by freight costs, currency exchange rates and lead times, the
global automotive industry is realigning its supply base by
geography, according to research by the Original Equipment
Suppliers Association (OESA).
A full 63 percent of
respondents to OESAs May survey said that they plan to
increase their value-added capabilities in North America over
the next five years, while 42 percent said they plan to
increase North American sourcing as part of their total
expenditures over the next five years.
"With our new product
line, we will be sourcing new components in North America," one
respondent to the survey said.
"(Our) target is to
purchase all components locally," said another. A third company
said it intends to localize parts from Japan to North America,
both by adding in-house capacity and outsourcing processes
Other respondents in
the automotive parts industry indicated plans to build new
plants or form joint ventures as they look to realign their
supply chains. For example, one respondent reported plans to
create new forging and machining capacity, which some OESA
members said is constrained.
"We will have a deepening of the supply chains in each
geographic market: the Americas, Asia/Pacific, Europe, etc.,"
said Dave Andrea, OESAs senior vice president of industry
analysis and economics.
management is one of the biggest drivers, coming from
(suppliers) experience with the (2011) earthquake and
tsunami in Japan," he said. The industry discovered "a funnel
where the supply chains converged into a few companies (making)
integrated chips, microprocessors, electronics. Unless we
entered that crisis," he said, that choke point "would not have
Today, the key
challenge is to diversify sourcing without adding redundant
costs. The industry is analyzing how many suppliers they have,
how much business is given to any one supplier and how to plan
for contingencies, he said.
"The worst case for
critical long-lead components is a plant becomes
decommissioned," Andrea said. "How long will it take to ramp up
alternative sources? That is driving a whole set of decisions
of seeking different materials and validating them and the
The new domestics now
purchase parts in dollars and sell vehicles in dollars, he
said. "When talking about domestic content, they are moving one
tier down to see how much content those suppliers are sourcing
within North America, alleviating supply-chain risk," Andrea
That, in turn, drives the domestic content discussion down
an additional level or two. "That is what I mean by deepening
of supply chain," he added.