The increased price focus of leading European car makers, and in particular Volkswagen, is hurting the future of the European industry, leading supplier executives said.

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The car makers are transferring not just manufacturing and assembly work, but also development, investment and warranty risks to suppliers, said Franz Fehrenbach of Bosch. “But at the same time pressure on prices continues”.


“If the European industry wants to avoid a development like in America, they must stick to the proven innovation partnership between car makers and independent suppliers” he said.


Mostly, suppliers are paid for their development work through the piece price, but crisis cost-cutting at OEMs can eat into this return and make supplier financing more fragile. Europe is facing a choice between the US and the Japanese paths, said Bosch executives.


Volkswagen, and to some extent Mercedes, have been putting particularly strong pressure on prices in the last year and a half, they added.

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Other leading suppliers agreed. “We see the same trend” said ZF CEO Siegfried Goll, although he pointed out that Volkswagen is under pressure in the market place and has to do something. He added that the premium car segment is not as strongly affected by the pressure.


But Martin Baumann, CEO of Eberspaecher, said that it is a slippery slope. “We are ready to take some of the burden, because in the end we need our customers to achieve certain sales volumes,” he said. “But these programmes are now becoming the rule”.


Once price concessions have been made to Volkswagen or Mercedes, successful companies like BMW expect to get the same as the others.


If you are at a supplier and wish to express your views on trends on car makers’ demands from suppliers, fill in the SupplierBusiness/Automotive News Europe survey at www.supplierbusiness.com/surveys/OEM_Supplier_Satisfaction_2006/ts_survey.asp


SupplierBusiness.com