Responding to Offshoring Trend in Automotive

Under pressure to shift production abroad, auto suppliers must develop new strategies, study argues

Under pressure to shift production abroad, auto suppliers must develop new strategies, study argues

Detroit — February 13, 2004 — U.S. auto industry suppliers face continued pressure to expand their production outside North America and must develop new strategies to cope with this trend, argues a report planned for release at the 2004 Society of Automotive Engineers (SAE) World Congress next month in Detroit.

Pressure to move automotive manufacturing jobs abroad will continue despite federal and local government efforts to maintain or increase industry employment levels in the United States, according to the "The Odyssey of the Auto Supplier Industry," a report prepared by the firm Roland Berger Strategy Consultants based on a study conducted in conjunction with the Original Equipment Suppliers Association (OESA).

The study includes the results of online surveys and interviews with top management of OESA members. OESA is a forum for more than 350 automotive suppliers with global sales of more than $300 billion annually. Members include automotive suppliers of components, modules, systems, material and equipment.

"Nearly every supplier we've interviewed so far has indicated they are under increasing pressure to expand production outside North America," notes Wim van Acker, managing partner of Roland Berger's U.S. operations. "This trend illustrates a critical need for suppliers, especially small and medium-sized companies, to develop a new set of manufacturing strategies."

Globalization of the supplier industry has evolved from multinational companies with regional operating groups to strategic enterprises bidding on global platforms, Van Acker said.

"Large suppliers are well aware of the pressing need to act, and they are actively pursuing opportunities abroad," the Roland Berger executive said. "A preliminary finding of the Odyssey supplier report is that small and medium-sized suppliers will be impacted the most by these emerging changes. They will have to decide whether to move with their customers.

"But if they do move with their customers, how will they avoid the pitfalls that may derail their efforts to expand in emerging markets? In many cases, these companies do not have the financial and human resources to support global expansion. Nor can they afford even one failure."

The Roland Berger study will discuss trends in the global automotive supply chain; specific automotive component groups; which regions may win or lose, and what actually is driving the migration of automotive manufacturing jobs to locations outside of North America.

The study seeks to help suppliers understand how their global manufacturing operations will need to change and how best to make those changes to survive and thrive, according to Roland Berger. In addition, the report will list tools, techniques and equations to evaluate where a supplier should be outsourcing or positioning its global resources.

The study will be the focus of a half-day seminar at the SAE conference.