Klaus-Dieter FlÃ¶recke, Automotive News Europe
Munich, Germany -- The gap between successful and endangered auto suppliers in Europe keeps widening, says a study by HypoVereinsbank and consultancy Oliver Wyman.
The most successful 25 percent of suppliers continue to grow, the study found. But the performance gap between suppliers in the top and the bottom quarter of profitability is growing.
The study surveyed suppliers with combined annual revenues of €145 billion. The suppliers were measured by key performance indicators, including gross profit, total return on capital, operating profit and revenue growth.
Steady downward price pressure driven by rising costs is widening the gap because it hits smaller suppliers harder, said Jan Dannenberg, director of Oliver Wyman's global automotive practice.
â€œThe demands from automakers for price reduction are already higher than suppliers can meet by cost reductions,â€ Dannenberg said. â€œAnd all suppliers expect the pressure to increase considerably.â€
European suppliers drop prices an average 2.4 percent and up to 4 percent annually, the study found.
Guido Schacht, a HypoVereinsbank risk manager and co-author of the study, says many suppliers have no margin of safety for unexpected problems.
â€œEnormous price pressures, high pre-financing costs, rising warranty risks, new competitors from low-wage countries, material cost increases and growing product complexity are leading to a situation where very few suppliers still have reserves,â€ Schacht said.
Schacht said carmakers should realise a system oriented toward price competition will cause more frequent supplier collapses.
From Automotive News Europe (A Crain publication)