automakers suppliers rethink relations to survive crisis
Last Updated : GMT 06:27:14
Arab Today, arab today
Arab Today, arab today

Automakers, suppliers rethink relations to survive crisis

Arab Today, arab today

Arab Today, arab today Automakers, suppliers rethink relations to survive crisis

London - AFP

Relations between automakers and their suppliers have never been easy, but the economic crisis is forcing major changes as both sides shape up to survive future storms, analysts say. In the past, the balance of power was simple: it was the global automakers who tended to call the shots over the small-to-medium-sized companies producing the thousands of components that go into making the final product. In fact, as much as 50 percent of a finished car is currently made up of parts supplied by small independent -- frequently family-run -- businesses and which account for as much as 75 percent of its final value. Nevertheless, the last global crisis forced many smaller parts makers to shut up shop, leaving the mighty car manufacturers high and dry without crucial components and bringing production at their vast assembly plants to a standstill. As a result, the two sides are rethinking ways of working together, according to Laurent Hebenstreit, member of the executive committee of Plastic Omnium, a major French parts suppler. "Carmakers realised they were very dependent on their suppliers and parts makers and that they would have to work together much more closely," he said. "Manufacturers tended to be rather despotic towards their suppliers, effectively using them as some sort of buffer against the crisis," said IHS Global Insight analyst Carlos da Silva. In a bid to help balance out the situation in France, the powers-that-be initiated a special body that laid down a code of conduct between automakers and their suppliers and -- with the financial support of Renault and PSA Peugeot Citroen -- established two funds to help parts suppliers in difficulty. As a result, some specialist branches, such as sheet-metal forming, have been stabilised and even received a boost, said Yannick Bezard, head of procurement at PSA Peugeot Citroen. If there were a new crisis, "they'll be in a position to survive." Nevertheless, other areas such as foundries remained vulnerable, Bezard added. All these measures were not, however, able to avert new shortages for carmakers earlier this year when the devastating earthquake and tsunami in Japan halted production of components and pigments used in the industry all over the world. This highlighted the problem of dependency on a single supplier and for Peter Tyroller, marketing and sales chief at Bosch, "this will affect supply strategies in the future." Events have made relations between automakers and components manufacturers "more transparent," according to Bosch chief executive Franz Fehrenbach. Hebenstreit of Plastic Omnium agreed, saying developments triggered alarm bells at the carmakers. "It cost them a lot of money and they won't want it to happen again," he said. Polk analyst Bertrand Rakoto was sceptical, however, whether the lessons had really been learned. "There is a semblance of partnership, but both sides are still trying to cheat each other, too," he said.

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