Major auto suppliers took a hit, but it could have been worse
A year of logistical problems and congested customs traffic at U.S. borders and ports has seen some suppliers reassess established sourcing models, reconsider international supply chains, and recalculate costs with additional local warehousing added to the equation.
“It was kind of a day-to-day firefighting,” said Laurie Harbor, CEO of suburban Detroit auto manufacturing consulting firm, Harbor Results Inc..
“But for the most part, I think the majority of the supply base has held up pretty well.”
Lear, ranked No. 9 in the world with 2020 revenue of $ 17.05 billion, has made a name for himself by releasing his Safe Work Playbook. The openly distributed industry documents detailed safety protocols such as social distancing measures and worker temperature checks, as well as best practices for communicating work procedures with employees.
Many suppliers have also stepped up to contribute to the “health arsenal” to produce medical supplies for the nation.
Employees at parts supplier Denso, ranked No.2 with global revenue of $ 41.13 billion last year, have started 3D printing face shields from their homes and helped workers in First line.
Engineers at seat supplier Adient, the industry’s 14th largest parts company, produced personal protective equipment. Adient posted sales of $ 12.67 billion last year, despite a 23% drop in sales to automakers.
Despite the emergency distractions, suppliers are still engaged in ongoing strategic business decisions.
German spare parts giant ZF Friedrichshafen continued its acquisition of US company Wabco Holdings Inc. with the aim of strengthening the role of companies in commercial vehicles.
The $ 7 billion deal was struck in May, just as the industry began to recover from the shutdown.
Number 23 BorgWarner Inc. has closed its acquisition of powertrain supplier Delphi Technologies, a deal with an enterprise value of $ 3.2 billion, in hopes of better positioning itself for the future of the electrification.
“The best suppliers still realized that a new form of electrification was coming, and we couldn’t stop our investment,” Harbor said. “What you saw at the OEM level was absolutely a re-engagement with this technology because, of course, new startups were becoming even more relevant, and the right suppliers had to follow that.”
Leadership changes have also spilled over into the industry.
Continental, with $ 29.68 billion in original equipment sales in 2020, installed a new president for its North American operations just weeks after the start of the pandemic. And North America’s largest supplier, Magna, saw Don Walker, a 21-year veteran of the company, announce his retirement as CEO in October. Magna hit $ 32.65 billion in sales to automakers last year, even with a 17% drop in sales from 2019.
The crises of the past year continue to complicate business, especially in the form of a shortage of chips and other shortages of critical parts.
Hudson thinks the industry is in the current situation because automakers were thinking in the short term, Hudson said.
“For once in our lives, demand actually exceeds capacity,” Hudson said. “But the lack of capacity and the lack of supply pushed up prices, which reduced the margins of the supply base, part of which was covered by [Paycheck Protection Program] ready.
“This is not new for 2021,” he added. “The surprise, frankly speaking, is that all of this has yet to be resolved.
“The supply base is going to have to, for lack of a better term, fix things. Suppliers cannot continue down this path. It just isn’t sustainable.”