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External Forces Drive Positive Change for Automotive Suppliers

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Today’s Wall Street Journal features an article that provides yet another reminder of the timeless adage that a rising tide lifts all boats, particularly when it concerns suppliers to the automotive industry.

The article, Car Mileage Push Aids Auto-Parts Suppliers (paid subscription or free metered view) describes how select tier one automotive suppliers have benefitted from both consumer and government mandates for greater fuel efficiencies in vehicles. Suppliers mentioned include BorgWarner, Delphi Automotive, Federal-Mogul, Honeywell International, Novelis and TRW Automotive. The appetite by OEM’s for increased innovation in fuel efficiency technologies such as advanced fuel injection systems, start-stop capability, turbochargers and aluminum alloys have brought considerable renewal and financial rewards for these select suppliers.

As our automotive supply chain readers are all too well aware, that was not the climate 4-5 years ago when the global financial crisis had many suppliers on the financial precipice. Delphi, a cast-off orphan from General Motors has come from being on the verge of financial calamity to just reporting $367 million in earnings because of innovative components such as its direct fuel injecting systems. Honeywell is recruiting lots of people with experience in turbocharges to accommodate planned growth. All of the specialty aluminum that Novelis produces for North American auto industry demand is reported to be sold out.

The WSJ notes that the Obama administration’s mandates requiring U.S. vehicles to demonstrate 54.5 miles per gallon by 2025, double the average 2012 rate, has provided the current momentum for suppliers. It cites Ford purchasing chief, Birgit Behrendt, indicating that the top question on the mind of Ford’s buyers are how will supplier innovation reduce a vehicle’s weight and improve fuel efficiency. Her quote is telling: “We are working with suppliers far out into the future.

Reading the article, Supply Chain Matters could not help but reflect on time tested change management principles that state that overall organizational change comes more from external than internal forces. 

Without the 2008-2009 financial crisis, and a government mandate that had far more teeth than prior mandates, would the automotive supply chain have responded to such needs for innovation as is currently occurring?

We encourage readers to chime-in on this question, but perhaps the answer is fairly obvious.

Bob Ferrari

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