Q&A: Supplier spokesman Kostal talks about the industry's current problems

Luedenschei, Germany. Because of automobile manufacturers' massive price demands, high financial advances for engineering work and competition from mega-suppliers, German suppliers are currently under a lot of pressure. Automobilwoche spoke to Helmut Kostal, suppliers spokesman at the German auto industry association VDA, about the industry's troubles.

What is the current atmosphere within the German supplier industry?

It is very tense to be honest. The demands that are currently made on suppliers are incredibly big.

What is it all about?

On one hand there are auto manufacturers' tough price politics. There is also a lot of pressure from mega-suppliers. They have locations all over the world and put offers on the German market that we cannot compete with. Another problem is that original equipment manufacturers (OEMs) make the same demands on suppliers for niche models as for volume cars. With the difference that only a small number of the niche models is produced, which means that the costs cannot be amortized. All these points pose a big danger to German suppliers and are certainly no reason to celebrate. Some are under so much pressure they do not know how to go on.

Did the latest price negotiations, such as with Volkswagen and Ford, result in a feeling of solidarity within the supplier industry?

One has to realize that suppliers have great difficulty showing solidarity with each other. They are often competing with each other for the next contract. Beside the high demands it is also the harsh way in which auto manufacturers make their demands on suppliers that troubles us. Suppliers are annoyed over the way they are being spoken to. This is not what we understand as being a partnership. Of course, suppliers realize that OEMs are in a precarious situation. For example, due to exchange rate fluctuations, some manufacturers were not sufficiently hedged against currency movement. Because of the unfavourable euro-dollar exchange rate they now have up to 40 percent less revenue than two years ago. Suppliers on the other hand can keep lowering their prices within the euro region by 5 percent each year. OEMs have to understand that too.

Can the VDA, or can you, mediate between partners regarding critical subjects such as price negotiations?

Not really. Due to the VDA's specific constellation -- the organization of auto manufacturers and suppliers within one association -- it is easier to discuss current problems, as there are different committees. But that also means that the VDA cannot take the side of the suppliers. That needs to be clear. We are primarily focusing on the consensus.

Suppliers often need to make major financial advances for design engineering. What kind of help does the automobile industry give you here?

Rainer Thieme, who was my predecessor as the VDA's supplier spokesman, tried very hard to find a happy medium to finance design-engineering work. He wanted to find a way of financing that would be too much of a burden either for OEMs or for suppliers. So far we have not had a solution.

Tags: Suppliers

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