Taking It To The Streets
pricing woes still plague nonwovens producers in auto market
By Ellen Wuagneux, Associate Editor
Published December 5, 2007
Global competition is up. Prices are up. Quality demands are up. Environmental regulations are up. But automotive market suppliers are striving to keep costs down—a tough task, indeed, considering the grueling pricing pressure they face from virtually all sides. The good news is that sales volumes continue to be attractive and growth opportunities with select OEMs are there, two factors that keep this difficult market worthwhile for many nonwovens producers. Another boon is that OEMs are always looking for cutting edge technology, so innovation, unique applications and new product ideas are rewarded, as long as they hit the right price targets.
Overall, in the automotive world, it is still a challenge to meet cost criteria, maintain quality or even supply better quality at a lower price,” observed Detlev Käppel, technical nonwovens division director at eswegee Vliesstoff GmbH, part of Textilgruppe Hof. “In the end, the goal is to achieve sufficient margins. The soaring cost of energy and raw materials and requests for lower prices exacerbate the current situation. In our opinion, the OEMs/Tier One suppliers have to face the situation and deal with it in a realistic way if they want to have reliable suppliers at their requested quality level in the future.”
Bill Preininger, North American market manager for Freudenberg Vitech, confirmed that there is no shortage of challenges in today’s automotive supply chain. “We are witnessing a supply migration to Mexico and China that will be followed by India and Vietnam. It is not enough to create demand for your products. With oil-based products approaching $100/barrel, suppliers must manage spiraling raw material costs that are generally unrecognized by their automotive customer base.”
German producer Sandler AG also described increased global competition as a vital issue facing producers in this segment. “As a consequence of globalization, suppliers to the automotive industry have to face increasing global competition,” stated Ulrich Hornfeck, sales director. “While suppliers have to cut down their cost in order to meet the OEMs’ request for lower prices, the prices for raw materials are continuously increasing due to scarce resources.” However, he said, globalization also offers new business opportunities: Sandler exports more than 60% of its products to foreign markets.
Freudenberg Vitech’s Mr. Preininger agreed that globalization has certain advantages, such as unifying an OEM’s product roll-out and execution. He also pointed out that this can present a low-cost supply chain price point for global suppliers. However, he said, OEMs and Tier One suppliers cannot have it both ways and expect localized supply at the lowest price point. “Perceived savings are often offset by logistic and inventory costs with increased quality complexity,” he said. “Ready or not, the automotive supplier is engaged in a global industry and market. Automotive suppliers must manage their costs, increase efficiencies, strive for zero defects and produce innovation. The alternative is a very unpleasant thought.”