Guest Post: State of the Automotive Industry – Is the Car Half Full or Half Empty?

Manufacturing Insights Blog

By Neil De Koker, president and CEO of the Original Equipment Suppliers Association (OESA)

2012 is shaping into an excellent year for the North American automobile industry, all things considered. Of course there are areas of concern, such as the uncertainty in the European market and the slowing down of sales in specific areas like heavy duty trucks and some OEM lines. But overall, North American supplier sentiment is positive and the industry is back to designing, manufacturing and fulfilling orders for safer, more fuel-efficient vehicles.

With factories busy meeting demands, suppliers are still cautious about adding headcount or investing in new capital expenditures.  Even though suppliers added 100,000 employees in the U.S. since 2009, the industry is currently producing the same number of vehicles as it did in 2007 – with 100,000 fewer employees.

And while our research shows that manufacturers have a great deal of confidence in the ability of the supply chain to meet capacity requirements, there is concern for the viability of sub-tier suppliers to meet production challenges. In order to meet the throughput that IHS Automotive predicts – more than 100 million units by 2018 – manufacturers in North America are investing more in plants and equipment, R&D and information technology.

Automakers also have a renewed interest in assessing risks that could disrupt production. Even though the supply chain has proven to be flexible and responsive to changing condition, it has become obvious that manufacturers have to take action to mitigate risk. The most common response was to increase dual resourcing of materials, increase inventory and validate alternate materials – all while closely monitoring the cost/benefit of every investment.

With a trend for increased unit sales, headcount and investment in the infrastructure, we are optimistic that the industry will thrive for the foreseeable future – especially if the sub-tier suppliers follow the OEMs and Tier One and Two suppliers by investing in equipment and technology to meet the anticipated demands of a world eager to invest in personal transportation.

Neil De Koker is the founding president and CEO of the Original Equipment Suppliers Association (OESA). With more than 50 years of experience, De Koker is recognized as an industry expert on issues facing the automotive industry with a particular emphasis on customer-supplier relations. He'll be part of a panel of experts discussing how automotive suppliers can meet increasing demand at the September 13 Automotive Leadership Seminar, held from 2-5 p.m. at the GM Heritage Center in Lansing.