NASHVILLE -- When it comes to industry trends, Don Walker warns suppliers to use caution before following the leader.
To survive in the next four years, suppliers must understand their individual product strategy, have flexible management teams and bring their customers innovative ideas, Walker said at the opening dinner of the Automotive News New American Manufacturers Conference on Monday.
For example, Walker noted, setting up operations in a supplier park just because it's trendy could be a detriment instead of an advantage for a supplier.
"If the supplier is too close to the car company, over time the employees of the supplier begin to believe they are actually associated with the car company," Walker said. "They may lose their flexibility and their drive to be competitive because they feel their jobs are not at risk."
Walker suggests suppliers use the same caution when faced with pressures to go global. Suppliers must be certain that there is a competitive advantage in expanding globally before doing so.
Many suppliers have "fallen flat on their face," he noted, by expanding merely because they thought it was necessary.
Suppliers also face pressure to slash prices to keep customers. Walker said this could lead them to bankruptcy.
Drawing on Magna's experience, Walker said offering automakers the best value, not the lowest cost, can lead to success.
"If you're equal in cost with somebody else, but you're adding new innovative ideas or functions or features, our customers are willing to pay for that," he said. Companies that become commodity suppliers, he added, will be squeezed out.
If a supplier doesn't understand its costs, Walker said, "you will lose your high profitable jobs and keep the dogs because you don't know the difference. There are ways to keep our customers healthy, but it can't be at the expense of margins off the bottom line."
Instead of making drastic cost concessions, Walker said suppliers should focus on everyday operations to cut costs and add value. Magna's day-to-day focus is on providing customers with the best styling, innovation and craftsmanship, he said.
Walker's other suggestions:
Understand your customer's goal and work together to drive costs out
Make sure your manufacturing processes are efficient
Take waste out of activities that don't add value to your product.