IRN ArticleS FROM 2009:
The Current State of Commercial Relationships
Automotive Design & Production / September-October 2009 / Melissa Anderson
As we prepare to conduct the seventh biennial IRN survey on price reduction requests, we have some theories and some questions about what the results will reveal. The context has certainly changed since our last survey of the supply base in 2007. North American light vehicle production that year was 15 million units. US sales were 16.1 million. Not to get all moist-eyed and nostalgic, but things were pretty good! Even in terms of pressure for price reductions, the 2007 survey results were somewhat encouraging. The average percentage pricedown requested by customers had declined significantly to 4.6%, and component suppliers were coalescing around an average figure of 2% as a doable giveback. DaimlerChrysler and GM, the most aggressive customers in the 2005 survey, had mellowed out, leaving Ford and some Tier Ones as “Most Likely to Strong-arm the Supplier.” • Full Article Text
The Coming Reveal
Mi Biz / September 28, 2009 / Melissa Anderson
As we conduct the seventh biennial IRN survey on price reduction requests this fall, we have been reflecting on how the context has changed since our last survey of the supply base in 2007. North American light vehicle production that year was 15 million units. US light vehicle sales were 16.1 million. Price negotiations for components seemed to be reaching some level of stability, since the 2007 survey indicated that the average percentage pricedown requested by customers had declined significantly to 4.6%, and component suppliers were coalescing around an average figure of 2% as a doable giveback. What will the 2009 survey show? • Full Article Text
Natural Gas Vehicles: A Solution to Our Problems?
Mi Biz / August 31, 2009 / Julie Cridler
A new bill recently introduced in the Senate seeks to boost the status and sales of natural gas vehicles in the U.S. The purpose of the New Alternative Transportation to Give Americans Solutions Act (also known by the clever acronym NAT GAS) is to reduce U.S. dependence on foreign oil by encouraging vehicles powered by natural gas, which is relatively plentiful domestically. NAT GAS provides, among other things, tax credits for consumers who purchase the vehicles, grants for related R&D activity, and hefty tax incentives for companies that establish natural gas vehicle (NGV) manufacturing facilities. • Full Article Text
Now for the Hard Part: Doing More With Less
Mi Biz / August 3, 2009 / Melissa Anderson
As the automakers get through the period of fast-track bankruptcies, substantial shutdowns, and summer changeovers, things are going to really start getting interesting. Because, after all, what happens when you try to ramp back up with an organization that has shed a considerable number of employees and all the institutional knowledge riding around in their heads? What happens when you have new owners, new mandates, and new constraints? What happens when you throw some cross-cultural dynamics into the mix? Now we will really see what these companies are made of. • Full Article Text
The Big Four: The New North American Industry Model
Automotive Design & Production / July-August 2009 / Melissa Anderson
In a recent conversation at our office, a representative from a Japanese trade association was musing on the changing shape of the North American auto industry. “At 20% market share, we became Public Enemy No. 1,” he said, of the New Domestic automakers and suppliers. “But when you hit 40% of the market, you become a big part of the industry. Are we not finally at a point where we could think in terms other than the Detroit 3 vs. the Japanese Big Three?” Going forward, he said, the NA market should be defined by new terms, such as the “Big Four” – GM, Toyota, Ford and Honda. • Full Article Text
Prospering Beyond the GM Bankruptcy
Mi Biz / July 6, 2009 / Julie Cridler
Now that the big question of whether or not GM is going to “file” has been answered, the road to recovery begins. The path, without a doubt, will be bumpy especially for the supply base. There have been many predictions of looming bankruptcies at supplier companies, and we have already seen some of that beginning to happen. For suppliers that are able to hang on through this difficult period, the light at the end of the tunnel may be bright. And, the tumultuous nature of the industry may open the door for new suppliers and present the opportunity for existing suppliers to introduce new technology. • Full Article Text
Cash for Clunkers: Boon or Bust?
