Birmingham, Alabama -- Suppliers cannot count on price relief when carmakers fail to build as many vehicles as they forecast, members of a panel at the Automotive News Manufacturing Conference said here last week.
Parts makers face significant upfront costs for engineering and tooling. But it's almost impossible to avoid losses on a contract when a customer builds fewer vehicles than projected, said Keith Wandell, president of seat supplier Johnson Controls Inc.'s automotive group in Plymouth, Michigan
"It's a hot-button issue," Wandell said.
When volumes don't materialise, suppliers cannot expect to change a contract, he said. The best hope is to negotiate some profit on future work and place parts on fast-selling vehicles. "At the end of the day, you hope it balances out," Wandell said.
Automakers have a mixed record on hitting production forecasts, said Craig Cather, CEO of CSM Worldwide. CSM is an auto forecasting firm in Farmington Hills, Michigan.
General Motors, for example, has been on target forecasting sales of the Chevrolet Corvette. But Cather says GM has built 90 percent fewer GMC Envoy XUV SUVs than originally projected and more than 40 percent fewer units of the Buick Rendezvous SUV.
GM has canceled the Envoy XUV.
From Automotive News