700 Midlands firms ‘at risk’

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 […]

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.