DETROIT – The cost of raw materials and OEM demands for higher-quality products at lower costs are among primary challenges faced by suppliers, a panel consisting of executives from Tier 1 and Tier 2 suppliers says.
Interior suppliers feel the heat even more than other component suppliers, executives say at the Ward’s Auto Interiors Show here.
“OEMs, while understanding the economic state of the industry, are faced with discerning customers and competitors’ excellent products,” says Joseph A. Bertucci, global engineering manager-cockpits and interior systems for Delphi Corp.
“Consequently, they are demanding even greater performance from their already challenged interior suppliers. OEM’s fit-and-finish requirements are stretching conventional technologies to the limit,” he says.
Being under the gun is nothing new for suppliers, but the amount of pressure from auto makers today is unprecedented, the panelists say.
Having a global footprint is essential if interior suppliers are to remain competitive, and profitable, says Albert Faraj, director-Customer Group for Visteon Corp.
“We are better able to face challenges in different regions because we have a balanced global footprint,” Faraj says. “This has enabled our customers to commit to global programs.”
A rapidly changing automotive landscape has left many suppliers facing bankruptcy or liquidation, causing a ripple effect throughout the industry and forcing many interior suppliers to rethink their business strategies.
“You won’t find our strategy to be terribly brilliant,” Faurecia North America President Jim Orchard says. “But in the face of what chaos we’ve had, we’re only focusing on four simple points: innovation and design; features and new materials; manufacturing technologies and perceived quality to our buyers.
“We believe excellent program management, global development and excellent execution of the program is another,” he adds. “Our customers deserve it first and foremost and if we don’t provide it we’ll lose our profit.”
Many of the suppliers in attendance agree North America increasingly is becoming a difficult region in which to turn a profit.
Not only is the competition fierce, especially in the U.S., it is also more difficult to conduct business due to governmental indifference, Orchard says.
“It’s easier for us to invest outside the country than for our national and state governments to work meaningfully with us for real solutions for legacy issues, health care, pensions, tax and trade laws,” Orchard says. “So it’s easy to see why the interior suppliers remain in turmoil.”
The consensus among interior suppliers in attendance is that the future appears daunting, but executives appear confident they have the right strategies and mindsets in place to succeed.
The key to success comes down to some simple, basic steps, Bertucci says.
“The interior product business requires a tenacious commitment to technology,” he says. “I believe a supplier must be willing to make long-term and unbroken investments in innovation, manufacturing capability and engineering talent.
“Think globally, remain focused on your business plan, have flawless execution and invest in research and new product development,” Bertucci adds. “In the face of today’s fierce competition, this is what it takes to survive.”