Global Fastener News

2011 FIN – Automakers Emphasizing Supplier Consolidation, Location

July 02
00:00 2015

SPOTLIGHT – Automakers are pressuring suppliers to consolidate. Automotive News reported fastener manufacturer Alpha Group of Cos., of suburban Detroit “received an ultimatum recently from one of its Tier 1 customers: Expand into Mexico by year end or lose future business.”
“We’ve tried to find a supplier we could consolidate with, but we don’t have buckets of cash to make that happen quickly,” Alpha president Chuck Dardas told reporter Dustin Walsh of Automotive News. “The pressure on us to consolidate has been enormous because this particular supplier makes up 12 to 13 percent of our business.”
Walsh reflected on a recent management seminar in Michigan and noted that one of the “take-aways” was the “automaker-led push for more — and faster — supplier consolidation is putting companies such as Alpha under a time and logistics crunch.”

At the Center for Automotive Research seminar, Ford and Nissan executives called for more supply chain consolidation.
Since the recession cut suppliers down to 1,500 global suppliers at the end of 2010 and wants to get down to 750 suppliers.
Consultant Bill Diehl said the economic downturn hurt Tier 2 and Tier 3 suppliers. They may be profitable at low volumes, but will lack the capital to match rising demand.
“These suppliers don’t have the strength or the systems to compete with growing demand,” Diehl told Automotive News. “Consolidation has to happen. Nobody is going to be adding fixed costs in the near term, and consolidation allows for great opportunity to leverage more facilities as the demand increases.”
In addition, automakers want continuity of supply. Rebecca Vest, vice president of purchasing for Nissan’s five North American plants, said at the seminars that suppliers need to locate near assembly plants. Nissan wants to avoid sourcing problems such as those it experienced after the March earthquake and tsunami in Japan.
“I’ve been through enough disasters to know that it’s lovely to able to drive over and pick up your parts,” she told the seminar.
The push for suppliers to locate near assembly plants in turn leads to Tier 1s pressuring lower-tier suppliers.
Dardas cited Alpha as an example of a supplier looking for consolidation targets, while establishing a parts warehouse in Mexico to satisfy customers.
Sheldon Stone, partner in the suburban Detroit restructuring firm, Amherst Partners, the automakers aren’t matching their requirements by not providing consolidation support.
“They have been much too slow in assisting the supply base through a reorganization process,” Stone said. “The OEMs, they have the world divided up into different geographical regions, they know what suppliers are supplying what parts in those regions, they know where they have redundancy and they know the financial strength of those suppliers. But what have they done in the last 24 months?”
For more of the story:
Editor’s Note: Articles in Media Spotlight are excerpts from publications or broadcasts which show the industry what the public is reading or hearing about fasteners and fastener companies.  ©2011/2015 Fastener Industry News.
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