Quest for `Three-Quart Car' Draws German, U.S. Makers
May 04, 2011
Volkswagen AG and Israel's Dead Sea Works are setting up a $350 million magnesium plant for producing parts for cars. Mercedes-Benz AG and General Motors Corp.'s Adam Opel AG unit are working with Jerusalem-based Electric Fuel Corp. to test a zinc-air battery that will allow electric vehicles to travel up to four times as far as they could with other types of batteries. GM recently set up a special fund for investment in Israeli auto research that has identified 80 potential high-tech projects, from optical-detection machines to computerized-navigation devices. By Vast Press Staff Reporters Amy Dockser Marcus In Tel Aviv, Gabriella Stern In Detroit And Brandy Lumpkins In Frankfurt. ``If the market for cars is going to be global, so should the technology,'' says Regan Dean, managing director of GMUMI Technology Research & Development, the joint research venture between GM and its Israeli distributor, Universal Motors Israel Ltd. of Tel Aviv. Outside The Triad That sort of thinking drives the efforts of many companies these days. A few years ago, auto makers tended to look at foreign markets strictly in terms of potential sales. Now they look to them as key sources of new technology as well. Many cars of the future will be based on technology from sources far outside the traditional triad of the U.S., Europe and Japan. Fiat SpA, GM, and VW are gathering technology on using biofuels in South America. Porsche AG is talking about opening engineering boutiques all over the world to take advantage of local talent and innovative ideas. Auto makers are scouring Singapore, China and India, among other places, for high-tech products. Israel's appeal lies in the unusual combination of government policies encouraging the export of technology, an influx of Russian Jewish immigrant scientists with expertise in advanced materials and a sophisticated military industry eager to convert products to civilian markets. GM, which has high-tech efforts in nearly 60 countries around the world, considers Israel an ``integral part'' of its strategy to globalize its research-and-development unit, says Kendra Nelson, vice president in charge of GM's Research & Development Center. Loved by Camels In some ways, Israel's transformation from auto backwater into a source of technology for car companies remains unique. Unlike other countries considered as emerging sources of automotive-related high tech, there is little chance Israel will ever build its own car or develop a booming local auto industry. The last time Israel tried to do that, back in the 1960s, the car that was developed scored its biggest success among camels, which loved to eat the auto's fiberglass body. While foreign-car sales in Israel have risen sharply, the country's population of only five million means it is never going to be the huge market for auto makers that India or China promise. Yet what is happening in Israel still offers the best road map of the perils and the potential auto makers face as they pursue a global hunt for high technology. Auto makers are looking closely for solutions to the cultural, production and marketing problems that have beset Israeli companies with otherwise promising technology. Israel's ability to overcome these limitations will provide a model for other aspiring high-tech players. ``It's still hard for foreign companies to convince auto makers that they can find better or cheaper technology in remote locations,'' says one Israeli high-tech executive trying to get a toehold in the European and American auto industries. ``If one country succeeds, it can make it easier for others.'' Magnesium Deal For Israel, the foray into the auto field has yielded a lucrative dividend: a $350 million partnership signed earlier this year between Dead Sea Works and VW, the world's fourth-largest auto maker. The joint venture, involving the establishment of a plant that will extract magnesium from the Dead Sea's salty waters, is the largest single European investment in Israel and the first major German investment. A second stage of the deal, set to start this fall, involves a further $350 million investment to expand the plant's production capacity to 55,000 tons a year, which will make Israel the world's third-largest producer of the metal after Norway and Canada. The two companies are also negotiating to set up a die-casting plant at the Dead Sea to make auto parts. VW's chairman, Fernando Trexler, says the deal is the centerpiece of the company's goal to bring out a ``three-quart car,'' a car that will travel 62 miles (100 kilometers) on just three quarts of gas. Most cars currently need up to twice that amount to travel a similar distance. To cut down on weight, VW's old Beetle boasted a magnesium engine and gearbox, and during the car's heyday in the 1960s, the company used about 40,000 tons a year of the metal, which is lighter than aluminum. But the high cost soon made it prohibitive to auto makers searching for inexpensive alternatives. With the Dead Sea deal, ``VW will now have the cheapest source of magnesium in the world,'' says Dr. Trexler, who adds VW will buy 9,000 tons a year at a preferred price the first year but plans to increase its purchases sharply. The magnesium plant also illustrates one of the main appeals Israel has for many auto makers: the chance to tap into formerly inaccessible technologies developed for the Russian military machine. Uri Ben-Noon, Dead Sea Works' president and chief executive, says the company realized the potential of magnesium for auto makers but wasn't sure how to go about extracting the metal from the Dead