Update from automotive supplier land (otherwise known as the Hell called Detroit).
Had lunch with the technology manager for a major interior trim supplier. He is a great guy, no ego, and no bs. He is also very upbeat, except for our most current meeting. He had a list of concerns for the automotive industry and said that many of these trends have only recently become visible. The big one? A huge explosion of pricing increases that will force the OEM's to pay up or shut down. The company he works for is very aggressive, and the leader in their segment, but they are having great difficulty pricing the next generation of products in the pipeline. He told me that raw material increases, as well as energy cost, are starting to put mature programs into the red. This is condition that will lead to death, as there is no way out for the supplier as they MUST continue to supply, and as many as four years could be left on a given program. The OEM is of course refusing to pay increases, and this is why we are starting to see some of the marginal players drop out of the game. NOTE: He told me NOT to bet against Collins and Aikman, as money and ego run deep with that one and to expect surprises.
The bottom line for me is that when a guy like this starts to worry, there is a reason. He thinks the layoff waves start after the annual Summer shutdown.
The rest of our discussion was focused on a rebate schedule, which is just a bs game to hide cost reductions from the OEM while still allowing cost increases to be fully documented and thus "fair game" for relief.
NOTE: Bob Lutz has announced that GM will put it's "extra" funds into bringing the next generation of big trucks/SUVs to market early. Many in the industry think this is NUTS with the current price of gas and significant declines in SUV sales. I admit, I don't understand the logic of it, as I don't think it is SUV styling that is holding back sales. Lutz is a very bright guy, so maybe there is more to this decision than would appear on the surface.
GT
TH |
