Independent stampers expect European automakers to outsource twice as many stampings and welded subassemblies by 2015. The move will be made to cut costs and handle a growing number of low-volume models.
The rising number of model variants and low-volume specialty derivatives will force European automakers to increase their use of outside stampers, says Heinz Schmitz, managing director of UK-based Stadco.
He estimates independent stampers currently handle E4 billion to E5 billion a year in outsourced work and expects 50 percent growth in the next six to seven years.
Gyula Meleghy, Tower Automotive senior vice president for Europe and South America, estimates the European market at E6 billion to E7 billion.
He predicts it will double by 2015 because of the cost advantages of outsourcing and new opportunities as car assembly moves further into eastern Europe.
He believes that 65 percent of all body-in-white stamping and subassembly is currently done in-house, and 35 percent is outsourced.
Germany's ThyssenKrupp Auto-motive is the market leader with a 25 percent share, Stadco's Schmitz says, followed by Tower Automotive, August Lapple and Stadco, which gained size in 2004 by purchasing the ailing Mayflower Vehicle Systems.
A trend begins
Outsourcing took off in the 1990s, says Hans Polder, sales manager for Lapple.
"There was a real explosion because automakers started the trend for multiple model variants," Polder says. "They asked us to take responsibility for larger and larger assemblies."
Lapple supplies assemblies such as complete front ends and door structures to Audi, BMW, DaimlerChrysler and Porsche.
Some OEMs now outsource up to half of the body shop's added value, Polder estimates.
Stamping shops represent one of the largest investments in a car plant. Normally they last 15 to 20 years before the equipment becomes less productive and less competitive.
Jens-Arend Feindt, manager of sales development and engineering within the body-in-white business unit at ThyssenKrupp Automotive in Germany, expects more outsourcing opportunities in five to 10 years, when many of Europe's current population of presses start to get old.
"There is a reluctance to invest in press shops because of the expense," he says. "Two OEMs have indicated this to us."
No press shop
Independent stampers also expect opportunities when new assembly plants are built, especially in eastern Europe. To save on investment, more manufacturers design these factories with no press shop or just a small one, Tower's Meleghy says.
"If they have a press shop, it is just for the outer skin parts that they continue to define as core competence. The rest is outsourced," he says. In the mid-term, suppliers could win new business by buying automakers' existing press shops.
"The first such sales could take place in the next three to five years," Tower's Meleghy says.
For example, General Motors' German subsidiary Opel discussed selling its stamping facilities in Bochum and Kaiserslautern, Germany, to various suppliers including Tower, Benteler and ThyssenKrupp.
No sales have yet resulted due to labor union issues at Opel and suppliers' concerns about financial risk, Meleghy says.
Even when times are good, cost and flexibility are the main reasons automakers outsource stamping and subassembly work.
Independent suppliers pay significantly lower wages than automakers. In Germany, the difference can be up to 25 percent.
"The same contract with the unions applies to both Lapple and OEMs, but the OEMs have historically paid a supplement on top of the contract," Lapple's Polder says. "It is a relic of the past, but it is difficult for them to extricate themselves from it."
Tower's wages in Europe are generally 20 percent lower than auto manufacturers' and most plants are not unionized, Meleghy says.
"We have a greater opportunity to negotiate with our work force to use the capacity more flexibly. Also, we operate with higher efficiency because of our size. It is much easier to manage a small entity than a huge one like Wolfsburg," he says.
Basic pay rates at Stadco are 10 percent lower than what Ford pays for the same work at its Saarlouis plant, says Schmitz. (The Saarlouis factory is Stadco's main customer in Germany.)
But Ford's higher social costs increase the difference.
Better flexibility lets independent stampers deliver savings to their customers, Schmitz claims.
Most automakers create overcapacity of about 5 percent per model to handle demand variation, Schmitz says.
But Stadco plants use highly flexible production equipment and can balance workflow over several customers to achieve close to 100 percent utilization.
Over the full model lifecycle -- say, at a rate of 2,000 cars per day and four body styles -- Schmitz estimates a per-car savings of E3.50.
Because Stadco can re-use more of its equipment at the end of a model cycle, that is another E7 savings per vehicle. In 1997 when Stadco won its first contract at Saarlouis, Ford's overall cost savings for outsourcing was 23 percent, Schmitz says.
Currently at Saarlouis, Stadco has a plant in the supplier park. Ford delivers 340 stampings from its stamping shop there to Stadco.
Stadco supports production of three Focus variants, spot welding 85 body-in-white subassemblies including the A- and B-pillars and body side interiors. Stadco is responsible for 21 percent of the 3,947 spot welds on the five-door model.
Plenty of workers
Both Stadco and Lapple say they can successfully retain employees despite lower pay rates.
"In the Saarlouis area, with the coal mining and steel industries in decline, there is plenty of available labor," says Schmitz.
Says Polder: "Lapple is a privately owned company with a strong reputation and a major apprenticeship program for 200 people. You can't compare it with working for an OEM."
Independent stampers can also have an advantage by offering employees advanced technologies such as hot forming, which handles the high-strength steels automakers want for their crash performance, Thyssen-Krupp's Feindt says.
"VW is the only OEM with in-house hot-forming capacity," he says. "It will be increasingly used in the future for parts such as bumper beams and B-pillar reinforcements."
In-bound logistics companies have developed systems that better protect stamped panels from damage. That development is increasingly used by stampers so they can avoid constructing stamping facilities dedicated to a single assembly plant.
For example, Tower stamps underbody parts for the new BMW 1- and 3-series models at its plant in Zwickau, Germany, and ships them to BMW assembly plants in Leipzig, 80km away; Munich, 350km away; and Regensburg, 240km away.
Tower will make complete door structures for the new Mercedes-Benz Sprinter light commercial vehicle at its new Duisburg, Germany, facility. They will go to Mercedes' Düsseldorf assembly plant 15km away but also 500km to Mercedes' factory in Ludwigsfelde, Germany.