A year of logistics troubles and clogged customs traffic at U.S. borders and ports saw some suppliers re-evaluate established procurement models, reconsider international supply chains and recalculate costs with additional local warehousing added to the equation.
“It was a daily kind of firefighting,” said Laurie Harbour, CEO of the suburban Detroit auto manufacturing consultancy Harbour Results Inc. “It was a theme of inconsistent demand, tied with massive labor challenges, tied with massive demand, all sort of unprecedented.
“But for the most part, I think the majority of the supply base actually weathered things pretty well.”
Lear, ranked No. 9 globally with 2020 sales of $17.05 billion, made a name for itself by releasing its Safe Work Playbook. The openly distributed industry document detailed safety protocols such as social distancing measures and worker temperature checks, as well as best practices for communicating work procedures with employees.
Many suppliers also stepped up to help with the “arsenal of health” to produce medical supplies for the nation.
Employees from parts supplier Denso, ranked No. 2 with global sales of $41.13 billion last year, began 3D-printing face shields from home and helped front-line workers.
Engineers from seating supplier Adient, the industry’s No. 14 parts company, produced personal protective equipment. Adient saw sales of $12.67 billion last year, despite a 23 percent decline in sales to automakers.
Despite the emergency distractions, suppliers still engaged in ongoing strategic business decisions.
German parts giant ZF Friedrichshafen pressed ahead with its acquisition of U.S.-based Wabco Holdings Inc. in a move to bolster the companies’ play in commercial vehicles.
The $7 billion deal closed in May, just as the industry began to ramp back up from the shutdown.
No. 23 BorgWarner Inc. closed on its acquisition of powertrain supplier Delphi Technologies, a deal with an enterprise value of $3.2 billion, in the hopes of better positioning itself for the future of electrification.
“The best suppliers were still realizing that a new form of electrification is coming, and we couldn’t halt our investment,” Harbour said. “What you saw at the OEM level was absolutely a recommitment to that technology because, of course, the new startups were becoming even more relevant, and the suppliers that are good ones having to follow behind that.”
Leadership changes also rippled through the industry.
Continental, with $29.68 billion in 2020 original equipment sales, installed a new president for its North American business just weeks into the pandemic. And North America’s largest supplier, Magna, saw 21-year company veteran Don Walker announce his retirement as CEO in October. Magna reached $32.65 billion in sales to automakers last year, even with a 17 percent decline in sales from 2019.
Last year’s crises continue to complicate business, especially in the form of the chip shortage and other critical parts shortages.
Hudson believes that the industry is in the current predicament because automakers thought short term, Hudson said.
“For once in our lifetime, demand actually exceeds capacity,” Hudson said. “But the lack of capacity and the lack of supply has driven up prices, which is reducing margins for the supply base, part of which was covered up by [Paycheck Protection Program] loans.
“Those aren’t new to 2021,” he added. “The surprise, frankly speaking, is that all this stuff hasn’t resolved itself by now.
“The supply base is going to have to, for lack of a better term, make things right. Suppliers cannot continue down this path. It just is not sustainable.”
