Price pressure is German suppliers' biggest concern

Idstein, Germany. Price pressure from automakers remains German suppliers' biggest worry.

Around 24 percent of suppliers questioned for a poll by Meo Consulting said that a squeeze on costs by automakers was by far the most taxing issue they face.

The second most worrying issues were automakers' delivery conditions (10 percent) and company internal problems (10 percent).

Not far behind were financing and raising finance (both 9 percent).

The range of companies taking part in the poll was wide, from small to medium sized to large suppliers.

According to Meo, companies that took part in the survey achieved average sales of 2 billion euros.

Andreas Feige, a partner at Meo, said a number of other issues were highlighted in the poll.

Among these were innovation pressure, insufficient technical expertise at automakers and a lack of coordination between OEMs' purchasing and technology departments.

What can suppliers do to withstand the price pressure?

Around 31 percent of those questioned said that increased innovation and improved technological competence are potential answers.

Some 24 percent of suppliers surveyed said cost leadership is the way forward and 17 percent favored better customer management.

In the past an average of 55 percent of price reductions has been achieved through improved processes and operational efficiencies but 15 percent of reductions were due to suppliers cutting their own profit margins.

Suppliers are also achieving cost savings by better integration with their sub-suppliers

But Feige said suppliers' management of their sub-suppliers is still a long way away from the level achieved by automakers with their suppliers.

Feige said that price pressure could be reduced by suppliers becoming more pro-active -- for example by offering price reduction workshops to automakers.

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