TRAVERSE CITY, MI – Some 20% of the $1.5 billion Inteva Products spends on automotive parts goes to more than 900 suppliers.
But the company hopes to reduce that considerably over the next three to five years, Vice President Mary Foster, who leads the privately held supplier’s combined purchasing and logistics operations, tells attendees at the Center for Automotive Research’s Management Briefing Seminars here.
Inteva is among the companies born out of the troubles that long-established suppliers recently have endured. In 2008, investor Ira Rennert and his Renco company bought the interiors and closure business from, and in January, Inteva completed its acquisition of the body-systems business of Arvin Meritor.
“My CEO would say it was a great marriage,” says Foster.
Arvin Meritor was strong in Europe, Inteva is strong in North America and both had operations in Asia. Inteva sales about doubled to $2.5 billion with the acquisition of the Arvin Meritor business, and it has added many suppliers.
“One of the things we are starting with, in the course of integrating the two companies, is that a lot of our suppliers were not common,” says Foster. “There will be significant synergy savings, just looking at the surface, in amassing volumes and testing for competitive advantage.”
Future savings also will come from the development at French and Mexican technical centers of common parts that can form different latches. Closures make up 34% of Inteva revenues, and interiors, 40%. Foster says Inteva is “always looking for smart acquisitions, alliances or joint ventures,” especially in the interiors area where it plans expansion in Europe and Asia.
Inteva has invested $100 million in three new plants since 2008, including a just-in-time facility in Oshawa, ON, Canada, to supply cockpits and headliners to. Foster says the factory was delivering to the customer just five months after Inteva won the business.
Another sequencing plant was built in Hungary, and a manufacturing facility was built in Mexico to improve the vertical integration of a latch factory there.
Foster says she evaluates suppliers based on their real costs, not piece prices.
The A-price of a part is its piece price, but “chasing the lowest piece price round the world is not the winning strategy,” she says. Packaging, shipping and logistics add to the cost and make up the landed price, or B-price.
Inteva now uses a C-price that addresses the risks involved, including political turmoil and the capability of a supplier to react to problems.
“Now we measure geographic concentration and political climate,” Foster says.
The March 11 tsunami in Japan showed the industry how concentration of a commodity electronic part in a particular place can affect operations worldwide.
Foster says Inteva’s Japanese electronic supplier was planning to relocate when the tsunami destroyed its factory. “It is up and running again, but “we had three months of scrambling.
“Working with our Tier 1 suppliers and our engineering teams and our customers, we did a lot of design changes to modify alternate products,” he says.
Politics disrupted Inteva’s supply chain this year, when a relatively peaceable revolution in Tunisia literally sidetracked normal transportation. The company’s supplier there routed parts through neighboring Libya to get them to Europe.
“The key is to have a better handle on the lower tiers,” she says.
Most of the top 100 suppliers, which account for 80% of Inteva’s purchasing, have been tied to the company and its predecessors for more than five years, Foster says, adding that long-term approach likely will continue.
Rennert has owned some businesses since the 1970s and doesn’t have a track record of building a company just to sell it.
“They are very inquisitive and they are learning a lot,” Foster says of the Renco owners. “They are very interested in the long-term growth potential of the automotive industry.”