Conti knows how to survive
By Tony Lewin, Automotive News Europe
Continental CEO Manfred Wennemer says the No. 1 rule for automotive suppliers is simple and easy to follow.
“Costs have to come down year after year and if you don't want to play by this rule you have to get out,†he said. “Our customers demand a 3 percent to 4 percent price reduction each year.â€
Wennemer is critical of suppliers who complain about steep price cuts, a trend started in the 1990s by combative purchasing director Jose Ignacio Lopez while at General Motors and Volkswagen.
“When Mr. Lopez came and said [reduce costs by] 20 percent, we all decided this was the end of the industry; that we would rather go home,†the CEO said. “But it was a good shock for us suppliers and I see no reason why this [trend] should not continue.â€
Not all suppliers will survive, said the Continental CEO. He expects that in five to six years today's 6000 to 7000 suppliers will be halved.
“Just 2000 to 2500 will still be in business,†he said.
Protect your property
The No. 2 rule for survival is that a supplier has to protect its rights to its intellectual property.
“We will not sign contracts that will allow customers to take our intellectual property someplace else,†Wennemer said. “The intellectual property is ours so we are not willing to hand it over free of charge.â€
The CEO said Continental's goal is 5 percent organic growth every year.
“In the last eight to nine years we have increased our turnover 2.6 times and our profitability has gone up five times,†Wennemer said. “Continental is a unique animal - there are no competitors with a portfolio like ours.â€
He said the German supplier expects to benefit from the growing demand for low-cost cars around the world and from safety legislation that will make electronic stability control a mandatory fitment in the US by 2012 and possibly in the EU that same year.
From Automotive News Europe (A Crain publication)
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