May Supplier Barometer Posting File

8/12/2019 May Supplier Barometer Posting File

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OESAOESA

Detroit Washington D. C.

The OESA Automotive Supplier Barometer is published in partnership with Deloitte LLP.

MayMay 77--99,, 20122012108108 Survey ResponsesSurvey Responses


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OESA Automotive Supplier Barometer Summary(continued)

Showing the resilience of the supply chain, of the respondents affected by the Evonik supply chainshortage, 33 percent remain very confident that they will meet customer releases over the next threemonths.

Other insight gained from the impacted respondents, include that the vast majority have receivednotification from sub-tier supplier of possible material shortages, 73 percent indicated that sub-tiersuppliers have issued a force majeure and 40 percent stated their own company had issued a forcemajeure.

On a more positive note, none of the 15 affected respondents have seen a reduction in customerproduction schedules. In addition, a full 60 percent believe they will not see any future cuts due to theEvonik disruptions.

For those companies anticipating production cuts, production cuts may come as early as the week ofMay 14 or as late as June 25.

One third of the 15 affected companies have seen reductions in sub-tier supplier shipments while 40percent do not believe they are at risk. Of those that expect sub-tier supply shortage, those

disruptions could occur as early as the week of May 28 or as late as the week of August 13.

Suppliers are looking at all options to mitigate supply chain risk including finding and validatingalternative materials, searching for available inventory, stepping up communication and monitoringproduction releases.

On the horizon, suppliers are concerned about rare earth elements, electronics, capital equipment,engineering talent as potential future risk.

4 OESA Automotive Supplier Barometer-May 2012Published in partnership with


5/30

Describe the general twelve month outlook for your business.Over the past two months, has your opinion become:

53%50%60%

70%

80%

90%

100%

6%

45%

37%

8%

4%6%

38%

1% 3%0%

10%

20%

30%

40%

Significantlymore optimistic

Somewhat moreoptimistic

Unchanged Somewhat morepessimistic

Significantlymore

pessimisticMay-12 Mar-12

5No. of Responses = 108 OESA Automotive Supplier Barometer-May 2012Published in partnership with


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Barometer ResultsBy Company Revenue

13%

35% 4

5%

42%

33%

37%

55%

33%

52%

41%

9%

22%

3%

4%

9% 4

%

9%

9% 3

%

60%

70%

80%

90%

100%Significantly more pessimistic

Somewhat more pessimistic

Unchanged

Somewhat more optimistic

Significantly more optimistic

# of # of

MarMay MarMay Mar May Mar May Mar May

4%

4%

15%

8%

4% 3

%

22%

4%

3%

74%

52% 4

0%

50%

37%

57%

36%

44%

30%

53%

0%

10%

20%

30%

40%

50%

$1billion

responses

in

May

responses

in

March

$1 billion 23 28



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Significantly More Optimistic

No comments provided

Somewhat More Optimistic

Toyota sales are booming and we've finally received relief for commodity increases. Continued increase in NA production plans are helping to make it a more optimistic outlook, but the

impact of the Evonik disaster is still not fully known. Still concerns about European market.

Positive volume development in North America. We are receiving more realistic quotes from our current and new customer base.

Comments:

Describe the general twelve month outlook for your business.Over the past two months, has your opinion become

First quarter exceeded budget and forecast. However, April sales softened slightly. Overall business is up but we remain guarded in our overall outlook. As the projections for both sales and car builds have risen our outlook has improved. North American sales continue to increase above expectations while European sales are questionable

for the remainder of 2012. Feedback from specifically Ford and Chrysler continue to be positive and to be prepared for further

increases in demand

Unchanged

Overall economic growth is still stagnating due to gridlock on Capitol Hill. Europe is still a concern. Conservative approach was followed when issued the 2012 forecast.



8/30

Comments(continued):

Describe the general twelve month outlook for your business.Over the past two months, has your opinion become

Unchanged (continued)

Too many concerns with our political arena. An election year that will continue to divide our country. Weare not fiscally responsible and continue to add $1.3 trillion to our already overly burdened debt peryear. You can not tax enough to get us out of this crisis.

We are receiving new awards, seeing growth, concerned about Europe and lack of growth in overalleconomy.

Sales forecast in North America has improved primarily due to increase in Ford productionrequirements. Growth in China sales are reduced versus forecast due to volume reductions in China

and Korea on the platforms we serve.

Somewhat More Pessimistic

Some signs of a decreasing incoming order rate. Europe's inability to develop an economic growth plan. Orders are dropping. GM is having more difficulties and Ford is slowing down as well. Our tooling supply orders have fallen off badly in the past 3 weeks - the outlook does not support this

decline so we are puzzled.

