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Sunday, 20 December 2015 22:25

Q&A: Dave Andrea, Chief Economist, Original Equipment Suppliers Association

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The Original Equipment Suppliers Association (OESA) expects North American light vehicle production to grow from approximately 17.5 million units in 2015 to 18 million units in 2016, according to a consensus forecast from its members. While that growth is positive for the industry, suppliers will need to navigate that momentum amid uncertainty regarding talent and international markets, OESA Chief Economist Dave Andrea tells MiBiz.

What are the major trends you see driving automotive suppliers in 2016?

From the North American perspective, the two biggest issues next year are going to be keeping up with current production demand as well as executing flawless launches of the new vehicle models. That is in the context, though, of bad auto markets in Brazil and Russia and uncertainty in terms of how the European market will recover and a slowdown in the growth of the Asia-Pacific market.

How are your members preparing to foster growth next year?

One strategy they’re looking at is capital investment for greater productively on the shop floor. For the most part, our members have turned to alternative work schedules. (They’re) working on 24-hour shifts to keep up with production. There’s been a major shift in our supplier barometer. Last year, 50 percent of suppliers said 25 percent of their production was on alternative three-crew or four-shift work schedules. This year, over 75 percent of our members had more than 25 percent of their workers on alternative work schedules. They’re managing their workforce in terms of the schedule and they’re also tapping into contract and temporary workers.

Do you foresee any major headwinds in the automotive supplier industry?

We have been operating in an environment of lower cost of inbound materials. …We know we’re going to be on the other side of that curve (so) suppliers need to be cognizant of that and still maintain cost structure to maintain their margins in what might be rising input costs over the next couple years.

Will the industry see major supply chain consolidation like it experienced this year?

I think that we will be in a constant flux of M&A activity. It’s twofold: Large component suppliers will always be looking at their total product portfolio and how that fits into the larger industry, similar to JCI’s spinoff this year. The other piece of it is with all these new technologies — whether suppliers are looking at vehicle-to-vehicle or advanced driver vehicle systems — you’ll see our traditional suppliers acquiring technology.

Do you see any major disruption impacting the automotive industry in 2016?

The mid-term review for the CAFE law is important to see if we keep the standard and model-year deadline or how we will adjust for credits or for testing cycles that might modify what the current rule is. That will determine a wide variety of issues, but primarily around powertrain technology and the mix between electric, hybrid electric and gasoline engines.

Interview conducted and condensed by John Wiegand.

Read 1250 times Last modified on Monday, 28 December 2015 10:31

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