More than 700 of the West Midlands’ 2,100 vehicle components suppliers could lose their place in the automotive supply chain by 2005 unless their competitiveness improves radically, a report warns this week.
Rationalisation in the industry is increasing pressure on first-tier suppliers to cut costs. These in turn are demanding major savings from second- and third-tier suppliers.
But the report, compiled by KPMG’s Automotive Practice in Birmingham, says many of the West Midlands’ smaller component suppliers could lose out to global rivals.
‘The knock-on effects for the West Midlands economy could be critical unless second-tier suppliers start to invest in improvement,’ the report says.
In a hard-hitting review of the way the top end of the supply chain operates, the report claims that many major tier-one suppliers used financial aid from vehicle manufacturers in the 1980s to help improve just-in-time processes and reduce costs.
‘This is being translated by tier-one suppliers to just do it cost reduction with second-tier suppliers,’ the report says.
It claims five of the region’s strongholds are under threat from overseas rivals: castings, plastics, forgings, interior trim and electrical and electronic components.
But the study also predicts fasteners and suspension systems will flourish.
‘Second-tier suppliers in the West Midlands are smaller than their main European competitors. To survive, they will need to form joint ventures, merge or be acquired,’ it says.