The auto supplier industry will see a wave of consolidations next year as federal bailouts for automakers and a recent uptick in sales provided only a temporary reprieve and simply postponed the inevitable, several executives told Reuters this week.
Speaking at the Reuters Autos Summit in Detroit, executives said the auto supplier base faces excess capacity but has been able to avoid the big wave of expected consolidation.
Auto sales have been hurt in the past year as customers tightened purse strings amid a weak economy, which came on the heels of already-slowing vehicle demand amid high gasoline prices last year. U.S. vehicle sales are expected to come in at just above 10 million units on an annualized basis in 2009, far below the levels of 17 million units just four years ago.
Hurt by weak auto sales and squeezed by demands for lower prices, many suppliers have been struggling to stay afloat. “Suppliers are very cash-sensitive,” Earl Hesterberg, chief executive of auto retailer Group One said.
Automotive suppliers make up the largest manufacturing sector in the United States, directly employing 686,000 people in 2008, according to data from the Original Equipment Suppliers Association.
A report by A.T. Kearney said suppliers are expected to lose $23.7 billion in 2009, and could need up to $33.5 billion in cash through 2012.