Slight industrial slowdown in North America across varied customer base.

Significantly More Pessimistic

Based on Europe.



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Supplier Sentiment IndexCompared to two months ago,

how has your 12 month outlook changed?

Positive

62

71 6973

70

5852

61

7166

52

66 64

6060

70

80

90

100

Ne

gative

333534

25

38

2123 23

34 37

0

10

20

30

40

50



10/30

What actions and strategies are being taken within yourcompany to mitigate supply chain risk?

42

41

39

36

33

36

0 5 10 15 20 25 30 35 40 45

* Increasing dual sources of materials

Increasing inventory or buffer stocks

Validating alternate materials

Sourcing materials/components closer to the point of use

Number of respondents

Did not ask in 2011

No. of Responses = 107 10

25

23

21

21

6

5

26

28

26

Expediting shipments

Reallocating production within existing supply base

* Increasing dual sources of components

Increasing investments in IT systems or technologies

Validating alternate components

Simulating supply chain disruptions

Other

2011

* In 2011, Resourcing, adding new suppliers = 32 responses

Did not ask in 2011

Did not ask in 2011

Did not ask in 2011

Reevaluating financial stability of specific vendors.Collecting more information on manufacturing locations.

OESA Automotive Supplier Barometer-May 2012Published in partnership with


11/30

Are you seeing a trend in sourcing away from "low cost countries"to localize supply in order to reduce supply chain risk?

Yes,58,

54%

No, 49,46%

If yes, which "low cost countries" seem to be mostvulnerable to this trend? China (30 responses) China and other Far East countries. China due to FX and increasing labor costs We are investigating to move some material from China to other countries. We have always tended to buy where we sell, so to the degree our fastest growing

regions are LCEs, so is our sourcing activities. For those seeking cheap assemblylabor, China is now most vulnerable to lower cost countries.

Asia (4 responses) India (3 responses)

11No. of Responses = 107

Southeast Asia (3 responses) Korea (2 responses) Taiwan (2 responses) Japan Thailand Eastern Europe Mexico

Overseas dropping with Mexico increasing. North American domestic production of supplier components are no longer cost

disadvantaged versus manufacturing in China due to strengthening of RMB versusthe dollar and wage and utility cost escalation. We still maintain a diverse supplybase in Asia, Europe and North America depending on technology, performanceand cost targets. Efforts are being expended to validate alternative designs andmaterials to reduce our overall landed costs.

While there is somewhat of a trend, this activity takes a long time to accomplish. We locate close to our customers to provide direct service.



12/30

Are you seeing a trend in dual sourcing from your customers inorder to reduce supply chain risk?

Yes,33,

31%

No, 75,69%

If yes, please describe Not so much a trend in the sourcing of parts. They are looking at raw materials to

be sure there are multiple sources available. Major OEMs are not sourcing 100 percent of a given business opportunity. Customers are moving towards more 'dual sourcing' strategies as described by

OEM purchasing organizations, but not all sourcing decisions are driven by this(yet).

When suppliers are telling the OEM they cannot or are not willing to invest orwant higher prices.

Our customers want us to have a contingency plan. We are seeing it as a means to keep us competitive, not necessarily as a supply


. Yes, but often to directed sources. Customers platform strategies creates several million unit opportunities that

justifies dual sourcing where each supplier has ample volume to achieve scale. Not a new trend, a continuation of standard policy on high runners and global

programs. Mostly on high volume components. In some cases more than dual due to capacity issues also of components.

RFQs with split volume scenarios. Its not a risk, just competition on price (cost). Some major program dual sourcing. This trend has been in the market for many years and we do not see a significant

increase or decrease. High volume, critical parts are being dual sourced.



13/30

Capacity Utilization

Estimate your currentrunning capacity utilization

rate

Estimate your capacityutilization levels (in percent) ifyou were to include warm-idledcapacity with current runningcapacity.

Estimate your capacity utilizationlevels (in percent) if you were toinclude warm and cold-idledcapacity with warm-idled andcurrent running capacity.

September2011

May2012

September2011

May2012

September2011

May2012

Upper Quartile

Response Value 90% 90% 85% 90% 85% 89%Median Response

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Value 80% 85% 75% 75% 70% 75%

Lower QuartileResponse Value 70% 70% 60% 60% 55% 55%

Current capacity utilization considers your current workforce levels and operating plant and equipment assuming 270working days and 3 shifts (disregarding all idled capacity).

