constraints in metal foundry, forging and casting capacity
servicing the auto industry have caused headaches for some
members of the Original Equipment Suppliers Association
companies claimed in a recent survey that there is "limited" or
"tightened" capacity of certain metal parts and machining in
"It can be difficult
to find competent suppliers of machined components," one OESA
"(We are short) simple
iron castings, there are machining constraints and a lack of
basic capability," another said.
Others complained that
local sourcing of products was constrained due to specification
gaps between Japan and North America, which has lengthened lead
Dave Andrea, OESA
senior vice president of industry analysis and economics, said
that before the recession the entire automotive supply base was
operating at roughly 75 percent of capacity. But after the auto
industry restructured and rationalized production, suppliers
have been running at 80 to 81 percent of capacity.
"We are entering a
period where the challenge is how to manage constraints in the
system. Its a different animal now," he said. The biggest
constraints relate to powertrain and chassis components, the
most capital-intensive operations leading to vehicle
"During 2008 and 2009,
(those suppliers) had the highest leverage in terms of
operating costs, so when (the) market dropped out there were a
number of bankruptcies," especially among casting, forging and
precision machining operations, Andrea said.
restructured and modernized but, haunted by the "memories of
business losses," suppliers are cautious about ramping up
capacity again. "They dont want to get ahead of the
demand curve," he said.
To build a new
production line, a supplier might want a contract "for 400,000
to 500,000 units to make the business case. Suppliers will line
up to judge (each new) program as to whether they can make a
return on the investment for the required capital," he said.
They will first attempt to "squeeze out every ounce of
production" on existing equipment with their current labor
But Andrea said the
North American supply base "is gaining confidence in a
sustained trend of growth. They know that to support an
additional 800,000 units of production for 2014 and 2015, they
do need to invest in capital equipment and hiring."