Supplier Opportunities Abound in Growing Automotive Market
The auto industry has always provided a trickle-down effect of business to several layers of suppliers. And now that domestic car production is resurging, U.S. suppliers are feeling more confident about moving forward with their own expansion plans.
June 5 2014 by Dale Buss
The trend has CEOs of these organizations facing decisions on capital investments that remain difficult, but that probably can be made more confidently than a few years ago, before the shift back to domestic auto output was secure.
“The dam has broken,” Automotive News reported. “North American vehicle production has grown to the point where it’s no longer enough for suppliers to run an extra shift to keep up with consumer demand. After years of dragging their feet, [suppliers] have no choice but to build or expand factories—and that’s precisely what they’re doing.”
These suppliers include Martinrea International, a Vaughan, Ontario-based maker of engine cradles that has begun constructing a plant in Riverside, Mo. to make the same product for General Motors’ plant in Fairfax, Kan., three miles down the road.
Meanwhile, Cummins, America’s major producer of diesel engines, continues to expand production in its hometown of Columbus, Ind., to keep up with significantly rising OEM demand for clean-diesel powerplants. Cummins’ expansion almost singlehandedly has elevated the town to a top position in many lists of communities experiencing economic growth.
European and Asian suppliers also are expanding in the U.S. at a time when Europe’s economy remains stagnant and the economies of emerging markets such as Brazil have proven iffy. “North America is a safe haven, in some ways,” said IHS Automotive analyst Mike Wall.
For instance, India-owned Sakthi Automotive recently opened a plant in an existing building in southwest Detroit to make parts for GM and Ford vehicles. The $2-billion company, a long-time auto-parts maker in India, decided to make major investments in North America and China to capitalize on the trend toward global vehicle architectures, the Detroit Free Press said.
Another nascent trend in the auto business can be expected to boost U.S. suppliers, as well—perhaps in unexpected ways. Google has led a parade of companies attempting to create “self-driven” cars and recently announced the creation of a prototype of cars that have no steering wheel, gas or brake pedals. But even Google will still need bread-and-butter suppliers—such as Roush Enterprises, a Livonia, Mich.-based prototyper—to adapt existing stock cars to autonomous mode.
Meanwhile, Denso International America, a Japanese company with major U.S. operations in Southfield, Mich., has announced plans to expand its Silicon Valley office to better support R&D in self-driving cars and other tech areas. It’s part of a plan by Denso to invest nearly $1 billion and create more than 2,000 jobs in North America over the next two years.
Overall, the U.S.-manufacturing trickle is becoming a torrent for auto suppliers. CEOs and owners of businesses that cater to the automotive market have become the beneficiaries and are now investing in their own futures with more confidence.