BRUSSELS - Europe's small-and mid-sized suppliers are under pressure and will need support from carmakers to survive, said Hermann Scholl, chairman of Robert Bosch GmbH.
As carmakers become more global, Scholl said, 'it is crucial for the small- and mid-sized supply industry to take part in this development.'
Like big manufacturers, smaller firms need to set up production sites in lower-cost countries rather than rely exclusively on plants in Europe. 'Only in this manner can (they) face up to international competition,' Scholl told attendees at the Automotive News Europe Congress here last month.
To do this, they need to be reasonably profitable. However, with recent financial difficulties, 'small and mid-sized German supply companies have been bought up by foreign manufacturers, especially American automotive suppliers,' he said.
Scholl said he does not believe the supply industry will undergo a fundamental change through mergers of small companies or takeovers of smaller suppliers by bigger ones.
'Even though I do not deny a certain trend in this direction,' he said, 'I do believe that the changes will only occur to a very limited extent.'
Scholl said carmakers might not favor such a restructuring.
Meanwhile, he criticized carmakers' efforts to cut their purchasing bills by doing detailed cost analyses of supplier products 'to seek out highly profitable products and to reduce their prices.'
Scholl said the analyses 'are often extraordinarily detailed and require the supplier to put in a great effort.
'The purchasing departments employ entire staffs which occupy and tie up a commensurate number of the employees of the suppliers,' he said. 'The process itself contributes considerably to an increase in the structural costs.'
Moreover, Scholl said that 'usually only the prices of reasonably profitable products are corrected downward,' while prices that do not cover costs are usually not increased.
He warned that carmakers using this method should examine whether they are 'damaging themselves in the long term by restricting the profitability of the suppliers. Only healthy suppliers can invest in long-term innovations,' he said.
Asked about prospects in China, where Bosch has four automotive joint ventures, Scholl said that 'figures were enthusiastic three or four years ago, but they were revised recently. China is an interesting market but we need patience.'
About new technology, Scholl said he is confident that intelligent highway systems will help drivers and prove popular.
Asked if sophisticated engine management will do away with catalytic converters, he said 'some physical laws go against the elimination of catalytic converters. I believe in new developments in new types of catalysts.'