Contrary to the frequent reports of failing North American suppliers, analysis by automotive forecasters CSM Worldwide has revealed that only about 25% of automotive suppliers are in an unstable financial condition.
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According to CSM’s director of supplier analysis Jim Gillette, most other suppliers are maintaining acceptable ratios of earnings to interest expense, a key indicator of financial health.
“Despite the troubles we’ve been seeing in the supplier sector, the sky is not falling,” Gillette said.
“Of course, there’s no denying that some suppliers are struggling, and we expect to see additional Chapter 11 bankruptcy filings over the next 12 to 18 months. But the big picture shows that the majority of suppliers are operating smarter and staying healthy despite higher raw materials costs and shrinking volumes from some of the OEMs.”
Gillette debunked another myth – that a big wave of consolidations among suppliers is on the horizon. “There are some sectors, such as brake assemblies and door trim panels, that are quite fragmented and could be ripe for substantial consolidation,” he said.
“But many others, including floor systems and airbag modules, are highly concentrated already. Looking at Ford as an example, almost all of its purchasing in 11 key component categories, including instrument panels, HVAC and fuel tanks, comes from just two sources per category.”
