US Tier One Auto Suppliers To Be Hit Harder As European Designed Vehicles Are Produced In US

Implications: With US auto sales down 13% in July and the forecast for the balance of the year equally distressing, news for the Tier 1 suppliers is even worse.  The news of existing designed European vehicles being brought to the US quickly , may well mean European companies presently manufacturing parts in Europe may come with them.  That means 2009 and 2010 offer no solution but only more problems.

Analysis:  With Ford and GM, rushing to move existing European designs into the US, the opportunity for the European suppliers to move into the US and take further business is more prevalent than ever. Both GM and Ford have already been talking for months with major suppliers about common platforms, common designs, common components and common suppliers globally.  Both certainly have common platforms but multi continent common platforms are the exception The intent for the future is to substantially reduce the number of suppliers to provide the preferred suppliers with enough business to be healthy and to provide enough revenue to continue to reduce their operating costs   Previously, auto companies frequently split component or module business and therefore there would be two suppliers, two management teams and two facilities supplying one identical commodity to one plant.  This was preferred to keep the suppliers competing and to protect against strikes or supply interruptions.   Now,with the rush to fuel efficient vehicles, Ford and GM are looking for global suppliers that can supply them in North America, Europe, South America and or Asia.  Common platforms, with common components have provided Toyota, Honda and others  with a pricing advantage as well as design cost advantage. Now the US companies with common platforms will rush to catch up.  With the supply base in the US on its knees due to the gas price and dismal sales, and with the European suppliers healthy, the opportunity for the European supplier companies in the US has never been better.  The urgency the auto companies have to get fresh fuel efficient vehicles to the dealerships will drive the Purchasing activities to go to the supplier of the European models first.  The weakness of the dollar against the Euro provides even more advantage for the Europeans.  Some sub-systems of the automobile such as fuel systems already is heavily European or Asian with Delphi being the strongest US player. Tire and wheel is another system dominated by the Bridgestone,Michelan, and the Continental's of the world.  US suppliers that have a Global stronghold will have an opportunity  but others will may be bought if they have a technology or continue to slide down if they are in a commodity based sub-system.