Some Auto Suppliers Still Struggling

The recession hit auto suppliers hard, and even though some are now reporting significant fourth quarter gains, others are not out of the woods yet.

After all, some auto manufacturers are still restructuring. Volvo Cars, for instance, is reviewing its supplier base, looking for places where it can reduce costs and simplify manufacturing processes. Ultimately, the company may cut as many as one-third of its suppliers, Volvo's purchasing chief told Bloomberg last week.

Volvo hasn't shown a profit since 2005. But, its new owner the Zhejiang Geely Holding Group Co. from China what's to turn things around, and improving supply chain efficiencies and alignment has become a top priority. All told, the company has about 450 suppliers, and of these, the 20 largest supply about 70 percent of Volvo's parts. This short list includes seatbelt and air-bag maker Autoliv Inc., seat manufacturer Johnson Controls Inc., and Robert Bosch GmbH.

Bloomberg reports that Volvo may trim its suppliers down to 300.

According to Reuters, the continued volatility in the auto industry has delayed a "long-predicted wave of consolidation in the (auto parts supplier) sector." Over the past year, industry analysts thought the recession would foster deals to help consolidate and stabilize the sector.

But, for the most part, those deals have not materialized, and prospects for future deals reportedly remain uncertain.

US auto sales are expected to recover somewhat this year, and researchers predict sales may reach 11.5 million, up from 10.4 million in 2009. (Note: While that's a nice upswing, it's still far below the very robust 16 million sold in 2007.) Auto manufacturers want suppliers to be ready for increased production, and in hopes of avoiding supply chain disruptions, they're asking suppliers to use growing cash for paying down debt, rather than on deals, the article reports.

TAGS: Finance
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