Auto Supplier CEOs: There Will and Needs to Be More Consolidation
Two CEOs of large automotive suppliers say the industry will—and should— consolidate further in coming years as its automaker customers grapple with a relatively flat sales environment and look for more efficiencies.
Speaking at last month’s J.P. Morgan Automotive Conference in New York, executives of Dauch Corp. (the former American Axle & Manufacturing), Cooper-Standard Holdings Inc. and Dana Inc. discussed the trends shaping their market and how they’re responding. Both Dauch, which in February completed its $1.4 billion purchase of GKN Automotive parent Dowlais Group, and Dana, which plans to wrap up its $5.1 billion deal to join forces with Eaton Mobility early next year, have recently consolidated parts of the industry. And the consensus is that more transactions are needed.
“It’s our job to look for growth, right? And right now, we’re not seeing a lot of growth from a vehicle-unit standpoint on a global basis,” said David Dauch, chairman and CEO of Dauch Corp. “So we’ve got to consolidate the industry and the core business that we’re in, in order to realize some of that growth. And that’s not only just us; it’s true for all the auto suppliers that are out there.”
Dauch’s point was echoed by Cooper-Standard Chairman and CEO Jeff Edwards, whose team is on pace to bring in $2.8 billion in revenues this year. Edwards pointed to forecasts that global auto sales are forecast to be about 90 million this year as well as in 2027 and 2028 and said that’s likely to also lead to more consolidation among car makers themselves. That will then inevitably ripple through those companies’ supplier bases.
“There, without a doubt, will be sharing of engineering or design specifications, I think, to help even further simplify what’s going on today with the specifications that are required in Europe versus Asia versus North America and other places around the world,” he added. “Again, I think the customers that we’ve been doing business with trust us that we can deliver high-quality product, help them with their overall efficiencies, help them with their overall cost targets.”
The global expansion of Chinese manufacturers surfaced in several conversations at the J.P. Morgan conference, with Dauch saying that Europe looks set for more restructurings and other strategic moves as Chinese firms eye the excess capacity on the continent. Edwards noted that Cooper-Standard has been growing its Chinese revenue base and intends to grow along with its customers there.
“If you’re not diversifying with the China market, then I think you probably are going to end up with an extreme amount of business […] tied up in 70% [of the world] if you’re not with the China customers,” he said.
Analysts at Boston Consulting Group early this year published a report on “how auto suppliers can rebuild and rise again” after the crisis from early this decade. Among their main points is that companies need to simplify their portfolios and build scale through consolidation while also cutting other costs.
“Additionally, as OEMs increasingly engage directly with Tier 2 suppliers and selectively internalize integration activities, Tier 1 players must fundamentally rethink their operating model,” the analysts added. “The traditional coordination and pass-through role is under pressure, requiring sharper differentiation in system integration, software, capital deployment and risk-sharing.”
Building New Markets, Too
Dauch is on the same page when it comes to sharpening his teams’ operations. He told conference attendees that a big part of integrating with Dowlais is about improving capacity utilization. He and Dana President and CEO Byron Foster also agree with BCG’s take that auto suppliers need to diversify beyond their traditional customer bases.
Dauch noted that about 20% of the clients today that are buying powder metal from his company’s former GKN operations are not in the auto sector and that their business can grow. In addition, he said Dauch is thinking about branching into industrial, aerospace or powersports markets where it can use its expertise.
“We’ll look at that but some of that takes capital to enter into, too,” he added, “whether it’s a greenfield approach or a strategic approach of some nature.”
Foster and his team are a littler further along the road in building a powersports business and also will diversify their customer base more into commercial vehicles when the Eaton Mobility deal is finalized. Additional market moves are also on the agenda.
“We’re already seeing some uptick in volume on the defense side for the second half of ’26,” Foster told the J.P. Morgan audience. “That should continue into ’27 and [we’re] working to gain new programs in the defense space as well as powersports.”
Finding a healthy and profitable balance between amassing scale, innovating product lines and branching into new markets is quite the tightrope for auto suppliers to walk these days. But as the world’s auto OEMs defend their turf and/or stake claims to new territories (geographical and technological), it seems very likely that new shocks will test their suppliers soon. As the BCG team phrased the situation in its report: “The choice is whether to endure these forces or use them as raw material for reinvention.”
About the Author
Geert De Lombaerde
Senior Editor
A native of Belgium, Geert De Lombaerde has been in business journalism since the mid-1990s and writes about public companies, markets and economic trends for Endeavor Business Media publications, focusing on IndustryWeek, FleetOwner, Oil & Gas Journal, T&D World and Healthcare Innovation. He also curates the twice-monthly Market Moves Strategy newsletter that showcases Endeavor stories on strategy, leadership and investment and contributes to other Market Moves newsletters.
With a degree in journalism from the University of Missouri, he began his reporting career at the Business Courier in Cincinnati in 1997, initially covering retail and the courts before shifting to banking, insurance and investing. He later was managing editor and editor of the Nashville Business Journal before being named editor of the Nashville Post in early 2008. He led a team that helped grow the Post's online traffic more than fivefold before joining Endeavor in September 2021.