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Supplier executives’ confidence in business conditions fell in third quarter.

Survey Finds Supplier Executives’ Pessimism Growing

The survey of executives with Original Equipment Suppliers Assn. companies revealed a fourth-quarter index reading of 34, an 18-point decline from the third-quarter reading of 52, and 16 points below a neutral reading of 50.

Ongoing supply chain disruptions, and the subsequent shutdowns of OEM production facilities, are fostering pessimism among automotive supplier executives despite strong U.S. demand for light vehicles, according to the Original Equipment Suppliers Assn.’s Q4 2021 Automotive Supplier Barometer Index.

The online survey of executives with OESA supplier companies, conducted Oct. 7-27, revealed an index reading of 34, an 18-point decline from the third-quarter reading of 52, and 16 points below a neutral reading of 50. OESA received 111 complete survey responses and 148 responses total.

The index’s “significantly negative” reading of 34 reflects growing pessimism throughout the supplier community, although the largest firms are the most pessimistic overall. “The deteriorated outlook is attributed to continued production shutdowns due to the semiconductor crisis, tightening labor conditions, and shortages of raw materials and components that are impacting the supply base’s ability to fulfill customer volumes,” OESA says in a news release.

Among the findings of the Q4 2021 OESA Automotive Supplier Barometer:

  • Production shutdowns stemming from supply chain shortages and issues, labor availability and the inability to fulfill customer volumes continue to be leading threats to the industry over the next 12 months and have worsened over the past quarter. Supplier confidence in the strength of the U.S. economy has also faltered as issues related to the pandemic have continued longer than expected.
  • Production volume in 2020 and 2021 was, and is, expected to fall about 500,000 units short of levels the supply base needs to break even, suggesting back-to-back years of net losses for suppliers. 2022 production volumes are expected to return to profitable territory but face risks stemming from the semiconductor shortage.
  • Terms of commercial loans and credit lines are expected to continue to tighten over the coming year. While confidence in capital acquisition remains at strong levels, suppliers are less confident they will be able to access their needed capital in comparison to 2020.
  • Thirty-eight percent of suppliers believe they are ahead of the industry’s pace of innovation while 28% feel they are behind. Focusing on partnerships, technological R&D, diversification and developing products and solutions that support the electric-vehicle market are common practices by firms that consider themselves the most innovative.

“Leading firms continue to navigate pervasive supply-chain constraints with a focus on teams and technology to improve visibility and manage through the current crises to lift competitiveness and build a stronger position in the market recovery,” says Mike Jackson, executive director-strategy and research, OESA.

Despite year-over-year profit pressures, suppliers continue to display remarkable tenacity by disrupting past practices to uncover new solutions and address opportunities across the mobility landscape – through a renewed focus on software competency and a vital commitment to harnessing innovation,” he says.

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