Oak Ridge National Laboratory (ORNL) Automotive R&D Initiative

1. Oak Ridge National Laboratory (ORNL)Automotive R&D Initiative 2006 Tennessee Valley Corridor National Summit Benjamin J. Ritchey, Battelle Memorial Institute June 1, 2006

2. Who Am I? • Vice President, Battelle’s Transportation and Economic Development Practices • Battelle Memorial Institute [Battelle] • Non-Profit Research and Development Firm • Headquartered in Columbus, Ohio • $3 billion in revenue annually • Battelle and the University of Tennessee co-manage US DOE’s Oak Ridge National Laboratory (ORNL)

3. Short-Term Assignment for ORNL • Outline ORNL’s Automotive R&D Strategy for Dr. Jeff Wadsworth (ORNL Director) and Dr. Jim Roberto (ORNL Deputy Director Science and Technology) • Analyze the components of the Southern Automotive Cluster and compare to the Midwest Automotive Cluster • Determine a strategy for ORNL and interested Southern universities to conduct research and development-related activities for the automotive industry • Identify potential opportunities to explore with the automotive cluster/industry that will help position the southern region for long-term economic development

4. ORNL’s Automotive R&D Goals and Visions ORNL’s Goal and Position: • Lab of the South ORNL’s Science Vision: • Provide scientific leadership to generate research, development, test/ evaluation, and problem-solving activities for the automotive industry while working with Southern universities ORNL’s Economic Development Vision: • Enhance the automotive industry’s growth and diversity of activities in the South

5. ORNL’s Automotive R&D Strategy • Working Group of Southern Universities • Auburn University • Clemson University • Mississippi State University • University of Alabama Birmingham • University of Alabama Tuscaloosa • University of Kentucky • University of Tennessee • Working Group Hosts: TVA and ORNL • TVA, Amy Bunton, General Manager, Economic Development • ORNL, Tom Ballard, Director of Economic Development and Partnerships

6. ORNL’s Automotive R&D Strategy • The end goal is to catalyze economic development in the South by focusing on automotive R&D. To be successful, we must: • Determine the strategy of a Southern Automotive Research & Development initiative for the purposes of aligning diverse research capabilities and expertise • Identify the economic development and innovation strategies necessary to expand and diversify the automotive industry’s presence in the South

7. Automotive Clusters – The Midwest Versus the South

8. Other 10% Asia US 23% 37% Europe 30% Automotive Industry – Market Size • The U.S. car and light truck automotive market was valued at over $400 billion in 2004 • The U.S. has the largest share of the global market Global Market Share by Region, 2004 (of $1,072b) Source: Datamonitor Numbers have been rounded

9. Currently, the automakers produce cars & light trucks in 71 plants nationwide* 64 of these plants, or 90%, are located in the Midwest and South 1 2 7 4 3 4 2 5 5 1 2 4 2 1 1 Automotive Clusters – Automakers Car & Light Truck Assembly Plants Car & Light Truck Assembly Plants Midwestern Cluster 37 Plants Midwestern Cluster 37 Plants 20 Southern Cluster 27 Plants Southern Cluster 27 Plants * Additional plants are located in Delaware, Kansas, Texas, and New Jersey

10. Automotive Clusters – Midwest vs Southern Production • The Midwest Cluster is the largest producer • However, production is increasing in the South and declining in the Midwest US Car and Light Truck Production, 2001-2004 (thousands of units) Source: Ward’s 2005 Market Data Book Numbers have been rounded

11. Trends – Shift in Manufacturing Location • Automotive manufacturing is expected to continue to increase in the South for reasons such as: • The population shift to the South, where the majority of new cars are being purchased • Automakers build cars close to their primary markets to reduce shipping costs • Low wages • Non-unionized labor • Educated workforce • Good, affordable power supply • Large, affordable tracts of land • Incentives

12. Trends – Transplant R&D Sites • The Japanese transplants, for example, have traditionally located their R&D primarily in Michigan, or near corporate U.S. headquarters Current Locations of Select Transplant R&D Facilities Manufacturing R&D U.S. Headquarters Source: Japan Automobile Manufacturers’ Association

13. Conclusions • Production and market size are increasing in the Southern Cluster, while declining in the Midwest • In addition to population growth, the South offers economic manufacturing advantages over the Midwest, such as lower wages, non-unionized labor, and affordable power • The transplants, based primarily in the South, may continue to grow at the expense of the Big 3 • Traditionally, automakers locate R&D in Michigan and/or near their headquarters, rather than with manufacturing facilities. However, opportunities are available in unique areas of excellence to become a player.

