USA: Parts suppliers look to European and Asian makers for growth - report
According to Reuters, US vehicle parts suppliers, pressured to reduce costs and prices, are forging closer links with Asian and European carmakers, whose increasing share of the American market may be a path to growth.
Vehicle manufacturers such as Toyota, Honda and Volkswagen are winning more customers from Detroit's Big Three, Reuters said.
As a result, the news agency noted, Detroit's share of the US market has fallen steadily to 61.5% now from 72.1% a decade ago, according to Ward's AutoInfoBank though the figures exclude foreign brands such as Jaguar, Mercedes, Volvo and Saab made by the Big Three.
Reuters said that some industry observers fear US car models will account for just half of all vehicles sold there in another 10 years.
In addition, Reuters said, there are fears that America's current car-buying binge is finally ending, which could force another round of cost-cutting at the car makers.
That could lead to more car maker pressure on suppliers which have already been told to slash parts prices by 1% to 8% each year, Reuters said.
"The OEMs are under more pressure now than they've ever been before," Reuters was told by Accenture partner and consultant Randolph Barba, who argues US car makers have been slow to improve efficiency and cut costs from their own operations.
In courting the Asian and European "transplants," suppliers say they are simply following the demand as they bid for new business, Reuters reported.
"They are gaining market share. We have no favourites," BorgWarner chairman and chief executive John Fielder told Reuters.
According to Reuters, Fiedler said BorgWarner set aggressive goals for broadening its customer base after determining it was too risky not to be diversified in the event of a downturn in the car market.
Reuters said the proportion of BorgWarner's sales to the Big Three dropped from 73% in 1997 70 to 61% last year and, by 2005, more than half of sales are expected to come from non-Big Three car makers.
Dana automotive systems group president Bill Carroll told Reuters the company wants to boost its sales outside of the US market to above 50% from less than one-third currently.
Carroll, while stressing the importance of Detroit’s Big Three to Dana's future, told Reuters that North America is simply a mature market.
"We have to grow faster with the non-Big Three to balance our customer portfolio," he told Reuters in an interview.
According to Reuters, a survey of 279 suppliers by Birmingham, Michigan, research firm Planning Perspectives suggested better ties with suppliers were helping Japanese car makers outpace Detroit.
Industry insiders have told Reuters that the Japanese, rather than delivering ultimatums for price cuts, are more willing to work with suppliers to identify ways to save money, for example by substituting a less costly material for a more expensive one.
Federal-Mogul chairman and chief executive Frank Macher told Reuters that the Japanese are gaining market share because they compete on the basis of value, performance and features, while the Big Three are buying share through incentives and pricing.
"That is a major flaw that needs to corrected," Macher told Reuters. "They need to learn to compete on the basis on what people really want."
But Reuters said US vehicle makers have indicated a willingness to work more closely with suppliers to improve the relationship, in some cases by bringing them into the planning process earlier.
GM head of North American operations, Robert Lutz, told an industry conference this summer that building trust among its supplier base was key to future success, Reuters added.