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Auto suppliers foresee better demand in '13

Keywords: Tags  Original Equipment Suppliers Association, sentiment, production forecast, challenges, raw materials, trucks, dealer stock, Dave Andrea Corinna Petry


CHICAGO — Automotive suppliers’ sentiment took a significant step up in January as the outlook in North America and Asia continues to improve, despite ongoing woes in Europe and concerns about the political environment on Capitol Hill.

The Automotive Supplier Barometer Sentiment Index moved up to 55 from 51 just two months ago, a substantial shift in attitude to "somewhat more optimistic" from "somewhat more pessimistic." The index is based on a survey of 108 companies by the Troy, Mich.-based Original Equipment Suppliers Association (OESA).

But regional market risks remain for suppliers, according to Dave Andrea, OESA’s director for industry analysis and economics.

"Things are positive in North America and Asia," one respondent said. "Europe is still a question."

Contributing to the better outlook was the government’s resolution of the fiscal cliff issue, which translated to higher confidence in 2013 production forecasts. U.S. auto output is expected to reach 15.2 million vehicles in 2013, a slightly conservative number compared with forecasts from independent forecasting consultancies, the OESA said.

Such expectations, along with tight capacity utilization, indicate there will be production constraints within the supply chain again this year, but that will lessen as manufacturing and engineering capacities are being added, according to the survey. Those constraints are expected to appear primarily in the material markets, powertrain/engine components and chassis systems.

Fewer respondents expect to face raw material shortages this year, but they anticipate having to deal with production overtime premiums, skilled labor shortages and internal manufacturing capacity constraints.

Suppliers are trying to hire workers to boost physical production capacity and productivity, the survey results show.

Respondents whose outlook has not changed in the past 60 days said they will wait to see what impact tax changes will have on consumer confidence, adding that they also are concerned about truck demand. They also noted that several new model launches have been pushed back up to six months, and dealer overstock is of concern as well—as is the current volatile environment in Washington.

Companies that conduct business in Europe are taking steps to address lower automotive demand and vehicle sales there. Such steps include layoffs at European operations, shifting resources from Europe to North America, refocusing acquisition strategy to North American targets, and "making sure we don’t overcommit to (original equipment manufacturers) in the form of capital/tooling investment," respondents said.

One survey respondent said his company is sourcing more from Europe as European-produced materials and finished products are looking for an outlet.


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