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Special Report

July 28, 2015
 

Reshaping the relationship between OEMs & Auto Suppliers

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Written by: Suhail Nasir
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Automobile spare parts suppliers are facing global changes. Mergers and acquisitions have become very common and auto suppliers have an increased ability to negotiate with the OEMs. Building a profit maximizing integrated cooperation mechanism has become the hottest topic among the OEMs and auto suppliers.

During the panel discussion of “Role of Auto Suppliers: Building Synergy with OEMs”, Dr. Ralf Cramer, a member of the Executive Board of Continental AG, Mr. Li Xinqiang, Assistant to Dr. Simon Yang, who is the President of Delphi China, Mr. Edouard de Pirey, President of Valeo China and Mr. Amit Mukherjee, the Deputy Executive Director of the Automobile Components Manufacturers Association of India, provided their unique perspectives and had an in-depth conversation on this topic.



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 “China-center” Strategy

“Continental has 1400 engineers, 25 factories and several R&D centers. Our strong team and our increasing localization have helped us to build a strong synergic relationship with our Chinese clients”, Dr. Cramer said. He believes that the Chinese market has been a key factor in Continental’s rapid developments over the last 15 years. Continental hopes to support the improvement of Chinese customers’ living standards, and will try to become a local player within the next 20-30 years.

Similar to Continental, Valeo also aims to fit into the local culture. “In 2003 Valeo found that the China market had become the most important part globally. Now Valeo has 15,000 employees in China, the biggest number among its foreign companies’”, Mr. Pirey said, “The auto suppliers are already on the stage, but a new development will be promoting the products of the OEMs”.

This point was agreed on by Dr. Yang. He pointed out that Delphi has become the core auto supplier for the major OEMs around the globe. Their 100% localized product line has attracted attention from many major OEMs.

Reshaping the Relationship between OEMS and Auto Suppliers

 For a long period of time, the relationship between auto suppliers and OEMs was based on the OEMs, ignoring the voices of the auto suppliers. The situation became worse with slowing market growth and increased competition.

“On one hand, the suppliers complain about lower prices, frequent design changes and an unclear plan. But the OEMs blame the suppliers on their high costs, low quality and slow response rates. These issues have always existed. The reason, I believe, is because the OEMs think of the suppliers as Part B. They maintain a firm one-way connection with the auto suppliers. This kind of relationship lacks communication and trust, and will definitely harm the synergy of the supply chain, ultimately weakening the comparative advantages of the product”, Mr. Li said.

Mr. Yang also stated, “The only win-win scenario involves both the auto suppliers and OEMs focusing on the clients”. A strong relationship between OEMs and auto parts companies is a major key to reducing costs.

Adjusting the relationship between OEMs and auto parts companies in the supply chain will be a key factor in reducing costs.

Five years from now, there will be closer collaboration between OEMs and auto parts companies. Some large suppliers will introduce new technology, particularly into the Chinese market. And OEMs will also respond to market changes and achieve joint developments together with suppliers. Only when paying attention to the entire life cycle of suppliers can the costs significantly reduced.

Dr. Ralf Cramer, a board member of Continental AG., believes that the Chinese market used to only pay attention to the quantity in the past. But with the continuous development of the Chinese market, it has begun to be motivated by quality. The upcoming 3- 4 years of investment and research by parts manufacturers to China will also help achieve the goal of reducing the costs of production.

-Published on page#24, July-2015 edition of MOBILE WORLD Magazine





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