Automotive briefs

Study: OEM price cuts force more auto suppliers offshore

A new study of the automotive industry shows that OEM-mandated price cuts are forcing more tier suppliers to send production to low-cost regions. A survey by Roland Berger Strategy Consultants in conjunction with the Original Equipment Suppliers Association surveyed more than 70 parts makers, with combined annual sales of about $72 billion. Suppliers in the study forecast a 17% drop in North American parts manufacturing capacity by 2010, excluding Mexico, where more vehicle components are expected to be produced due to the country's lower labor costs. On the day the study was released, Tower Automotive said production of frames for Chrysler's Dodge Ram pickup will move to a joint venture in Mexico from Tower's Milwaukee plant, citing price pressure in its decision. The study also found new Asian markets like India, Thailand and Vietnam being explored by automotive suppliers for production of components that require more labor and less sophisticated technology. Examples include batteries, wheels, plastics, electronics and some powertrain components.

Ford raises eyebrows with new contracts

Changes to the language in supplier contracts at Ford Motor Co. have raised concern among suppliers. The language reportedly allows the OEM to change the terms of a contract before it expires and pushes up to 50% of the cost of recalls back to suppliers. Ford currently pays all of the cost of recalls up front and later negotiates with suppliers on a settlement. Ford spokesman Paul Wood said in a news report "An overwhelming majority have not expressed any concern. We believe our revised terms will work well with our suppliers."

Ford VP speaks of paring down supply base, cutting costs in 2004

Suppliers in the automotive industry looking for relief from constant cost pressures will not be happy to hear what Ford's vice president of product creation in North America has to say. "The pressures of continual cost discussion are just a way of life. They will go on forever," said Phil Martens at a recent conference in New York. Ford in December asked its top 100 suppliers to cut prices by 3.5% and projects $500 million in cost savings in 2004, despite planning several costly new vehicle launches. Martens also said Ford wants to cut its supply base and work with healthy suppliers, saying, "I want suppliers who are going to reinvent their businesses as we reinvent our business." Martens said if the cost cuts impact suppliers' margins too much, it is a sign that the supplier is not working as efficiently as it could. Ford currently spends $90 billion with 2,000 suppliers.

Strike averted! Union at U.K. Nissan plant calls off strike

Unionized workers at a Nissan plant in the U.K. have called off plans to strike over the relocation of its purchasing department (see PURCHASING, Feb. 5, 2004, page 14). The strike plan was revealed in December after Nissan failed to consult with members of the Amicus Trade Union over the relocation of the plant's 70-person purchasing department from its existing location in Sunderland to an office in Cranfield, Bedfordshire, some 240 miles away in an effort to place purchasing closer to a production plant. Although the relocation will take place as planned, union officials called off strike plans when Nissan agreed to put more effort into finding other jobs in the current plant for staff who don't want to relocate. Employees were told of the move three months in advance and were required to provide notice by January 1 as to whether they could move to the new location by June 2004. They were offered more than $13,000 each to cover expenses and ongoing help with higher mortgage payments. Out of 70 staff in the department, 17 voted in favor of the strike, five voted no and the remaining 18 union members did not return their papers.