Supplier chief: Anticipate buyers' needs

By Robert Sherefkin, Automotive News

Traverse City, Michigan - Auto parts makers can weather the stormy North American auto business by better anticipating customers' needs, says George Dettloff, president of SKF Automotive Division.

That's a tall order for any supplier struggling with high raw-material prices, vehicle production cuts and intense pressure to cut costs. And that includes SKF, the Plymouth, Michigan, supplier of commodity parts such as bearings and seals.

"It's all part of being able to anticipate, innovate and adapt," Dettloff said this month at an industry conference here. "Small steps in innovation are not enough. Suppliers must anticipate what customers will need, five, 10 or 15 years down the road."

Parts makers such as SKF face constant price pressure because automakers treat their products as commodities.

Moving parts up the value chain has long been a challenge.

But even commodity suppliers can win by anticipating and providing a quick manufacturing or product solution in time for a launch, Dettloff said.

In a previous interview, Dettloff cited SKF's success in obtaining a premium for a seal by eliminating the need for an installation tool.

"We're all facing a number of stormy factors these days," Dettloff said. "But we can maneuver through the sea of uncertainty that permeates our industry."

SKF's strategy has allowed its global automotive business to maintain a profit margin of 4 to 5 percent.

Dettloff declined to discuss profit margins on SKF's North American business, which generated sales last year of $1.2 billion. About a third of that business is automotive.

Still, he said, SKF will meet General Motors' demand that its top suppliers return an average 20 percent price cut over three years.

Just 150 of GM's top suppliers are expected to meet that goal.

SKF's cash position remains good, Dettloff said, and the company is looking at possible acquisitions.

SKF ranks No. 100 on the Automotive News list of the top 150 suppliers to North America with estimated North American original-equipment automotive parts sales of $405 million in 2004.

From Automotive News