Mi Biz / June 8, 2009 / Julie Cridler
In addition to the never-ending discussion of the auto bailout, we are now starting to hear more about a scrappage program brewing in Congress. The program – affectionately called Cash for Clunkers, but formally titled the Accelerated Retirement of Inefficient Vehicles Act of 2009 – at first glance seems like a brilliant solution that will solve problems on many levels. Consumers can trade in older vehicles and receive a voucher toward the purchase of a new, more fuel efficient model. The consumer is happy, the environment benefits because newer cars emit less pollution, less fuel will be consumed, and the car companies will receive a much needed boost in sales. Everybody wins, right? Maybe…or maybe not. • Full Article Text
The New, Improved CAFE Standards
Automotive Design & Production / June 2009 / Melissa Anderson
It could be said that Bob Lutz is the Will Rogers of the auto industry, a source of pithy witticisms that contain a core of unvarnished truth. One of the quotable quotes attributed to him that has been making the rounds lately is an analogy that CAFE standards are like trying to fight obesity by requiring tailors to make only small-sized clothes. With interest in the subject sparked by the recent release of new CAFE standards, versions of Lutz‟s 2007 comment can be found everywhere from auto blogs to Tom Friedman‟s column in the New York Times. • Full Article Text
Outlook for Small Cars Gradually Strengthening
Mi Biz / May 11, 2009 / Melissa Anderson
Areas of enthusiasm in the auto industry last year were few and far between, but one of the segments that caused some excitement was small cars. As prices for a gallon of regular gasoline exceeded $4.00 in June and July of 2008, consumers were thinking twice about the appeal of sport-utility vehicles, minivans and pickups. Seeing this, the automakers ramped back production of those light truck segments to 45% of total North American units from what had been 55-60% for the previous seven years. • Full Article Text
Small Suppliers Treading Water
Automotive Design & Production / May 2009 / Melissa Anderson
All eyes are on GM and Chrysler these days as they try to find a course that marries the strategies that they think are appropriate with a package that will satisfy their new, reluctant partner, the U.S. government. A comparable struggle for survival is taking place outside the limelight, within the supply chain. Trade associations representing suppliers are doing their best to raise the visibility of the impact that the market downturn and turmoil is having on the supply base, but the challenge of getting any attention is immense, given the magnitude of the problem represented by the primary actors. • Full Article Text
Autos Off to a Slow Start
Mi Biz / April 13, 2009 / Melissa Anderson
It is hard to think about anything other than the big picture in the automotive industry these days. There is always any number of intriguing things going on that could be commented upon, but this year it is harder to tear oneself away from fixed examination of the overall health of this patient. So we will use this month’s column to do a spot check on how things are holding up. The short answer is, not so well. • Full Article Text
Unhappy Suppliers, Mixed Results
Automotive Design & Production / April 2009 / Melissa Anderson
My colleague, IRN president Kim Korth, is fond of using the opening line of Tolstoy‟s novel Anna Karenina as an analogy for what we observe in the automotive supplier population: “Happy families are all alike; every unhappy family is unhappy in its own way.” As publicly-held suppliers begin to report their financial results for 2008, it is interesting to see how they fared and to review the variations on a theme of a very unhappy year. • Full Article Text
Volkswagen: An Investment in the Future
Mi Biz / March 16, 2009, Julie Cridler
We could all stand to hear something positive about the automotive industry. Amidst the announcements of plant closings, extended downtime, and expansion plans being put on hold, the supply base should take comfort in the fact that Volkswagen has not altered the trajectory of their plans for the plant they are building in Chattanooga, Tennessee. • Full Article Text
Planning in an Age of Uncertainty
Automotive Design & Production / March 2009 / Kim Korth
It is beginning to look a lot like 1982. Automotive production levels in North America in 2009 are likely to drop to just over 10 million units. The level of decline is almost identical to the peak to trough decline of 42% experienced between 1978 and 1982. The $64 question is whether or not things will get any worse before they get better. • Full Article Text
Eat Your Spinach, Pay Your Gas Tax
Mi Biz / February 16, 2009 / Melissa Anderson
If you want to grow up to be big and strong, we are told, you have to eat your spinach. It may not taste very good today, and you aren‟t going to be big and strong for another 15-20 years in any event, but your mother says you have to. At least it‟s not Brussels sprouts. So, too, the gas tax – something that helps us to accomplish desirable longer-term goals but tastes yucky. • Full Article Text
Innovation, Interrupted
Automotive Design & Production / February 2009 / Melissa Anderson
The end of 2008 was a period of heightened drama for the auto industry, as some automakers pursued emergency loans from the lame duck government and vehicle sales fell to unfamiliar depths. The scale of the crisis overshadowed individual stories that were being played out as suppliers and the supporting financial community also tried to maneuver their way through the obstacles at hand – principally falling production, disappearing cash flow, and sometimes more unique circumstances. • Full Article Text
Safe and Successful Takeovers
Automotive Design & Production / January 2009 / Jud McKinley
Given that there are elements of a dog-eat-dog dynamic in the automotive industry in the best of times, it is not surprising that the worst of times creates even more instances where one company can benefit at the expense of another. The shriveling of vehicle sales and corresponding cutbacks in production have many suppliers struggling to get by with lower revenues and stretch their dwindling supply of cash. • Full Article Text