Daimler’s disposal of its Chrysler business looks hard to avoid. The rise the DaimlerChrysler share price on the expectation of a sale has made shareholders’ preferences clear.

With the disposal of Chrysler, one of the major driving forces behind the growth of German automotive suppliers in North America over the last several years may be removed.

Over the last 10 years one of the big underlying movements in the automotive industry has been the growth of European- and in particular German- suppliers in North America as the traditional customers of the North American supply base.

Chrysler’s German-inspired product renewal programme, which still looks one of the most aggressive in the North American industry, has been accompanied by a shift in Chrysler’s supply base. German suppliers have been at the forefront of that renewal.

The German suppliers have used Detroit as a stepping stone to the North American market over the last 10 years, a trend that has been intensified with the German role in Daimler Chrysler and the search of GM and Ford for strong international technical partners for their global model programmes.

A whole series of large and medium-sized German suppliers have made the growth of their business with Chrysler, GM and Ford one of the major platforms of their expanding operations in North America – from Siemens VDO and Behr who bought outsourced components businesses from the company – to medium-sized suppliers like Brose in seat frames or Eberspaecher in exhausts.

Brose has jumped from nowhere in North America to become a major supplier of door modules to Ford. Continental further strengthened its position as a GM supplier with the acquisition of Motorola‘s automotive electronics business.

At the same time, many of the German industry’s traditional Detroit-based rivals have fallen on hard times and the German industry has assumed global industrial leadership across several sectors.

On the surface, the problems of the possible retrenchment of DaimlerChrysler in North America threatens the strong international growth in the German automotive supply industry that has led to a growing international dominance for leading German supplier groups among technologically sophisticated suppliers.

But although the weakness of the Detroit three is a challenge for Germany’s leading suppliers, they have mostly moved beyond a reliance on North America for their global position. Leading companies such as Bosch, Mahle and ZF also enjoy strong positions in Asia.

As a Bosch executive said at a recent conference in Germany, the company has moved to localised itself internationally and create product lines for each of the different requirements of vehicles in different regions.

German companies are very well placed to meet growing demand to solve the environmental challenges the industry faces in the next decade.

Senior purchasing executives at car makers complained that the level of technology providers in the pool of potential global suppliers is shallow – they can find as many suppliers of small metal or plastic components as they want but, when it comes to an engine management system, the choices are still restricted.

German suppliers have been profiting from this with a significant improvement in margins over the last few years at leading German suppliers like Continental, Siemens VDO and Bosch.

And that situation is likely to persist a little while longer until new strong competitors emerge from China or India – the medium term prospects for leading German automotive suppliers remain good.

Edmund Chew