GRAND RAPIDS — As West Michigan automotive suppliers race to meet customers’ orders in what’s expected to be another banner year in 2016, those companies must also keep their eyes forward and prepare for the next downturn in the business cycle.
That was the cautionary tale from automotive industry insiders who spoke Thursday at the 17th Annual West Michigan Automotive Suppliers Symposium, hosted by Grand Valley State University.
“We’re six years into this recovery, but what comes up will go down in this industry,” said Mike Wall, director of automotive analysis at IHS Automotive Group in Grand Rapids. “The vast majority of folks are doing well, and rightly so — we’ve gone through a lot. But we need to be preparing for the downturn and how that may look and feel, but also keeping our eyes on the strategic plans seven years down the road.”
Wall did not give an indication of when the downturn may occur, but he offered three scenarios based on IHS predictions. The scenarios show the next downturn reducing North American light vehicle sales by either 10 percent, 20 percent or 40 percent.
Automakers are expected to sell 17.8 million units in North America this year after reaching 17.5 million units in 2015. IHS projects U.S. light vehicle sales to taper off slightly after reaching an expected 18.2 million units in 2017.
While Wall remains positive that the automotive industry and economy as a whole are in a better position to weather the next downturn than they were in 2008, he said manufacturers should start building those scenarios into their strategic planning.
“Keep those scenarios in mind as you’re stress testing your financials and stress testing your operations because those are the questions that are going to be coming up (from banks and customers), if you’re not already getting them,” Wall said.
Meanwhile, production levels for North American light vehicles are also slated to climb, reaching 18.2 million units this year, up 4.2 percent from the 17.4 million units produced in 2015.
Suppliers also need to pay attention to the pace of new model introductions, Wall said. OEMs are expected to launch 21 new vehicles this year, up from 19 in 2015. That activity ramps up for the next three years, peaking at 49 new vehicle launches in 2019, according to IHS projections.
The key to keeping abreast of the next downturn and other trends in the automotive industry, comes down to a close relationship and engagement with customers, said Chris Hall, vice president of corporate strategy for Holland-based MOTUS Integrated Technologies LLC.
MOTUS was formed in June 2014 when Connecticut-based Atlas Holdings LLC acquired a piece of the interiors business from Johnson Controls Inc.
The company has reached $525 million in annual revenues, Hall said.
“There’s a lot of movement on the OEM side,” Hall said. “The main takeaway is you need to be proactive. If you’re reading these headlines in the news, then it’s probably too late. You need to get ahead of this and be engaged with your customer and try to understand what’s coming down the pipeline.”