German rubber group in appeal for ‘fair' automotive supply agreements

Dusseldorf, Germany – The German rubber industry association WDK, as part of the German automotive supplier industry association (ArGeZ), has called on local car makers to consider the welfare of small and medium-sized components manufacturers during negotiations for next year’s contracts.

"There is a mood of alarm among the 9,000 medium-sized German automotive suppliers," said Christian Vietmeyer, ArGeZ spokesman in a statement 23 Nov.

"Shortly before the end of the year, many of them are waiting for a vital agreement with the car manufacturers in Germany,” he said.

Automotive suppliers, according to Vietmeyer, are concerned with “a fair distribution” of unexpected special charges, arising from raw material price increases, delayed parts call-offs or even supply cancellations.

The industry official stressed that German car makers such as VW, Daimler and BMW had reported “very positive earnings developments” since 2021.

Meanwhile, he said, many of suppliers to those companies “are struggling to survive.”

"A concession by car manufacturers to their battered suppliers? No way!” Vietmeyer said, noting that car makers have been refusing to negotiate over new developments such as the Russia-Ukraine war and the energy price crisis.

“The automotive suppliers are calling on German automobile manufacturers not only to proclaim fairness in automotive supply, but to live it,” Vietmeyer said.

“Negotiations over a year and more for current orders, with an increasingly harsh tone are definitely not solution-oriented,” he added.

To address the woes of component makers, ArGeZ urged car makers to offer “sustainable” agreements to their suppliers.

“Compensation for unexpected special charges from the 'first wave' – raw material prices, disruptive parts call-offs, supply chain disruptions, logistics costs – is currently only planned until end of the year, if agreed at all.

“The burdens from the "second wave" – war, energy costs, inflation, wage agreements – have not yet been negotiated or resolved,” he added.

The spokesman urged the car industry to designate “a contact point” in every company or group of companies to resolve structural supplier conflicts.

To further support automotive suppliers, the industry official urged car makers to help them secure liquidity.

“Many suppliers have been experiencing negative cash flow for 12 or more months.

“The creditworthiness of suppliers continues to be affected – with economic consequences also for automotive manufacturers, their risk departments and subsequent company support,” he warned.

The ArGeZ spokesman, therefore, urged car makers to ‘immediately pay’ claims that have been agreed upon, and to also develop a mechanism to make advance payments possible for long-term deliveries.

In addition, the spokesman urged the car industry to ‘stimulate’ competition in the upstream supply chain.

This, he said, could include simplifying the time-consuming approval procedures currently prescribed by car makers when switching suppliers.

He also urged the car industry to show more flexibility for the supply of raw and auxiliary materials at times of uncertainty in the supply chain.

"The jobs of German automotive suppliers are important for the social stability of our country.

“Keeping suppliers in sight is essential to maintain Germany's technical competence and future viability," the official warned.

According to Vietmeyer, the German automotive supplier industry employs more than 1 million people and plays a “crucial role” in preserving the know-how in the country.

ArGeZ also argues that local suppliers can help control further global disruptions by offering short supply chains, low susceptibility to faults and a low CO2 footprint.

"The question of location for German automotive suppliers arises now. It must therefore be solved now," Vietmeyer concluded.