.

    According to Mr. Lewis of DuPont, service, too, is a key factor for today's automotive manufacturer. "In major OEM markets, customers are requiring more service," Mr. Lewis said.

    "As our customers look to become more global, they are looking for suppliers that are more global. It opens opportunities and provides threats" for coatings suppliers, commented Mr. Zahren of PPG.

    These firms Coatings World spoke with have recognized the need to remain competitive in the face of the changing marketplace. Sometimes remaining competitive requires companies to make tough choices, such as closing down a long-running plant-a decision that BASF was forced to make.

    "We do what we can do to rationalize way to continually improve," Mr. Weber said. BASF's drive for continual improvement will force the company to shutter a facility in Detroit.

    "It's always a tough decision," Mr. Weber said about the decision to close the site. However, with the plant's age (it is BASF Coatings' oldest facility) and the fact that BASF has other manufacturing facilities doing OEM work, "it made sense to spread the business out," he added. The site, located at 3301 Bourke Avenue, will be closed by mid-2000. It currently produces solvent-based coatings.

    Opening a new facility has helped Red Spot improve its position in the market. The company's new 28,000-sq.-ft. application center located in Plymouth, MI allows Red Spot to demonstrate new coatings technologies, which has led to new business, according to Mr. Storms. Additionally, Red Spot has started to supply its technologies in Europe for Chrysler applications. The European activity, with possible new developments in South America, are testament to Red Spot's quest to "follow the global customer," Mr. Storms said.

    There is bound to be some shuffling of accounts and customers as the automotive industry shakes out from this most recent round of consolidation. Some coatings companies may win new accounts; others may lose them. Mr. Zahren contends the change will make the market stronger. "In total, it's driving all suppliers to be more global."

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