Automotive News - August 12, 2024 - 12

12 * August 12, 2024
opinion
T
EVs need strong
automaker and
supplier relations
T
he path to an all-EV future is muddier than it was
three years ago. One thing, however, is abundantly
clear: Automakers and suppliers must make progress
as partners and not adversaries.
That sentiment was echoed as recently as Aug. 6 by a panel
of executives - who are tasked with finding that elusive
balance between government regulations and consumer
demand - at the CAR Management Briefing Seminars in
Traverse City, Mich. Electric vehicle sales aren't taking off as
initially planned, with high costs and questions about
charging infrastructure weighing on consumers. Automakers
have been forced to pivot and temper initial outlooks,
delaying some EV production and putting more emphasis on
hybrids.
Suppliers are caught in the middle.
This month, Magna International Inc. took the unusual step
of lowering its 2026 financial outlook because of EV
uncertainty and contract assembly woes. Magna CEO Swamy
Kotagiri put it succinctly: " The market has shifted drastically. "
Other suppliers have said the rapidly changing plans will
weigh down earnings. Add to this a tight labor market, costly
raw materials and high interest rates and it's not difficult to
imagine a stressed supplier base.
As those red flags are raised, we're reminded of the good
and bad on the latest supplier scorecard from Plante Moran's
annual survey. It was encouraging to see five of six
automakers tracked by the survey improve their scores from
a year ago. More discouraging was seeing Ford Motor Co.'s
score fall and Stellantis remaining at the bottom of the pack,
despite a small year-over-year improvement.
The race to profitable, mass-market electrification is going
to take every ounce of brain power the industry has to
muster. The days of automakers driving all the innovation
and suppliers simply fulfilling orders have long passed.
Suppliers are a significant source of new ideas.
If there ever was a time for automakers to play the long
game with suppliers, this is it.
Toyota has prioritized collaborating with suppliers for years
and leads the Plante Moran survey. In February, the carmaker
said it would pay higher prices to Japanese suppliers to
incentivize faster production and better working conditions.
As challenges mount, the prize is greater than ever, and
we'd like to see more of that kind of leadership.
this past week was " stranded
capital. "
It represents the money that
suppliers spent to tool up for
automakers' ambitious electric
vehicle targets - investments
that may never be put to full use.
In so-called normal times -
when suppliers routinely enjoyed
higher profit margins than their
automaker customers - that
might have been manageable, at
least for the healthy suppliers.
But after the strains of the COVID-19
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COMMENT
From atop the Mitten, suppliers'
world looks challenging in 2024
RAVERSE CITY, Mich. - It's always
refreshing to come up north for the
CAR Management Briefing
Seminars. You can get out of the
daily auto grind, hopefully gain some
perspective and come back ready to finish
the year and prepare for the next.
The verdant view from the top of the
Mitten state is beautiful; the view of the
industry - especially for suppliers - is not
so great.
The most resonant term I heard
that you couldn't meet, or we didn't meet,
we're in it for the long haul, " Reuss said.
" And so whatever that is, we'll work it out. "
'We'll rise or fall' with our base
If they take him at his word - and many
may, given Reuss' long track record - they
couldn't have heard a better message.
His words largely echo the sentiments of
supplier advocates like Ann Wilson, the
retiring senior vice president at
the Motor & Equipment
Manufacturers Association.
" We'll rise or fall with our supply
base, " she said of the industry.
Wilson was the first to raise the
JAMIE
BUTTERS
EXECUTIVE
EDITOR
pandemic and the ensuing chip shortage
(as well as multiple UAW strikes), suppliers
don't have the robust balance sheets of the
late teens. And the debt that they have
added is now far more costly than it
would've been a few years back - or for
most of the past decade and a half.
Suppliers are hurting, and they blame the
bad planning of their customers -
specifically, General Motors and Ford
Motor Co.
If suppliers are feeling left behind - or
just a little anxious about their situation -
GM President Mark Reuss made it clear
that this is not the automaker's intention.
" I don't know anything more important
than our relationship with our suppliers, in
terms of execution, technology,
development and launch, frankly, " he said
on stage here Aug. 7. " I think those
relationships are everything. "
Most suppliers work on GM programs for
both EVs and internal combustion engine
vehicles, Reuss said. (He didn't mention
Ford by name, but he stressed that GM did
not separate its EV and ICE businesses,
because there is a lot of overlap in the
