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Notes From the Auto Industry
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How have the changes made by large manufacturers affected smaller suppliers?

Auto suppliers can expect better times, according to industry analyst Michael Robinet, director of global production forecasting for IHS Automotive. He projects North American light vehicle production to grow to 13.6 million units in 2012, up from an estimated 13.0 million units in 2011.

Robinet projects strong growth in emerging markets such as Asia, China and Eastern Europe. As a result, he says that automakers want suppliers to co-locate at their plants around the world. If suppliers are not already reaching into foreign markets, they could have difficulty winning contracts. "What we are telling our clients is you need to find friends in those locations. The OEMs [original equipment manufacturers] are pushing very, very hard for local supply," he says.

Floods, earthquakes and fires all impacted automotive supply chains this year. At the annual West Michigan Automotive Summit, Al Gier, director of General Motors global risk management, told suppliers to expect even greater dislocation in the future. He said companies must understand the complete supply chain so they know where they are vulnerable and can react quickly.

To make sourcing simpler, George Halow, Ford's global cockpit and trim chief engineer, has recommended that carmakers standardize specifications so the same material can be accepted everywhere similar parts are manufactured.

Unions negotiating new contracts at the Detroit Three demanded and got a share of the cash that's rolling in. UAW members gained hefty signing bonuses, annual performance and quality bonuses and commitments to invest in U.S. plants and retain employment. Automakers are also offering sweeteners to hourly workers who are close to retirement, opening up opportunities for younger workers and taking advantage of the lower wage tier for incoming workers. OEM agreements are likely to act as patterns for unionized suppliers.

Finally, automakers are addressing the poor relationships some of them have with suppliers. General Motors CEO Dan Akerson said the company will give suppliers more precise production targets and pay a premium for new technologies in vehicle product development.

The article you read was prepared for general information purposes by McMurry. These articles are for general information purposes only and are not intended to provide legal, tax, accounting or financial advice. PNC urges its customers to do independent research and to consult with financial and legal professionals before making any financial decisions.These articles may provide reference to Internet sites as a convenience to our readers. While PNC endeavors to provide resources that are reputable and safe, we cannot be held responsible for the information, products, or services obtained on such sites and will not be liable for any damages arising from your access to such sites. The content, accuracy, opinions expressed, and links provided by these resources are not investigated, verified, monitored or endorsed by PNC.