Fast and clear communication between suppliers and automakers is becoming increasingly paramount as Tier 1s assume responsibility for more vehicle content, according to Joe Magliochetti, chairman of Dana Corp.
Company: Dana Corp.
Thesis: Vehicle development must be a partnership that will enable both suppliers and vehicle producers to be successful.
"The successful linkage of our supply chain will play an absolutely critical role in the shape and form of our industry's landscape," Magliochetti told the Automotive News World Congress. "Connectivity may well become the single most important factor for success."
To achieve connectivity in the supply chain, Magliochetti said, Dana will use a combination of trade exchanges, and will not use Covisint exclusively. The optimal exchanges, he said, need to help Dana reduce cost and increase speed-to-market potential.
He also cautioned that it is increasingly difficult for both automakers and suppliers to recoup the cost of fixed investments because model changes are becoming ever more frequent. Shortened product-life cycles, he said, have shaved as much as two years off the time that automakers and suppliers have to amortize costs.
"We can't provide either the technology or the access to that technology without some recovery," Magliochetti said. "We're not in the business to develop a better mousetrap for free."
Vehicle development, he said, must be a mutual pursuit.
He also said that Dana, which ranks No. 3 on the Automotive News list of the top 150 suppliers to North America, is unable to comply with all of DaimlerChrysler's recent calls for price reductions.
Since 65 percent of the supplier's costs for its products are generated from prime materials, such as forgings or castings, Magliochetti said Dana is unable to grant the price reductions unilaterally.
"Partnerships – whether among customers or peers – clearly must achieve a fair return on the full capital employed – fixed capital, working capital and perhaps most importantly, intellectual capital," he said. "A successful relationship goes well beyond simply demanding price reductions."