GERMANY/UK: Demand for new technology means suppliers are growing despite flat market
The drive to add new technology to cars has spurred growth at the parts makers that supply European automakers, even though Europe's new vehicle market itself remains relatively flat.
Germany's Robert Bosch retained its spot as the largest supplier of parts to Europe's carmakers with European OEM sales of $US16.59 billion for 2004, up 17.2% from 2003.
French supplier Faurecia remained second largest with European sales of $11.3 billion.
Magna International of Ontario, Canada jumped to No. 3 from No. 10 in Automotive News Europe's list of the Top 30 European OEM parts suppliers.
Magna International grew its business in Europe faster than any other supplier - up 90.9% to sales of $8.79 billion for 2004. Magna has grown on the strength of the contract assembly work done by its subsidiary Magna Steyr of Graz, Austria, which builds vehicles such as the Mercedes G class, BMW X3 and Chrysler 300C.
Companies supplying electronics content dominated the top group.
"Electronic content continues to rise, said John Lawson, analyst for Citigroup SmithBarney in London. "But manufacturers are taking longer to test and validate electronics."
Automakers are testing electronics components more closely because of several highly publicised recalls due to glitches.
Antonio Ferreira, manager of components forecasts for CSM Worldwide in London, said big suppliers are taking control of more systems, a trend that means extra growth. "We're seeing a lot more r&d development within these super suppliers," he said.
"This is the kind of supplier that controls almost a complete supply chain. They're supplying a complete module to the OEMs. There is more content and more value. But in return, there is more responsibility and more r&d expenditure."
The growth in content does not necessarily mean comparable growth in profits because of greater r&d expenditures, coupled with soaring raw materials costs.
"Suppliers are complaining about less profit," says Ferreira. "Definitely margins are going down from one generation to another within the same contract."
Companies that provide commodities are less likely to grow, say analysts.
"I don't think you're going to see a lot of growth in areas where people are providing fundamental hard parts for vehicles,'' said Dave Royce, manager of corporate strategy for Siemens VDO Automotive in North America. "There are only so many axles being made. But a company involved in something like emerging restraint system technology will have more opportunities.''
Revenue of the Top 30 suppliers grew 17.3% from $117.9 billion in 2003 to $138.35 billion in 2004, according to Automotive News Europe's rankings.
Automotive News Europe