May 21, 2014 - The Original Equipment Suppliers Association’s sentiment index rose 3 points to 59 in May—from March’s 56—driven by healthy U.S. auto sales and higher capacity utilization rates both among automakers and at component and subassembly production plants.
Based on quartile results, the median value running rate is 90 percent, reports Dave Andrea, OESA’s senior vice president-industry analysis and economics. “These numbers reflect the increasing production volume rates, launch activity, talent availability and supplier concerns over any unforeseen constraints,” he says, basing his analysis on the Troy, Michigan-based group’s survey, which this month tallied responses from 107 member companies.
Asked about possible supply chain constraints, versus a year ago, twice as many companies cited electrical and electronics systems as being at risk. Others cited powertrain systems and components, specifically availability of casting capacity.
“Lead times for carbon and alloy steel are lengthening,” said one respondent. Another also mentioned hot-rolled and cold-rolled steel sheet supply constraints.
“(We are experiencing a) weak supply base for metal casting products,” reported one manufacturer. “Certain supply chain casting capacity appears to be very constrained,” said another. Even a company that brought some casting processes in-house is seeing internal constraints.
A manufacturer of interiors and HVAC components saw a shortage of metal stampings for interior components. One OESA member company cited the shortage of truck drivers and carrier capacity.
Looking forward, engineering talent is rated as the most significant risk to suppliers in new product launches, not just within their own operations, but at their customers, says Andrea.
Asked to outline their North American sourcing strategy for the next five years, companies plan to localize their production and supply base further in the southern United States and across Mexico. It echoes a comment by one company, that “reshoring has been a great objective (among automakers) and supportive of component manufacturers in the U.S.”
Some comments that confirm the reshoring/localization trend are as follows:
- “We will continue to source (materials) within North America whenever possible.”
- “Our plants are always looking at sourcing locally.”
- “We’re beginning to transfer purchases from Asia back to North America, which is a large part of our forward sourcing strategy.”
One external concern is the flurry of recalls this year, which more than one responding company feared would negatively impact auto sales. “GM recalls (are) an additional threat for suppliers, especially those selling safety-related products,” one member comments.
Photo courtesy of Voestalpine