Don't get too comfortable. The shifting of the world's supplier community is just beginning. Once the globalization of the American and European auto industry shakes out, there will be only one supply base serving automakers in both those regions.
Between now and 1997 the number of Tier I suppliers in North America and Europe will collectively be cut by nearly 50%, and those remaining will have to reduce costs by 18% to 24%. Where the cuts are made is up to the automakers.
The best guess is that there currently are 1,000 Tier I suppliers in North America, 640 in France, 835 in Germany and 350 in England. That totals about 2,825, meaning nearly 1,400 won't be part of that tier when the next century dawns.
If you're a North American supplier, don't panic.
Although there will be some more tweaking, the supply base here already has been chopped almost in half. Europe is a different story. It's about four years behind North America. The cuts are just beginning.
Suppliers there are shell-shocked. They look like they've been hit in the head. They just don't know what hit them, how hard they were smacked or what to do about it.
It makes no difference whether you are an American supplier or a European, the first inclination is to launch an all-out campaign to spread out, to get business on the other side of the Atlantic or in the Asia/Pacific region.
It won't work. The Japanese suppliers basically own the Asia/Pacific. There won't be an increase in business opportunities in Europe or America until the European automotive industry downsizes.
The answer is, instead, to link up with other European or North American suppliers to create more joint relationships and programs to develop world products or processes. That's what the automakers prefer.
It's not going to be easy. Both continents are overloaded with Tier 1 suppliers. If Americans think they can go to Europe and obtain additional business, they will have to give up something in North America.
If the European think they can come to North America for additional business, then they will have to give up something over there.
How do you decide what to give up?
Don't go bonkers. There's plenty of time. Get to ether and jointly come up with a plan. That should satisfy big auto companies likeMotor Co., Corp., Renault SA, AG and Peugeot SA, at least for awhile. They don't expect those kinds of changes tomorrow.
If the two continents start competing against one another, the industry will lose. A better plan is to identify the strengths of each country; leverage the capabilities of the companies and the workers in each of them to perform at the highest level.
For example, Americans are excellent at marketing and business strategy, but implementation sometimes suffers. The French are known for plastic process and application innovation, but its borders still are closed. Germany's strength is in precision equipment and machinery or highly engineered products, but it is expensive.
England comes up with creative and unique products and processes, but can't get them to market.
The bottom line is to stay in business and make money. The only way to do that today is to strategize business products on a regional and national level. "Know what you do best, and do it." To be product-diverse and global is a losing strategy for the future.
The suppliers that remain after this shakeout will be vying for space in a huge business. By 2002, predictions put worldwide demand for light vehicles at 64 million, almost 20 million more than in 1992. The growth is coming from China, South America, South Africa, India and the Asia/Pacific.
South America, however, is the only area where North American and European suppliers have any hope of getting big business. The other growth areas are already blanketed by Asia/Pacific suppliers (most from Japan) that have no intention of giving up a lick of business. They probably won't have to unless the North American and European suppliers change their tactics, because the Western supplies barely have a toehold in those nations. Unless things change dramatically, the worldwide supplier community is set on a course that divides it up into sides after the turn of the century. Asia/Pacific may be one, Europe and North America the others.
There is a way around it for some companies. Western suppliers that already are doing some business in the Asia/Pacific should think about splitting off that business into independent corporations with a separate culture that is totally focused on at part of the world.
Back in the West, suppliers that are doing business with the transplants - either in
America or Europe - may be forced focus strictly on those automakers.
The truth is, you can't fight it. But here's word of warning: Don't go out into the world alone.