Suppliers set for more restructuring angst

10 February 2000
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10 February 2000 | David Arminas

Suppliers to the UK automotive industry could be living with uncertainty for another decade as vehicle manufacturers continue their restructuring, according to an industry expert.

Professor Garel Rhys, director of the Centre for the Automotive Industry at Cardiff Business School, said the European automotive industry's "lack of equilibrium" means vehicle manufacturers have still to decide what is in their best interests.

Rhys believes suppliers that move into supplier parks near vehicle manufacturers should be vigilant about their future. "A manufacturer's needs are not going to be decided on where their suppliers are," he said. "Talking partnerships and trust is all right if the system is in equilibrium, but not when the manufacturer's long-term survival is at stake."

Rhys's warning comes amid speculation over Ford's possible closure of its 70-year-old Dagenham plant in east London and decision to shift its manufacturing to Cologne, despite the company's recent announcement of a £425 million Dagenham revamp. This would include capacity expansion and a supplier park for component makers.

The plant is scheduled to build the remodelled Fiesta, starting in late 2001. But little of the earmarked money has been spent, possibly because of the threat of a strike from white-collar workers, according to some analysts.

Production changes and interruptions of planned plant developments are part of the UK's strong pound and questionable production efficiencies, said Roger Cockroft, a principal consultant with PricewaterhouseCoopers.

"The cost of producing goods in the UK are out of line with the rest of the world," he said. "Margins suffer and business moves to improve them."

Peter Cooke, professor of automotive industries management at Nottingham Business School, said: "Any supplier moving into a supplier park should read the contract twice. We often forget that manufacturers plan on a pan-European basis. That's their first level of concern and, as part of a contract, you might be asked to supply anywhere in Europe."

Cooke said suppliers in a supplier park may have excellent logistics links to foreign manufacturing sites, courtesy of the manufacturer, but this could be costly for the supplier in the long run.

As more and more first-tier suppliers are getting fed up with restructuring announcements and disruptions to their own logistics plans, he said, a 25 per cent excess manufacturing capacity across Europe means more supply chain disruptions are likely.

No one from Ford was available for comment as SM went to press.


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