Warm-idled capacity is defined as idled capacity but being able to ramp up production within 3 months with minor capitalneeded. By including warm-idled plant capacity, the utilization rate will decrease from the current capacity level definedabove.

Cold-idled capacity is defined as idled but being able to ramp up production after 3 months with moderate levels of capitalrequired. By including cold-idled plant capacity, the utilization rate will decrease from the current and warm-idled capacitylevel defined above.

No. of Responses = 91-103 OESA Automotive Supplier Barometer-May 2012

Published in partnership with


14/30

Are you affected by the recent Evonik plant disruptions andpossible material shortages?

Yes, we are nowseeing the effect andimpact of shortages,

4, 4%

Yes, in the future weexpect to see the

impact of shortages,11, 10%

No, we are no longerconcerned about the

affect because we

have work-arounds,8, 7%

Impacted now Comments We are helping our customers deal with

solutions to shortages they are facing.It's not affecting us directly.

Expect to be Impacted Comments

Impact only for plastic fuel lines. We have inventory to carry us through

14

No, we were neverdirectly affected,

85, 79%

No. of Responses = 108

source to handle any shortfall. Evaluating alternative material and

overall, global customer schedules. Little consumption of PA12 and

alternative material qualified. Confirming use of alternative materials. Tier2 supplier to a directed supplier to

us.

OESA Automotive Supplier Barometer-May 2012



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If yes, are you affected on the supply or demand side?

9

0 5 10

We procure these materials directly for ourproduction

We urchase com onents that contain

Number of Responses


5

these materials

We sell components into systems that haveother components using these materials




17/30

If impacted, for what parts?

Number of Responses

7

4

2

2

0 2 4 6 8

Electrical/Electronics

Body Interior

Suspension, Steering, Brakes

Engine


1

1

1

1

10

0

0

Body Exterior, Frame

Transmission

Driveline

Exhaust, Emissions

Multipurpose Components

HVAC

Wheels, Tires

Other




18/30

How confident are you that you will be able to meet all of yourcustomers' releases over the next three months?

VeryConfident,

5, 33%

Sli htl

Neutral,0, 0%

SomewhatSkeptical,

1, 7%Very Skeptical,

0, 0%

Unsure,0, 0%

18

Confident,9, 60%


Published in partnership withNo. of Responses = 15


19/30

Have your suppliers notified you of potential shortages?

Yes, 14,

No, 1,7%


93%




20/30

Have your suppliers cited a force majeure related specifically tolack of supply?

Yes, 11,

No, 4,27%

20No. of Responses = 15 OESA Automotive Supplier Barometer-May 2012



21/30

Has your company cited a force majeure to your customers?

Yes, 6,40%

No, 9,

21No. of Responses = 15 OESA Automotive Supplier Barometer-May 2012



22/30

Have your customers already reduced production schedules?

No, 15,

100%

If no, when do you think your customerschedules are at risk of being cut?

Week of May7, 0, 0%

Week ofeek of May

Week ofJune 4,

1, 7%

Week ofJune 25,

2, 13%

Not sure,1, 7%


We do notbelieve

they will

be cut,9, 60%

ay ,2, 13%

21, 0, 0%

Week of May28, 0, 0%

Week of June

11, 0, 0%

Week of June18, 0, 0%




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What specific actions are you taking as a top priority in responseto the possible material shortages from Evonik?With your suppliers:

Alternate Materials: Working on alternative materials. Testing and proposing alternative material structure(s). Alternative material validation. Evaluating alternative materials. Confirming use of alternative materials. Supplier is looking for alternative material to qualify with OEM. Verifying availability and executing material changes.

Stock/Inventory:

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onger nventory pos t on. Monitoring stock.

Alternate/Dual sourcing:

We are procuring material from our alternate supplier.

Communication:

Contacting suppliers and receiving weekly status. Checked with current supply base and we have been assured no disruption. Daily calls.

Other:

Staying close to all production schedules. Investigating impacts, alternate sources, and recovery plans.




25/30

What specific actions are you taking as a top priority in responseto the possible material shortages from Evonik?With your customers:

Alternate Materials:

Design in new resins. Alternate material validation. Use alternative material. Working on expedited validation. Confirming use of alternative materials. Executing a material change.

Communication:

Monitoring:

Proactive schedule monitoring. Staying close to all production schedules. Watching releases from week to week. Closely monitoring releases in order to flex appropriately.

