Arnold Schwarzenegger and Daimler chairman Dieter Zetsche at the launch of the new G-Class © Daimler AG
Arnold Schwarzenegger and Daimler chairman Dieter Zetsche at the launch of the new G-Class © Daimler AG

Daimler warns of supplier risks from shift to electric

Will Green is news editor of Supply Management
14 February 2018

Daimler has warned a switch to electric engines and the diesel backlash could create complications for suppliers.

In its annual report for 2017 Daimler, parent company of Mercedes-Benz, said moving away from petrol and diesel engines risked altering component volumes and could lead to demands for compensation from suppliers.

“Due to the planned electrification of new model series and a shift in customer demand from diesel to gasoline, the Mercedes-Benz Cars segment in particular is faced with the risk that Daimler will require changed volumes of components from suppliers,” the report said.

“This could result in over or under-utilisation of production capacities for certain suppliers. If suppliers cannot cover their fixed costs, there is the risk that suppliers could demand compensation payments.

“Necessary capacity expansion at suppliers’ plants could also require cost-effective participation.”

The report said in 2017 industrial raw materials prices were on average around 20% higher than the previous year and there was “significant volatility”.

“Supplier risk management aims to identify potential financial bottlenecks for suppliers at an early stage and to initiate suitable countermeasures,” said the report.

“Although the crisis of recent years is over, the situation of some suppliers remains difficult due to a high degree of competitive pressure. This has necessitated individual or joint support actions by vehicle manufacturers to safeguard their production and sales.”

Daimler said regular reporting dates were set for suppliers “for which we have received early warning signals and made corresponding internal assessments”. “On those dates, the suppliers report their key performance indicators to Daimler and decisions are made concerning any required support actions,” said the report.

Daimler said in 2017 it received reports of “suspected violations by suppliers of rules concerning working conditions and the treatment of employees” which it was investigating.

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