Automotive suppliers remain optimistic about near-term business
conditions in January, but expect to face capacity constraints
as North American light vehicle production ramps up to 16.5
million units over the next two years, according to a recent
The Original Equipment
Suppliers Association (OESA) auto supplier sentiment index
remained at 60 in January, unchanged since November.
forecasts for North American light-duty vehicle production
volumes are 16.5 million units for both 2014 and 2015 compared
with last years median forecasts of 15.2 million units
for 2013 and 15.5 million units for 2014, according to Dave
Andrea, OESAs senior vice president of industry analysis
shortages, production overtime premiums and internal
manufacturing capacity constraints are major challenges facing
suppliers as they work to meet increased production levels,
"Companies are ...
increasing capacity through added facilities, shifting
production locations, adding capital, working flexible and
alternate production schedules, adding additional suppliers and
supply chain development and management," Andrea said.
Nearly one-fourth of
respondents indicate they will add physical production capacity
this year or at least review their asset base, shift production
to a different facility, add production runs or expedite
tooling and capital investments.
To boost productivity
at existing operations, suppliers are studying options that
include "careful capacity planning," improving throughput,
adding overtime and weekend hours, moving all factories to 24/7
production, alternating schedules at some facilities and
The 18 percent of
respondents who said they experienced external supply chain
constraints plan various fixes. Some component manufacturers
said they expect to source from additional suppliers or develop
stronger partnerships, while others will seek to vertically
integrate with certain suppliers. One respondent expects to
carry more inventory, while another will build supply ahead of
production schedules. A third vowed to spend "extra time
(guaranteeing) commodities are secured."
In terms of
suppliers 12-month outlook, "the new investments in
Mexico have had a very significant affect in our potential
business," one supplier reported.
opportunity in spot production shortages, saying, "We can pick
up some new business."
One upbeat OESA member
noted that platform and new model launches are "proceeding
effectively. (We are) experiencing fewer start-up issues than
anticipated and new (requests for quotes) are increasing."
Another reported that
although some product launches were delayed, "overall new
business is coming in at a consistent and increased pace."
Clouds on the horizon
consist of instability in the Middle East, sluggish European
economic growth and slower Chinese growth, suppliers