Suppliers grow or shrink

The world of auto suppliers in 2020 is a tale of two industries.

While some companies have been trimming their U.S. work forces in recent months, others are in expansion mode and hiring workers.

Among those adding employees are Fort Wayne, Ind., steel supplier Steel Dynamics Inc., supplier Denso Corp. and YKTA, which announced last May it will create 650 jobs to support Mazda-Toyota in Huntsville, Ala.

But at the same time, others have been making or planning job cuts in response to forecasts for an industry slowdown. Among them: seating supplier Adient, which had several rounds of layoffs over the past year; Continental, which announced last year that a few hundred jobs in the U.S. would be impacted by "structural adjustments;" and Bosch, which last year eliminated 6,800 jobs worldwide, leaving its total at 400,000.

Geography does not explain the two different worlds. At the end of January, Goodyear Tire & Rubber laid off 105 workers at its plant in Gadsden, Ala., just one month after more than 700 other employees there accepted voluntary buyouts. At the same time, Dakkota Integrated Systems said last month that it will hire 400 workers and start production in Detroit to supply Fiat Chrysler Automobiles.

These opposite realities among suppliers illustrate industry evolution and uncertainty, said Jeff Schuster, LMC Automotive president of the Americas and global vehicle forecasting.

Product mixes are changing, technologies are changing and market share is shifting among manufacturers.

"With all of the noise and uncertainty going on," Schuster said, "you're seeing differences within the supply base with some that are hiring, while suppliers in the traditional industry are either trying to redefine themselves or cut back.

"All of this makes them uneasy."

A supplier's success amid industry disruptions is largely dependent on its product mix, customer mix and regional mix, said Stephan Keese, partner at Roland Berger, a company that produces an annual global automotive supplier study.

While suppliers seek new revenue opportunities, they also face increasing pressure from automakers that have to navigate their own capital requirements and declining profit pools, the Roland Berger study concludes. Changing vehicle concepts also require a different and more diversified product portfolio, and different talent bases.

The evolution is separating the "winners and losers in the industry" for parts suppliers, and could lead to more consolidation and acquisitions, Schuster added. It could also lead to the fading away of both startups and some traditional players.

BorgWarner's recent move to acquire Delphi Technologies essentially spells the end of Delphi as a business name — a name that came down from the decades-old Delco name of General Motors' in-house parts business.

ZF's ongoing deal to acquire Wabco, Faurecia's acquisition of Clarion Electronics, Tenneco's acquisition of Federal-Mogul and Magna's acquisition of Olsa in 2018 all are examples of businesses evolving in their product lines.

"There's a factor of industry consolidation that we have to be cognizant of," said Joe Perkins, CEO of the Detroit-area chassis components supplier Busche Performance Group. "That's where I'm being really thoughtful about what makes the most sense. I feel like I've got a front-row seat to what's going on."

Changes in vehicle architecture and powertrains are also driving hiring and downsizing, Sven Dharmani, leader of the EY global advanced manufacturing and mobility supply chain unit, told Automotive News.

"If a supplier had invested seven or eight years ago to dive into product development to support EV and autonomous, they're going to see that demand pick up," Dharmani said. "But if you are a traditional piston supplier or a traditional crank shaft supplier, you're starting to see the demand start to fall.

"Your current product base is going to sustain your revenue for a short period of time. But it's not going to help you drive growth in the future," Dharmani added. "I think suppliers are going to have to take some calculated risks of, what do I have to invest in so I can build my future?"