Suppliers: Rough times will continue

By Jesse Snyder, Automotive News Europe

Prague - Suppliers want more business with virtually all automakers, but are less optimistic about getting the work than they were a year ago.

That is one finding from the third annual Automotive News Europe/SupplierBusiness Supplier Relations Survey.

“It's a slightly gloomier outlook for the industry this year,” said Edmund Chew, managing director of SupplierBusiness and co-presenter of the report. “Suppliers are a little more pessimistic about the industry as a whole.”

Asked which auto brands or groups they would like more or less business with, the partsmakers said more for every manufacturer except General Motors North America. But their belief that they will get new business was much lower than in the 2006 survey.

Suppliers expect a modest boost in work from Ford of Europe and Fiat. But this will be offset by big declines for 19 manufacturers, especially Chrysler, Renault, Nissan and Volvo.

Asked if they expected to do more business with a manufacturer in three years, they said yes for 18 of the 21, but their expectations were lower for each automaker.

Similarly, suppliers found 14 of the 21 attractive to work with -- especially Toyota and BMW -- but they rated 16 automakers less attractive than a year ago.

In 2006, the responses were more positive than in 2005.

“Many purchasing groups made an effort to improve relations two years ago and suppliers noticed that last year,” Chew said. “But it doesn't seem to have lasted.”

Supplier favorites

Overall, suppliers expressed a strong preference for Toyota and BMW as customers. To a lesser extent, they also favored Honda, Nissan, Audi and Mercedes-Benz.

The Chrysler division of DaimlerChrysler fell dramatically in suppliers' eyes as the US operations tried to cut expenses and its sales volume declined before Cerberus Capital Management agreed to buy it.

Chrysler slipped toward the bottom where it joined the North American arms of the other two US automakers, General Motors and Ford. Suppliers rated the three automaking operations low on a variety of factors: price-cut demands, technical prowess, protection of intellectual property.

“There continues to be a high correlation between profitability and sales momentum and suppliers' rankings,” said Arjen Bongard, editor of Automotive News Europe and co-presenter of the survey results. “The most successful brands have the best relationships with their suppliers.”

More than 120 supplier executives took part in the survey.

BMW leads rivals

In the eyes of parts suppliers, BMW has a clear lead over German rivals Audi and Mercedes-Benz.

On four key issues -- which automaker demands the best quality, the best product technology, who is the most technically competent, and who is most attractive to work with -- suppliers ranked BMW tops.

On the issue of which automaker demands the most testing and validation of parts, Audi ranked first among the three, followed by BMW and Mercedes. On four other issues in the survey of supplier relations, Mercedes finished third, although suppliers found it more attractive to work with than Audi.

In last year's survey, suppliers ranked Mercedes higher on demands for quality and product technology than this year, said report co-author Chew.

“Mercedes has reduced its demands for quality and product technology compared with last year,” he told Congress delegates.

Said Chew: “It reflects recent changes that have led to cost-cutting and less demands for technology.”

From Automotive News Europe (A Crain publication)