Page 53 - MetalForming April 2013

Compared to Just Three Years Ago ...would you rather be a part of an industry that is:
• Running at 40-percent under-utilized across the board, or one dealing with 20 percent of the industry that is running full-out;
• Announcing three major reductions in workforces per week, or fighting for the job candidate with three completive job offers; or
• Dealing with 50 percent of the suppliers that are frozen out of the capital markets, or running the workarounds to deal with five percent of the suppliers that are on watch lists while simultaneously launching 50 new products and supporting 600,000 units of incremental production?
The answer is easy. And in the context of an improving economy and the result of a great deal of hard work by suppliers, OEMs, dealers and others up and down the value chain, we can say that the current state of the North American supply base is fundamentally strong with great near-term opportunities.
will remain proactive in keeping their break-even points well in check.
OESA members have noted that North American industry-level break- even points have grown by 21 percent, from 9.5 million units in 2009 to 12 million units in 2013. This increase pales in comparison to the 85-percent increase in production expected to occur in 2013 over the 8.6 million units manufactured in 2009. This will help protect supplier margins, at least in North America. For bankers looking to lend into the industry, consider this: Industry volume would need to de- cline by 25 percent (15.9 million to 12 million units) for the overall supplier industry to run up against the breakeven point.
Production Constraints in the Supply Chain
While North American production volumes are strong, suppliers face major issues over the next three years as they near prerecession and record production levels, and must support a record number of new vehicle launch- es. Overall, the supplier industry is run- ning at approximately 82-percent capacity utilization. The top 25 per- cent of OESA members—as judged by capacity utilization—are running their operations at well over 90 percent of
capacity. These tight capacity-utiliza- tion rates indicate that there will con- tinue to be production constraints within the supply chain. These con- straints will not be systemic but will show up as various “pinch points” throughout the supply chain.
On the positive side, unlike past years where suppliers’ responses might have been to push overtime and machine operating time, rather than delay or scale back investment decisions, suppliers are boosting pro- duction and engineering capacities. For 2013, suppliers are adjusting
workforce shifts, adding plant and equipment, optimizing production throughput, increasing supplier- development activity and improving schedule and release information and communication. Even with these increased efforts, there is a general expectation that material markets, powertrain/engine components and chassis systems will remain tight in supply. There also will continue to be constraints in electronics and capital equipment, two sectors that have shown constraints since the 2010 recovery.
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