Global consolidation of the automotive industry is about to trigger a huge shake out of Britain’s £13bn components sector, analysts and industry leaders have warned.
Last week’s Daimler-Chrysler merger is likely to be followed by more mergers and joint ventures as car makers act to cut costs and over capacity.
Analyst Mark Little of BT Alex Brown said the number of car manufacturers would halve to around 10 in the medium term.
GM is looking at acquisitions in Korea, Japan’s manufacturers could merge, and Renault and Peugeot are also likely to find partners.
But suppliers are tipped to bear the brunt of most cost savings, such as the £800m cut in components spending forecast by Daimler-Chrysler.
First-tier system suppliers now look set to pass cost demands down the supply chain. Hundreds of family-owned suppliers across Europe will struggle to survive, Little warned.
‘There is going to be huge consolidation. There is a long tail of engineering companies that won’t be with us,’ said Little.
Industry expert Professor Garel Rhys said there would probably be job losses among the UK’s 110,000 component workers. Smaller suppliers at the end of the chain would be the most vulnerable.
‘Certainly there will be a huge shake out,’ Rhys said.
John Ellis, UK director of MacLellan International, a contract services company, said suppliers were already being forced to make cost savings demanded by manufacturers and some were close to a ‘cut-off point’ where they could not afford to maintain quality.
‘We are all on very tight programmes,’ Ellis said.
Britain’s suppliers are at greater risk than their Japanese and German counterparts, because of a failure to keep pace with productivity improvements by car makers, a new study shows.
Oxford University Professor of International Business Mari Sako said productivity had grown three times faster in assembly plants than in supplier plants.
‘I am not optimistic the gap will be rectified, unless the bad performers go out of the market,’ she said. ‘Some are bound to go bankrupt and many smaller players may not be able to survive.’
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