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. Keep them informed of the status. Communicating / advising them of our information. Relaying information from our suppliers to our key customer. Working on quick approvals. Daily calls. We made phone calls to our customers that may be affected by this shortage and asked if they were ok

and if we may see production shortages and all have said they are good. Some of our customers shutdown for change over and we are getting informed that several companies and divisions are so busythat they will not be shutting down and are giving us the heads up so we can support their needs.

Alerting when there is a risk. However, our investigations to date have shown limited risk for ourcomponents.




26/30

If affected, what specific actions are you taking as a top priority inresponse to the possible material shortages from Evonik?Within your own company:

Alternate Materials:

Executing a material change. Confirming use of alternative materials. Evaluating alternative materials.

Communication:

Global coordination. Cross-functional teams working together. Assessing global allocation of material to balance risk.

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- . Weekly updates. Keeping our production control people in constant contact with our customers production release

people as well as monitoring releases closely.

Other:

Actively managing our supply chain to ensure delivery and work around plans where necessary.

Will flex company operations if reduction occurs.




27/30

Given the recent Mitsui Chemical plant explosion, what effect (if any) have youseen or do you expect to see that could influence your ability to meetproduction schedules and 2012 business plans?

Responses: Parts due date pushed out three months. None. The OEMs have found alternative schedules to work around the issues. We do use materials from this plant but have found available capacity from competitor plants of Mitsui. Same as resins. The shift to natural gas as a feedstock from oil puts pressure on polypropylene supply. None, but suppliers dependent on the nylon could disrupt customer production. We are still investigating but at this point don't see any direct affect (8 similar responses)

We have not seen any effect at this time (3 similar responses) None expected (56 similar responses)

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Not applicable (5 similar responses)




28/30

What other areas of concern do you have that the industry needsto monitor as a potential 'next crisis'?

Regarding materials: Rare earth elements (5 similar responses) None/not concerned (4 similar responses) Synthetic rubber (2 similar responses) Steel Special bar quality steel Tool steel Stainless steel shortages

Cold heading rod Aluminum castings

Materials seems to be at greatest risk thatshould be evaluated further, where there maybe a single source for base material (i.e. CDTat Evonik).

Specialized materials with limited supplieroptions for the same specification. Incrediblethat one plant down can have such a global

impact. Supply chain analysis would be goodto improve our understanding.

28

Polyester Propylene Resins Oil prices

More stringent specifications are reducingsupply base.

Dependence of OEMs on few suppliers. Raw material prices (5 similar responses) Material availability (5 similar responses) Hard to anticipate

Appears to be stable




29/30

What other areas of concern do you have that the industry needsto monitor as a potential 'next crisis'?

Regarding components: None/not concerned (5 similar responses) Electronics/wafers for semiconductors (4

similar responses) Local tool manufacturing Impact of steel price increases Tires Availability of MBE suppliers

Some capacity constraints Dependence of OEMs on few suppliers

Regarding indirect purchases: None/not concerned (7 similar responses) Equipment suppliers, tool shops Qualified people Injection molds Machine tool lead times Concern of origin point Supplier capacities

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Shortage of quality suppliers Low cost country supply disruption Lower tier suppliers could be impacted if not

monitored properly

None/Not concerned (7 similar responses) Having enough properly trained automotive

technical staffs (3 similar responses) Capacity constraints (2 similar responses) Over capacity Tool and die

Shortage of quality services Engineering resources




30/30

Thank you for your participation

T he O E S A A ut om ot i v e S uppl i er B ar om et er s ur v ey i s publ i s hed ev er y

o t h e r m o n t h . T h e n ex t s u r v e y w i l l b e la u n c h e d o n M o n d a y , J u l y 9 , 2 01 2

and wi l l be released Friday, July 13, 2012.

For media questions For content questionsand comments, contact: and comments, contact:Dave Andrea Kathy ReissSenior Vice President Director Industry Analysis and Economics Research and Industry Analysis

. . . [email protected] [email protected]

OESA1301 W. Long Lake RoadSuite 225Troy, MI 48098www.oesa.org

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Please note: The information and opinions contained in this report are for general information purposes. Comments are edited only for

spelling and may contain grammatical errors due to their verbatim nature. Responses to this survey are confidential. Therefore, only

aggregated results will be reported and individual responses will not be released or shared.

As used in this document, Deloitte means Deloitte & Touche LLP, Deloitte Consulting LLP, Deloitte Tax LLP, and Deloitte Financial Advisory

Services LLP, which are separate subsidiaries of Deloitte LLP. Please see http://www.deloitte.com/us/aboutfor a detailed description of the

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Documents

May Supplier Barometer Posting File