It Was a Pretty Good Year in Car Business -- Except for Suppliers Auto-parts suppliers faced myriad cost pressures and largely missed out on industry's heady pricing

Peter Anthony, the head of a Chicago-area auto supplier, has spent much of this year feeling left on the sidelines in an industry delivering solid profits to car makers and dealers.

Raw-material prices and labor costs have soared for his firm, UGN Inc., which makes insulation products for vehicles.

Hiring had become such a challenge that the company eased its drug-screening policy and recruited former inmates to fill factory vacancies, Mr. Anthony said.

All the while, car companies keep canceling orders last minute due to their own challenges with a computer-chip shortage, denting revenue.

“We’re being hit from all sides,” Mr. Anthony said.

It has been a pretty good year for many in the car business. But one swath of the sector has largely missed out: parts suppliers.

Some auto-parts makers say the outlook is almost as gloomy as it was in 2008 and 2009, when sales collapsed due to the recession.

“How are suppliers going to offset these cost increases we’ve experienced without getting price relief from [the car companies]?” Mr. Anthony said.

UGN is losing money and recently began discussions with his customers about revising terms.

The biggest rub, however, is his company is losing out on the auto industry’s frothy pricing, Mr. Anthony added.

With tight inventories, car buyers are paying record sums for new vehicles, and that has led both auto makers and dealerships to post healthy earnings this year, despite disruptions caused by the computer-chip shortage.

Mr. Anthony’s firm is one link in a global supply chain that is buckling under the pressure of labor shortages, rising freight and commodity costs, and manufacturing disruptions.

Suppliers typically do business with the car companies under fixed contracts that set prices for the length of a vehicle program — which can run longer than five years — and are difficult to renegotiate, executives and industry attorneys say.

Auto-parts makers also rely on a steady flow of work orders and efficient, just-in-time supply chains to contain costs.

But delivery delays and canceled orders resulting from the chip shortage, combined with soaring costs across their businesses, are putting even more pressure on already-thin profit margins, executives and industry analysts say.

Tension over who will shoulder the escalating costs is mounting.

Smaller, cash-strapped suppliers are increasingly refusing to ship parts unless they get a price increase, said John Trentacosta, a Detroit-area attorney who represents suppliers.

“For a lot of them, it’s desperado time,” he said.

Lately, even large suppliers who ship directly to car companies are seeking better terms, attorneys and executives say.

Cooper Standard Automotive Inc., which makes brake-fluid lines and other components, recently told analysts it’s asking customers for price increases totaling about $100 million.

Last Monday, Faurecia SE, a French maker of vehicle interiors, was the latest among many large auto suppliers to cut profit forecasts in recent weeks. It cited choppy production schedules from its customers, the car companies, and labor shortages that have inflated costs associated with opening a facility in Michigan.

A recent survey by the Original Equipment Suppliers Association, a trade group, showed that sentiment among executives about next year’s outlook was at its second-lowest level since the financial crisis, better only than in spring of 2020.

Representatives for several major car companies said they have worked with suppliers to ease inflationary pressures but that specific aspects of contract terms are private.

General Motors Co. president Mark Reuss said the auto maker’s willingness to renegotiate depends on the contract’s length and other factors, but the preference is to stick to terms.

“I would say passing things through is not the way to create value for our customers,” he said during a Barclays virtual investor conference.

So far, the North American automotive-supply base has largely avoided the high numbers of bankruptcies and distressed sales experienced during the 2008-2009 downturn, industry consultants and attorneys say.

Many parts suppliers entered 2021 with relatively strong balance sheets, bolstered by federal support and cash cushions hurriedly built up at the onset of the pandemic, said Chuck Moore, managing director at restructuring firm Alvarez & Marsal.

Still, with rising commodity costs and supply-chain pressures lingering through next year, many suppliers are taking out loans, tapping credit lines or trying to renegotiate terms with customers, Mr. Moore said.

“We’ve been getting more calls from suppliers because of liquidity pressures,” he said. “I expect that’s going to continue.”

The financial pressures building on the auto-supply base come against the backdrop of technological change that is forcing suppliers to invest in new areas, as auto makers pour money into the development of electric and driverless cars.

“Electrification itself is turning the industry on its ear, and then you pile on top of that this traffic jam of issues,” said Mary Buchzeiger, chief executive officer of Lucerne International, a Detroit-area supplier of stamped metal parts. “We had an easier time in 2008.”

Brian Pelke, president of Kay Manufacturing Inc., which makes parts that go into engines and transmissions, said auto makers routinely have canceled entire weeks of production with little notice.

That leaves his Chicago-area company, which has about 150 employees, stuck with excess inventory and short cash flow.