14. Conclusions • Over 85% of automotive R&D is conducted in Michigan • The state has more than 215 automaker and other R&D organizations, including engineering, research, new product development, design, and testing facilities • Michigan still appears to be the place of choice for R&D • The State of Michigan is specifically targeting automotive R&D to replace the loss in its manufacturing sector • Both Toyota and Hyundai recently opened new R&D centers in Michigan

15. Honda Case Study:Case in Point

16. Honda’s 25-year Evolution • Honda has developed in Ohio from a motorcycle assembly plant in 1978 to what has become the company’s North American Manufacturing, Engineering and Logistics Hub today. • Currently, Honda’s Ohio Hub focuses on: • Manufacturing • Production Engineering • Research and Development • Purchasing • Logistics • Quality Assurance

17. Conclusions of Honda Case Study • Honda’s growth, expansion, and diversity of activities (including R&D) in Ohio has led to significant economic development: • 16,049 Ohioans employed by Honda in 2003 with total wages exceeding $1.1 billion annually • 154 Ohio companies are suppliers to Honda, employing 40,776 • The Honda Case Study can serve as a roadmap for the South as the region focuses on R&D strategies

18. ORNL’s Automotive R&D Strategy(Work in Progress)

19. ORNL’s Automotive R&D Strategy • Process to determine R&D strategy • Determine business case for automotive R&D • Understand current automotive R&D needs/issues • Focus on leading edge R&D issues and needs requiring unique science/engineering support • Inventory expertise/facilities (ORNL/Universities) • Understand current automotive R&D assets at ORNL/Universities • Match research expertise to R&D needs • Develop ORNL R&D strategy including leadership, industry interactions, needed expertise/facilities, implementation plan, and monitor progress

20. ORNL’s Automotive R&D Strategy • Work with automotive industry to identify leading-edge research and development opportunities that require unique science and engineering support Strategic Objective: • Energy Security • Global Warming/Air Quality • Passenger Safety • Consumer Preference Automotive Industry’s Commitment to Advance Technologies will impact:

21. ORNL’s Automotive R&D Strategy Potential Leading-edge R&D Opportunities (Interviews with automotive industry continues need to finalize focus areas.) • Energy/Propulsion Technologies • Advances in fuel injection and lean burn technologies, particularly fog-type injectors • Diesel NOx after-treatment technologies • Battery improvements for hybrids • Production, distribution, safety, delivery, and onboard storage of hydrogen • Fuel cell technologies, including real-time imaging of water in a cell • Electronics • Improved sensors for accident prevention • Large scale electronics integration • Software development in a complex, highly integrated environment • Managing widely varying product life cycles within a vehicle

22. ORNL’s Automotive R&D Strategy • Simulation capabilities to demonstrate the integrated vehicle • Stronger, more robust software development tools • Inter-vehicle electronics communication technologies to support intelligent transportation • Materials • Formability issues of light weight materials • Joining and bonding of light weight materials • Corrosion issues (Magnesium) • Material failure knowledge • Advanced manufacturing and design • Material behavior modeling • Nano-technology related to light weight components, fuel cells, and batteries • Safety of nano-particles in manufacturing

23. ORNL’s Automotive R&D Strategy • Thank you for inviting me. • I look forward to a return visit to provide a completed automotive R&D strategy, implementation plan, and progress to date. Contact Information: Thomas B. Ballard Oak Ridge National Laboratory Director Economic Development & Partnerships (865) 241-1948 ph ballardt@ornl.gov Amy H. Bunton Tennessee Valley Authority General Manager Economic Development (615) 232-6442 ph abunton@tva.gov Benjamin J. Ritchey Battelle Vice President Transportation & Economic Development Practices (614) 424-5701 ph ritchey@battelle.org