By Tony Lewin, Automotive News Europe
Continental CEO Manfred Wennemer says the No. 1 rule for automotive suppliers is simple and easy to follow.
â€œCosts have to come down year after year and if you don't want to play by this rule you have to get out,â€ he said. â€œOur 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.
â€œWhen 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,â€ the CEO said. â€œBut 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.
â€œJust 2000 to 2500 will still be in business,â€ he said.
Protect your property
The No. 2 rule for survival is that a supplier has to protect its rights to its intellectual property.
â€œWe will not sign contracts that will allow customers to take our intellectual property someplace else,â€ Wennemer said. â€œThe 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.
â€œIn the last eight to nine years we have increased our turnover 2.6 times and our profitability has gone up five times,â€ Wennemer said. â€œContinental 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)