“The car companies have been making record profits,” said Mr. Pelke, “while the rest of us are just trying to get by.”

News Related


What makes thecryptocurrency market so volatile?

The price of Bitcoin has been fluctuating drastically in the recent years sometimes it rises as high as $65,000 and sometimes it drops down to $30,000. Additionally, most other famous ... Read more »

CCI imposes penalty on four maritime transport companies for cartelisation

CCI passed this order on the basis of available evidence which revealed that there was an agreement between NYK Line, K-Line, MOL and NMCC with the objective of enforcement of ... Read more »

Tips to guide you withyour first cryptocurrency investment

Digital currency has turned into an inexorably famous venture resource for investors. Regardless of its instability, investors seem quick to get on board with the crypto fleeting trend. The justification ... Read more »

Best Crypto Exchange 2022

Because of the mind-boggling development in digital money exchanging, more individuals than any time in recent memory are searching for the best crypto trade to collaborate with to contribute viably. ... Read more »

Figuring out Bitcoin

Bitcoin is Digital Money Indeed! In the same way as other different sorts of cash like the yuan, the dollar, the euro, and the ruble, Bitcoin is genuine cash. It ... Read more »

How to Invest in Cryptocurrency

Digital currency has moved into the standard as a speculation resource class. Assuming you’re hoping to add some to your portfolio, it could be hard to sort out some way ... Read more »

Importance of affiliate marketing

A lot of benefits for e-commerce businesses can be provided through Affiliate marketing. As per ongoing examinations, 81% of brands depend on affiliate connections since they include next to no ... Read more »

Top benefits of performance marketing

Performance marketingis a presentation-based type of paid promoting and publicizing where a business just pays once an ideal activity is accomplished. These activities – settled upon by the business and ... Read more »

Morgan Stanley CEO James Gorman edges past Jamie Dimon with $35M payday

Morgan Stanley CEO James Gorman’s compensation hit a new high in 2021. Bloomberg via Getty Images Morgan Stanley CEO James Gorman raked in $35 million in total compensation last year ... Read more »

3 reasons to invest in COVID test manufacturer Abbott Laboratories

When it comes to underrated healthcare stocks that smart investors love, Abbott Laboratories(NYSE: ABT) takes the cake. While it might not seem as exciting as its similarly-sized peers in pharma ... Read more »

Gas reserves record low in European, Ukrainian UGS — Gazprom

As of January 22, the active gas volume in European storages was 26% lower than last year Read more »

Gazprom registers new daily record of gas supplies to China

Earlier, it was reported that Russian gas supplies to China during the first half of January were 1.5 times higher than the figure in the like period of the last year Read more »

Importance of crypto

A couple of years prior, in the event that you had referenced the expression “digital money” as far as I might be concerned, I would have envisioned cash of some ... Read more »

Guide for cryptocurrency

What is cryptocurrency? A digital currency (or “crypto”) is a type of payment that can course without the requirement for a focal financial authority like an administration or bank. Empowering ... Read more »

A small guide for cryptocurrency trading for beginners

What is Cryptocurrency Trading? Prior to getting straightforwardly to digital money exchanging, let us comprehend the significance of trading. Exchanging can be characterized as the conservative idea of trading resources. ... Read more »

How will the future business be transformed forever through cryptocurrency?

On the off chance that you haven’t exactly yet gotten used to the possibility of digital money, you are following some great people’s example. Just an expected 15% of Americans ... Read more »

ACM fines Apple 5 million euros in App Store case

Apple does not meet the requirements set by the Dutch Authority for Consumers and Markets (ACM) in a decision on the App Store case. The company will therefore receive a ... Read more »

Future of cryptocurrency

Cryptographic money has turned into a worldwide phenomenon lately, albeit a lot is still to be found out with regards to this developing innovation. There are many worries and stresses ... Read more »

About Bitcoin and it's working

Working liberated from the oversight of banks or any focal control or state run administrations, Bitcoin is an advanced cash. It rather depends on cryptographyandshared programming. Copies of Bitcoin transactions ... Read more »

Inflation could lead Fed to hike rates more than 4 times in 2022: Goldman Sachs

Fed Chair Jerome Powell acknowledged the likelihood of several rate hikes. Graeme Jennings-Pool/Getty Images The Federal Reserve could hike interest rates more times than expected this year as it aims ... Read more »

Advantages of bitcoin trading

Bitcoin (BTC) is a digital currency and an inventive installment network that was enrolled right after the 2008-09 emergency. Computerized money offers a few advantages, for example, lightning-quick exchanges and ... Read more »

