Canadian Plastics

Automotive supply chain “vulnerable, unsustainable” going forward: report

The auto industry is strong today, but must be prepared for another slow down, the new study by Harbour Results Inc. said.

November 5, 2015   Canadian Plastics

Despite being strong at present, the North American automotive value chain is on an unsustainable path and must be prepared for another slow down, a new study concludes.

The study, by Southfield, Mich.-based Harbour Results Inc., identified a number of factors that point toward this downturn, beginning with the fact that, although the North American automotive industry is predicted to produce more than 20 million vehicles in 2015, the industry will experience a plateau going forward to 2022. “A shift to low volume vehicles with a high mix of product will result in 80 per cent of the models being under 100,000 units in annual volume by 2018,” the study said.

Second, the study noted, “the Detroit 3 automakers have less than 45 per cent of North American market share, down from 87 per cent in 1962.”

Third, regulatory issues, customer demand, advanced technology and economic factors are
putting automaker profits at risk, the study said. “Factors that are eating away at profitability include increased complexity, high mix, low volume variants, increased capital investment,
increased tooling costs, product development cost and timing, high launch costs and
warranty costs,” it warned.

Fourth, the study noted, growing complexity and the demand for new and innovative technology coupled with automaker price pressures is putting “a squeeze” on Tier 1 supplier profitability.

As a final challenge, the tool and die industry continues to face increased challenges; including, increased tool complexity, shorter lead times, lack of skilled labor, tooling jobs on hold, capital
equipment needs, and cash flow management. “As we look to the future, there continues to be a capacity gap within the tool and die industry,” the report said.

“The automotive industry has reached an inflection point and the entire manufacturing value chain will need to change the way it traditionally does business to remain profitable and prepare for a future downturn,” HRI president and CEO Laurie Harbour summed up in the report’s conclusion.


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