Ford spokesman Ford Wood recently confirmed that Ford plans to reduce the number of global suppliers from approximately 2,500 to approximately 800 in the next few years. This figure is much higher than the number of cuts planned by Ford in 2005.
Previously, GM spokesman Wei Keman confirmed to the outside world: In 2005, General Motors cut about 500 suppliers, and its existing number of suppliers has dropped to 3,200.
The integration of resources and selection of suppliers by vehicle manufacturers is a legitimate business operation of the company. However, GM and Ford’s plans and actions to cut suppliers on a large scale have undoubtedly added to the already-difficult US auto parts companies.
This "winter" is very cold
In 2005, it was undoubtedly a winter for US parts companies. Many parts and components companies have not survived this winter and are on the verge of bankruptcy. Thomas T. Steinkamp, ​​former director of Chrysler Group and head of New York private equity firm Ripplewood Holdings LLC, said: "Actually, there are spare parts companies that filed for bankruptcy protection almost every day." Parts companies apply for bankruptcy protection.
In 2005, Collins Ackerman, a key manufacturer of automotive flooring and acoustic components, filed for bankruptcy protection. Oxford Automotive was once a supplier to many passenger car and truck manufacturers in North America and Europe. It employs close to 6,000 people and sold more than one billion U.S. dollars in 2004. However, after the company filed for bankruptcy protection in December 2004, 10 factories in the United States have already sold six and will close the remaining four. Today, Oxford Automotive is a European company headquartered in France. In October 2005, Delphi formally filed for bankruptcy protection with the Federal Bankruptcy Court in New York. Delphi claims that the scope of this bankruptcy reorganization is limited to the United States, and its subsidiaries outside the United States will not be affected.
I thought that the situation will improve in 2006, but Ford's reduction plan at the beginning of the year made this winter even colder. These upper-tier suppliers are in a difficult position, putting the small manufacturers supporting them into greater pressure to survive. For example, Delphi has approximately 3,800 suppliers in North America. Experts estimate that 20% to 30% of small businesses will face bankruptcy. The approximately 1,700 suppliers that Ford reduced this time will have more and more second- and third-tier suppliers facing closure.
"Abandon" is also a helpless move
In fact, there is a cooperative relationship between parts and components companies and vehicle companies, and some large-scale parts companies and their OEMs are even more dependent on each other. Therefore, when these parts and components enterprises encounter difficulties, their supporting automakers will lend a helping hand. At the end of September 2005, Visteon announced that Visteon will transfer 17 plants and 6 research and testing institutions to Ford Motor Company. When Delphi announced its application for bankruptcy protection, GM also indicated that it would be given some help. “As the reorganization of resources faces a threat that will not always succeed, automakers are more willing to cooperate with the parts companies with which they have a relationship,†said Thomas T. Steinkamp.
“Now, the three major American auto companies have gotten mad, and there is still the energy to help suppliers in difficulty, especially so many suppliers in difficulty.†Thomas T. Steinkamp added.
At the end of January 2006, GM’s 2005 fiscal year report showed that the world’s largest car manufacturer had a loss of US$8.6 billion in the 2005 financial year. This difficult North American automaker’s losses amounted to the highest level since 1992. . The GM's losses are mainly concentrated in the North American market. Although the Chinese and European markets have achieved remarkable earnings results last year, it is clear that they cannot make up for this big hole. Poor financial conditions have overshadowed the sales of 9.17 million cars sold last year. Although the 2005 competitor Ford Motor Co., Ltd. made a profit of 2 billion U.S. dollars, the profit mainly came from the automotive finance business. Ford Finance realized a pretax profit of 4.4 billion U.S. dollars last year, and the just-released Ford 2005 financial report shows its annual global auto sales. The pre-tax business loss amounted to 1 billion U.S. dollars, of which the North American automobile business lost a pre-tax loss of 1.6 billion U.S. dollars.
In this difficult situation of its own, it is reasonable for automakers to abandon non-core suppliers that are not close to their business.
Doing a good job is the way out
The decline in the output of US automakers and the decline in profits will continue for some time. Starting from the beginning of 2005, rising raw material prices have caused the profits of component manufacturers to be seriously affected. The sad days of the two air-supply parts suppliers will continue.
Ford, while cutting suppliers, announced 27 future parts companies that will have more business with them, including Johnson Controls, Dana, Lear Corporation and Visteon. These are all parts and components companies that are highly innovative in one aspect.
“Partners need to adjust themselves, not just rely on the help of some OEMs.†Thomas T. Steinkamp said.
According to Dear, chief financial officer of Japan Culture & Trade Industries Co., Ltd. (BBK), many suppliers have a wide product line but do not have a competitive product. Therefore, when winter comes, their days are the worst.
“They need to pay attention to what they are good at, rather than using limited resources to carry out multiple fronts.†Deere said, “Parts companies need to expand their number of customers and the number of vehicle platforms to achieve self-protection.â€
Just as Visteon plans to invest its investment in three major product lines, namely automotive interior systems, air-conditioning systems, and electronic systems including lighting, component companies will only have a way out if they do something special in one area.