Predictions for cryptocurrency in 2022

Cryptographic money has blast in ubiquity throughout the course of recent years, to the point that the elective venture class has basically gone standard. While Bitcoin was the first and ... Read more »

Bitcoin vs. Ethereum

It’s nothing unexpected that investors are keen on cryptographic forms of money. Bitcoin (BTC), the first in the resource class, was the single best-performing standard interest somewhat recently, and its ... Read more »

Policeman who killed doctor enters monkhood

Pol L/Cpl Norawich and his father Pol Sub Lt Nikom (in white robes) enter the monkhood at Pariwat Ratchasongkram temple on Monday. (Photo by Wassayos Ngamkham) A crowd control policeman ... Read more »

DDMA meet on January 27 likely to decide on weekend curfew, odd-even rule for opening shops in Delhi

Representative image Amid demands of lifting weekend curfew and odd-even system of opening shops by traders as well as the AAP and the BJP, Delhi’s apex COVID-19 management body DDMA ... Read more »

NFT collector Crypto Sauga launches 10,000 digital assets on WazirX NFT marketplace

Representational image. [Image: Shutterstock] CryptoSauga Star Club (CSS), a platform offering non-fungible tokens (NFTs), on January 24 announced a drop of 10,000 digital artworks on WazirX NFT marketplace. CSS is a project by ... Read more »

UK to scrap COVID tests for fully vaccinated travellers

Punjab Chief Minister Charanjit Singh Channi has appealed to people to get themselves vaccinated against COVID-19 at the earliest. (Representative image) Fully vaccinated travellers entering England will soon be exempt ... Read more »

Benefits of Using Apps in Crypto Trading

Cell phones have made some amazing progress, from gadgets that could settle on decisions and send instant messages to undeniable regular registering machines with applications and brilliant availability. With the ... Read more »

Strategies for Day Trading Cryptocurrency

The expression “informal investor” comes from the financial exchange, where exchanges commonly just occur during normal business hours on non-weekend days. One outstanding contrast when day-exchanging cryptographic money is that ... Read more »

Benefits of Review Websites

Assuming you are betting aficionado, you need to stake the cash in the best gambling club site. Be that as it may, realizing the best is difficult as we might ... Read more »

Reports about reducing gas supplies to EU amid sanctions are ‘fake hysteria' — Kremlin

In the most difficult moments of confrontation between East and West, Russia flawlessly fulfilled its contractual obligations, Dmitry Peskov recalled Read more »

Police who killed doctor enters monkhood

Pol L/Cpl Norawich and his father Pol Sub Lt Nikom (in white robes) enter monkhood at Pariwat Ratchasongkram temple on Monday. (Photo by Wassayos Ngamkham) A crowd control policeman who ... Read more »

Sonia, Manmohan Singh, Rahul Gandhi, Ghulam Nabi Azad among Congress star campaigners for first-phase poll in UP

Sonia Gandhi and Rahul Gandhi at a party briefing. (File image: Reuters) The Congress on Monday released its list of 30 star campaigners for the first-phase assembly election in Utar ... Read more »

Dutch regulator fines Apple €5m in dispute over dating app payment rules

Photo: Dutch consumers authority ACM has fined tech giant Apple €5m for failing to meet its requirements on payment systems for dating apps, which limit makers to using Apple’s ... Read more »

No assessment for capital in box 3 for the time being

The Tax and Customs Administration does not impose an assessment on people who have assets in box 3 ‘until further notice’. Due to a recent decision of the Supreme Court, ... Read more »

National Restaurant Association asks Congress for more grant money as omicron hits industry

People dine at an outdoor dining patio set up at a restaurant on March 18, 2021 in New York City.Angela Weiss | AFP | Getty Images The National Restaurant Association ... Read more »

Delhi slashes number of dry days to 3, down from 21 earlier

The Delhi government under its new excise policy has reduced the number of dry days to just three from 21 last year, according to an official order issued on Monday. ... Read more »

Experts against green EU label for gas and nuclear energy

Photo: ANP Gas and nuclear energy are not sustainable or green, says an important group of experts in a report for the European Commission. The so-called Sustainable Financing Platform thus ... Read more »

'Boycott Amazon' calls on Twitter over products depicting Indian flag, tricolours

Last week, the ecommerce giant had conducted a sale ahead of the 73rd Republic Day on January 26. (Representative image) Ahead of Republic Day, e-commerce giant Amazon is facing the ... Read more »

Gas prices in Europe surpass $1,100 first time since December 27

The overall increase in gas prices since the beginning of the trading day is 19.4% Read more »
On you will find lots of free English exam practice materials to help you improve your English skills: grammar, listening, reading, writing, ielts, toeic