talents needed to make and sell both types
of vehicles.)
Reuss acknowledged " tough spots "
related to EVs as segment growth slows and
production plans are adjusted. He
emphasized that GM is committed to its
suppliers and indicated that support may
be available for those who need help.
" When something is short or you're
having a problem because of a schedule
THE WE E K LY NEWS PAPER OF THE INDUS TRY
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Keith E. Crain, Editor Emeritus
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Blind faith in techs
has proved costly
TO THE EDITOR:
Regarding " Column: Good service
depends on techs who follow the shop's
processes, " autonews.com, July 22: I
couldn't agree more with this cautionary
tale. Blind faith in technicians gets more
issue of " stranded capital " in a
panel discussion examining what
the November presidential
election may foretell for the auto
industry.
The general consensus is that a
second Trump administration
would be bad for EVs and good for
big pickups and SUVs, which
could be good for automakers and dealers
- at least for the short term.
For suppliers, it may mean that their
investments to support rapid EV adoption
will be forever stranded.
On the national stage, EVs seem to be
divisive. John Bozzella, CEO of the Alliance
for Automotive Innovation, said the
greatest predictor of EV intention is party
affiliation. That demands attention, he
argued, because Democrats weren't born
loving EVs and Republicans weren't born
hating them.
Nevertheless, EVs have arguably become
a wedge issue, and that's not good for an
industry segment that needs all the
customers it can get.
It's complicated
I'm not blind to the fact that industry
stakeholders are always looking to gain an
advantage and use the opportunities they
have to argue for things to be more in their
favor.
It's not like dealers don't advocate for
themselves at the NADA Show. It's all part
of doing business in a big, complicated
industry.
While suppliers suffered during the
pandemic - because production was
depressed and unpredictable - few, if any,
went out of business as a result of the
strain. (I've heard that exactly one did, but
it also appeared to be under duress
heading into the global health crisis.)
Still, there is a serious risk to the health of
the supply base again. And widespread
failures would be most disruptive to the
LETTERS
advisers and managers in trouble (and
potentially costs more in profit) than nearly
any other oversight. The personal
illustrations were priceless additions, too.
JON QUADE
Port Charlotte, Fla.
The writer is a longtime automotive
consultant and freelance writer.
GETTY
makers and retailers of automobiles, as well.
Facing these arguably existential
economic challenges, how are suppliers
supposed to stay focused on the
environmental threat of global warming?
I led a panel here about green
manufacturing and whether it's just a pipe
dream.
Kristen Siemen represented GM, as its
vice president of sustainability, and the
automaker publishes an annual report of
its progress. Some elements are
accomplished ahead of schedule, such as
diverting waste from landfills, while others
remain far away, such as eliminating
emissions from the use of its vehicles.
Siemen noted the importance of setting
goals and measuring progress.
For suppliers - especially smaller ones
- sustainability is a less urgent priority
compared with finding and keeping good
workers or protecting the company from
cyberattack.
But there are times when it does matter,
said Mark Schmit, who heads a division
with the Commerce Department's National
Institute of Standards and Technology that
works with small and medium size
manufacturers.
One is when their customer demands it,
the other is when it helps to save them
money, such as by reducing energy
consumption - especially on a per part
basis, through greater throughput.
He agreed with GM's Siemen, who said,
" A lot of it is common sense, like your
mom told you: Turn out the light when
you leave the room, don't leave the water
running. "
While customer pressure through the
supply chain can make a difference, it
needs to be done thoughtfully.
Joe Hinrichs, the former president of
Ford's auto business who now is CEO of
railroad CSX, said automakers need to
focus more on partnering with their
stakeholders - especially their suppliers.
The auto companies " felt so strongly
about being in control - [that] purchasing
kind of mindset - and have to think very
differently about ... collaborating and
being a better partner and being a better
enabler of that ecosystem that thrived, as
opposed to being the center of it all and
everyone is supposed to serve it, " he said
on Aug. 8. " That model doesn't work
anymore. "
If that could be the takeaway from this
conference, then suppliers' outlooks would
certainly brighten.
You may email Jamie Butters
at jbutters@crain.com.

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Automotive News - August 12, 2024

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