The $100 billion supplier?
Well, Lear Corp. buys UT Automotive, creating the world's sixth 11-figure automotive supplier. That's 11 figures, as in $10,000,000,000 or more.
UTA gives instrument panels to Lear. Now Lear can do an entire interior, from carpeting to seats to headliners.
But imagine combining Lear with another huge supplier. Then combine that with another.
Are we looking someday at a $100 billion supplier?
Tom Snyder, president of Delco Remy International, raised the possibility of the $100 billion supplier at a recent Automotive News conference.
Assume a total pot of $600 billion in sales of original-equipment parts. Today's largest supplier, General Motors' Delphi Automotive Systems Corp., had 1998 sales of $28.4 billion. That's less than 5 percent of the market.
Snyder's point was that this is an industry primed for serious consolidation. Nobody dominates, not even Delphi. And size can bring with it cheaper capital, efficiencies in purchasing and manufacturing and a greater base over which to spread research and development expenses.
While no supplier dominates, there are powerful suppliers in their segments. For example, Lear, Johnson Controls, Magna and Faurecia have locked up the Western seat market.
Thus the question: Do automakers want to buy the whole interior from Lear? The functions that absolutely must be performed by the vehicle manufacturer have dwindled to supervising design, then marketing and selling the vehicle. Everything else - powertrain, suspension, stampings, interior - can be done outside.
No trend lasts forever. But Tom Snyder's concept of the $100 billion supplier looms above all the big deals that have come to dominate the supplier industry.