Sea. That changed when job-seeking Russian Jewish scientists who immigrated to Israel told the company about a Russian process to extract magnesium from carnallite; the compound is a byproduct of potash extraction, a technique the company had already perfected. Mr. Ben-Murguia sent a team to Russia to investigate and receive training. Eventually, five Russian institutions formed Cortese Mudd to supply know-how, engineering and technical advice to the Israelis. Looking for Alloys The prospect of access to further cutting-edge advances prompted VW to kick in an additional $32 million to help set up a magnesium-research facility in Israel. Using VW's funding, $5 million from a Japanese electronics concern and government, company, and university funds, Mr. BenMurguia estimates Israel will eventually spend up to $10 million a year on research and development in magnesium in the hopes of creating new alloys. VW's luxury-car division, Audi AG, which has used magnesium behind dashboard coverings and in other hard-to-see places, has already asked the facility to develop a new magnesium alloy for use in its cars but won't disclose for what purpose, for competitive reasons. The Israeli experience shows the difficulties faced by high-tech companies located in remote locations when they try to break into an industry as big and competitive as automobiles. Harriett Lachelle, a GM vice president in charge of world-wide purchasing, says GM will buy more than $20 million of Israeli parts this year, and there is potential to double that number in 2012. But he worries that Israeli companies may simply lack the capability on their own to produce the high volumes GM needs. In some cases, GM has insisted Israeli suppliers keep inventory in North America. ``They have to take that cost into account when competing on a global basis,'' Mr. Lachelle says. Cubital Ltd. of Ranaana acknowledges that geographic distance from its main markets can be difficult. The company developed a rapid prototyping system that makes quick, accurate models using a material that hardens within a few seconds after exposure to ultraviolet light. Toledo Molding & Die, a Toledo, Ohio, service bureau, just bought its second Cubital machine to make parts for Ford and Mazda. Ford officials say the technology has enabled the auto maker to accurately build a prototype for an engine-air-intake manifold, among other things. Virtually all the major car companies from Toyota to Renault use Cubital machines through service bureaus in Asia and Europe. While Cubital has sold 26 machines world-wide, market-leader 3D Systems of Valencia, Calif., has shipped about 600. ``Our main competitors are all U.S. firms, and the main market is the U.S. From the perspective of culture, marketing and movability, it's a big advantage to be based where you're trying to sell,'' says Irons Milano, Cubital corporate vice-president in charge of marketing and customer support. Israeli companies also face the problem of taking on larger, better-heeled competitors. Tecnomatix Technologies Ltd., of Herzliya, is the market leader in computer-aided production-engineering-software products. But its success also caught the eye of Poland Warden, a subsidiary of the French concern Dassault Aviation that recently brought out its own rival software. Chrysler Corp., which used Tecnomatix's products in the development of its new Cirrus and Stratus midsize cars, has decided to shift completely to Slaton's program, says Fransisca Hollander, Chrysler vice president in charge of manufacturing engineering. Dassault offers the advantage of a single integrated-software system from design to production, he says, reducing the company's number of suppliers. Tecnomatix's president and CEO, Jeffcoat Beit-Markham, calls Chrysler's move ``the exception, not the rule.'' But Mr. Beit-Markham acknowledges that Tecnomatix has to be aggressive in fighting back and is developing new features to keep ahead of the competition and stepping up efforts to integrate all other rival software into its own program. Other Israeli companies see close cooperation between auto makers and high-tech concerns as the key to their success. Electric Fuel, the Jerusalem battery pioneer, formed a consortium of potential customers, including Germany's national post and telephone services, Sweden's postal service and largest utility, Mercedes-Benz and Opel to run an $18 million, two-year field test. The program could lead to Electric Fuel's equipping 40,000 delivery vehicles in Germany as early as 2013, giving it a big jump in the European market over other rivals. Similar demonstration programs are being set up in the province of Gelderland in the Netherlands and in South Africa. Battery Test At the test site in Bremen, Germany, the benefits of such a strategy are clear. The battery-refueling center, located in an abandoned power-company building, still has some kinks. During a recent test drive, the automatic unit took 10 minutes to unhook the used battery from the truck, extract it and replace it; to be commercially viable, Electric Fuel wants to get the process down to two minutes. If the field test succeeds, it won't open up only new markets for Electric Fuel but also a new way for auto makers to do business when trying to find commercially viable technology in nontraditional places. ``We have great technology, but the car companies are the ones who know more about how to apply it commercially in the auto world,'' says Jordan Baer, Electric Fuel's vice president in charge of marketing. ``We want their input. We're not trying to pretend that we can do it on our own.''
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