June 2005 management briefing
Recent high-profile corporate failures in North America, most notably Meridian Automotive Systems, Tower Automotive and Collins & Aikman, highlight how things can go wrong for suppliers in the automotive industry. Declining profitability and margins are a result of factors such as vehicle assembly overcapacity, the need to discount less popular models, profit squeezes at OEMs, and price declines for their components, systems, and modules, coupled with higher costs associated with greater product development and logistics responsibilities. This month’s briefing looks at the challenges faced by automotive suppliers, through a growing array of selection criteria imposed by OEM customers, and the associated financial concerns. It also provides an industry background, in terms of production trends, the way forward for tier 1 suppliers, globalisation, and M&A activity.