Consolidation Among Auto Parts Suppliers Surging

Major deals among global automakers are driving sweeping changes in other segments of the industry, most noticeably a growing trend toward consolidation by original equipment manufacturers. So reports the 1998 PricewaterhouseCoopers Global Automotive Deal Survey, which predicts the trend to continue for several more years. According to the consulting firm's survey, slightly more than half of 1998's 620 worldwide automotive deals involved parts suppliers; the deals were valued at $30.3 billion (nearly double the value reported in 1997); and the average value of the 10 largest deals more than doubled. U.S. suppliers accounted for 56% of last year's total number of deals. PricewaterhouseCoopers analysts offered several predictions on the future of the automotive suppliers market, including:

  • Intense competition, tight profit margins, and excess capacity will challenge the viability of companies that produce fewer than 2.5 million units a year, lack a strong brand position, or cannot raise adequate research-and-development funds.
  • A company with sales of $500 million or less probably lacks the critical size to remain a Tier 1 supplier.

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