Study: Auto Part Makers Squeezing Each Other

WKSU - August 22, 2011
   

WKSU

A new study from Case Western Reserve University says auto parts suppliers will have 
to take the — quote — “high-road” in manufacturing if they expect to survive. WKSU’s 
Kabir Bhatia has more on the nuts and bolts of what that means for the way one of 
Ohio’s biggest industries does business…

Ohio parts suppliers are getting squeezed on the low end by China and Mexico,
and on the high end by Germany and Japan. And the Case study says, since they
can’t continue competing on price, they need to invest more in worker training,
research and efficiency. Only about 20 percent of U.S. manufacturers are doing
that now, says Susan Helper, who headed the study. But those who did were
better equipped for the last recession, and may be better prepared for the next
one.

“(HELPER)…They saw less of a sales decline during the automotive crisis. They
also have a number of indicators that suggest they’re going to do better in the
future, because a greater percentage of their products are new or innovative, as
opposed to being older products in which they have a lot of competitors…”
She says success requires improved supplier relations, too. For example, the
company making car doors can’t afford to be overly stingy with the company supplying
door handles.

“(HELPER)…That’s not necessarily to just reduce the price. If all you’re doing is
squeezing the margin of the supplier below you, then that’s going to have
medium- and long-term impacts because nobody’s going to have the money to
invest.”

The Weatherhead School of Management at Case looked at one thousand secondand third-tier auto-parts
suppliers across the county. Those are the ones employing fewer than 500 people. They also do not supply
the automakers directly, as first-tier suppliers do.

 

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