If the bad times don't kill you, the good times just might.
Despite some nervous talk of a sales slowdown last week at the Management Briefings Seminar in Traverse City, Mich., the idea of rapid growth had some executives worried, too. The problem is small suppliers may not be ready for the 15 million-unit market that some people think is around the corner.
Some say Tier 2 parts makers lack the efficient production systems automakers and Tier 1 suppliers have embraced in recent years. Guy Morgan, managing director at consulting firm BBK, says: "Many of them have very unsophisticated management."
Lots of small suppliers failed during the recession, and many survivors have not improved their manufacturing operations, which could leave them capacity-constrained if things get too good too fast.
"A lot of the Tier 2s have been running six days a week trying to keep up with 13 million the best they can," said Larry Jutte, Honda's former top North American purchasing executive and now head of brake assembly supplier Ernie Green Industries. "What's going to happen when the industry needs 15 million? This is going to be the next pinch point for the auto industry."
Morgan estimates that as many as 30 percent of Tier 2 suppliers may be unprepared for expansion: "Many of them just won't survive the next wave."