To an auto parts company generating revenue of $3.2-billion annually, the $40,000 (U.S.) or so that Linamar Corp. paid to purchase a Cadillac SRX is barely a drop in the bucket. But if the new rear axle system the company has installed in the silver SRX works out as planned it could be the best money the company has ever spent.
Linamar's Agilit-e system is the most complex system the auto parts company has made and its bid to make sure it's a player in electric vehicles as auto makers spend billions of dollars to develop alternatives to the internal combustion engine.
Innovation is crucial if parts makers want to participate in this transformation and contribute to the breakthroughs that will enable auto makers to meet stringent new fuel economy and emissions standards that will come into effect near the end of the decade.
"You must innovate to survive," declares chief executive officer Linda Hasenfratz.
Innovation has been front and centre at Linamar since the company was founded by Ms. Hasenfratz's father, Frank, in 1964 in his garage in Guelph.
In recent years, it has been essential to meet customer demands for price cuts of at least 2 per cent annually.
"Where's that going to come from?" Ms. Hasenfratz asks. "If it comes from your pocket, you're dead in five years."
For many years, she says, innovation at the Guelph-based company has focused mainly on processes, or improving the way the company designs, develops and manufactures gears, camshafts, power transfer units and other components that go into vehicle engines and transmissions.
But now, to grow globally, product innovation is essential, she says. Linamar spends about 2.5 per cent of revenue on research and development at its McLaren Performance advanced technology group in Detroit and elsewhere throughout the company.
Doubling that level to about 5 per cent of annual revenue is a good benchmark, she adds.
Linamar is using the SRX to demonstrate its Agilit-e system, which uses electric motors driving the rear wheels to turn a front-wheel drive version of the luxury crossover into one with all-wheel-drive that can also be a pure electric vehicle with a range of about 32 kilometres. It can also be a hybrid that utilizes a combination of the internal combustion engine and electric motors.
The SRX typically has fuel economy of about 16 miles a gallon, but the Linamar system boosts that to about 40 miles a gallon, says Mark Stoddart, the company's chief technology officer and executive vice-president of sales and marketing. Such an improvement would take the vehicle much closer to meeting U.S. requirements of a fleet average of 54.5 miles a gallon by 2025.
"Fuel economy is the first driver, but to be able to get it, a lot of [auto makers] are going to have to introduce some form of electrification/hybrid," Mr. Stoddart points out.
Fuel economy is improved in part in a traditional all-wheel-drive vehicle by eliminating the drive shaft, which transfers power from the front wheels to the rear wheels. That saves about 80 kilograms.
The system also enables auto makers to reduce the size of the engine, to a four-cylinder 2.2-litre engine from a six-cylinder 3.7-litre engine, which also improves fuel economy while increasing horsepower at the same time.
The other advantage is that it's a plug-in system.
"They don't have to tear up the vehicle to put this in," Mr. Stoddart says.
Linamar has grown from that startup in a garage to a global company with operations in Europe, China and Mexico mainly through components and systems developed for the internal combustion engine.
The Agilit-e gives it a substantial system for the electric vehicle business "for whatever percentage that's going to be in the market," Ms. Hasenfratz says.
Innovations drive competitiveness, she says.
"For us to continue to grow our business globally, we absolutely need to have a growing product innovation business."