Jump to content
  • Greetings Guest!

    CheersandGears.com was founded in 2001 and is one of the oldest continuously operating automotive forums out there.  Come see why we have users who visit nearly every day for the past 16+ years. Signup is fast and free, or you can opt for a premium subscription to view the site ad-free.

Sign in to follow this  

Auto suppliers leap roadblocks

Recommended Posts

Auto suppliers leap roadblocks

CEOs at two powerful firms say worst over, but challenges remain

Brian J. O'Connor / Detroit News Finance Editor

The worst of the automotive industry restructuring is over, but consolidation and global competition will remain a fact for auto suppliers, according to the CEOs of two of the world's largest auto suppliers. They say small parts-makers still face potentially crippling credit troubles.

Timothy Manganello, CEO of BorgWarner Inc., and Richard Dauch, CEO of American Axle & Manufacturing Holdings Inc., told a meeting of the Detroit Economic Club on Tuesday the auto supply business will remain challenging and constantly changing as global competition increases, technology evolves and suppliers become larger as their numbers dwindle.

The sentiments of both men echoed a newly released study from Southfield-based global advisers AlixPartners LLP that finds the supplier business has bounced back to early-2000s profitability levels, despite the fact that production today is 30  percent lower.

Both American Axle and BorgWarner emerged from last year's painful auto restructuring after undergoing drastic changes.

At Auburn Hills-based BorgWarner, Manganello said, a 45 percent cut in orders meant, "we had to learn to run our company like it was a distressed business."

And Dauch's firm narrowly avoided a restructuring under Chapter 11 of the bankruptcy code. "It was a helluva lot worse than '79 to '82," he said, referring to an earlier downturn following the oil crisis and severe double-dip recession of the early 1980s.

One lingering effect of the global economic meltdown is that while the large Tier 1 suppliers -- which sell parts directly to automakers -- have recovered, the smaller Tier 2 and Tier 3 companies that supply them still face trouble getting credit for working capital.

"They're the feeder for the food chain," Manganello said, and could jeopardize production for larger companies.

"The banks will control which Tier 2 and Tier 3 suppliers live," he said, adding that BorgWarner has helped smaller operations by prepaying some orders or offering faster payments and partial payments for materials.

The financial woes among smaller firms could lead to more acquisitions and consolidations among suppliers. Dauch said the auto parts industry has shrunk from 30,000 companies in the 1990s to 10,000 by 2000 and now stands at fewer than 5,000.

BorgWarner, Manganello said, just purchased a $180 million firm in Spain to fill a technical void. "We've got plenty of cash for the right kind of acquisitions," he said.

While some had feared that sovereign debt issues in Europe would hurt auto sales, Manganello said that European production has been helped by exports to the United States and China, especially of high-end cars.

"European production is better than people expected," Manganello said, "and the car companies are starting to say the same thing if you talk to them on the side."

From The Detroit News: http://www.detnews.com/article/20100616/AUTO01/6160340/1148/auto01/Auto-suppliers-leap-roadblocks#ixzz0r1H7AOJL

Share this post

Link to post
Share on other sites

Your content will need to be approved by a moderator

You are commenting as a guest. If you have an account, please sign in.
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Sign in to follow this  

About us

CheersandGears.com - Founded 2001

We ♥ Cars

Get in touch

Follow us

Recent tweets



Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.