A new study has found that first tier suppliers are putting increasing pressure on their second tier suppliers, in response to price reduction demands from the vehicle manufacturers.
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According to Automobilwoche, the study, conducted by the consultant Hans-Andreas Fein, and the US automotive consultants IRN, and now in its third year, looked at 188 price rounds. It found that relations between contractors and sub-contractors in the industry are at a new low.
“Two thirds of suppliers surveyed think that the atmosphere between companies is extremely hostile and even poisonous,” said Fein. Half of suppliers said that purchasers do not give suppliers any room for negotiation with their price reduction demands. A tench of supplires said that they found discussions with customers were ‘dictatorial’. Some even went so far as to say they are ‘cold, frosty and brazen’.
Only 10% of price rounds were considered constructive or conducted in a partnership manner. Just 8% were considered friendly, fair or cooperative.
The survey noted a difference in mentality between vehicle manufacturers that are family-owned and those that are pure public companies, BMW, Porsche and at times Peugeot, were considered more cooperative and less demanding in price negotiations. On the other hand those companies with shareholders to please were much tougher.
On average vehicle manufacturers demanded price reductions of 4.2% while large suppliers demanded, on average, reductions of 7.1% from their suppliers.
Although Ford and Renault made amongst the most aggressive demands, they were not necessary the most successful in achieving cost reductions. Ford achieved cost reductions of on average 2.5%, while Renault had to content itself with 2.3%. Suppliers achieved reductions of around 2.9% in 2006.
