Don Walker expects parts makers to inherit more responsibilities from automakers. He also sees growing risks.
Walker, CEO of Magna International Inc., told the Automotive News World Congress that suppliers must be prepared for more responsibilities because automakers must reduce investment in engineering, testing, tooling and assembly equipment as they move to more frequent vehicle launches.
'There will be a lot of demands on us in the area of technical capabilities,' Walker said.
As automakers get out of the parts business, Walker said, suppliers will have to be much more sophisticated in program management, logistics and supplier development. 'We will have to be more efficient than the OEMs,' said Walker, a mechanical engineer who joined Magna in 1987 from General Motors of Canada Ltd.
Suppliers are responding by adding capacity and expertise through acquisitions. But Walker said many are paying too much for acquisitions, and debt poses future problems.
Suppliers that expect to survive will need a strong balance sheet, Walker said, reminding his audience of Magna's brush with death in 1990. The company, based in Aurora, Ontario, faced bankruptcy when it fell into default on about $1 billion worth of debt.
Walker cautioned that while suppliers continue to add responsibilities, they must chart their own course.
'The danger is that if we do everything the same way as the car companies, it will increase our costs,' he said, 'and we will become a clone of the OEMs. If we do everything the same way, then no one is farther ahead.'