Suppliers need to make hay while the sun shines — that's what Michael Robinet, the consultant and executive director with S&P Global Mobility, said last week on an Automotive News LinkedIn Live chat about the myriad challenges facing auto-parts makers.
For the past three and a half years, suppliers have been like lonely Bill Withers, howling that there "ain't no sunshine."
Perversely, the sun shone brightly on automakers and dealers alike during the COVID-induced shortages of recent years.
But for suppliers, the depressed and inconsistent production mucked up every conceivable business plan — and that was on top of the inflation that rang up the cost of labor, stainless steel, specialty resins and countless other commodities.
Now production is picking up, which is stressing suppliers' working capital needs at a time when financing is harder to come by and more costly when it can be found.
And remember that EV revolution?
Automakers want suppliers to invest in the powertrain shift. For some that might turn out to be immensely profitable, but for others, it's an added burden as they head into an uncertain future.
"I almost feel bad for the procurement teams of the vehicle manufacturers," Robinet said, "because they know when a supplier darkens their door, it's usually not to say, 'I've got a new product for you.' It's usually to say 'I need a price increase.' "
It should be little wonder that for the past three-plus years, suppliers might feel like they see "only darkness every day."
Lyrics aside, the dread was perhaps less daily than weekly — the rate that the all-too-common "call-offs" were coming in.
"You get called on Thursday: 'We don't need your product on Monday.' But you've already told all your people to come in, you've ordered inventory, etc.," Robinet said.
Lack of transparency isn't a new challenge for auto suppliers, but it remains a serious one — especially in these times that are characterized by what Robinet called "jagged demand."
Getting that call-off a couple of days earlier could make a significant difference, especially for smaller suppliers that are most at risk.
Finally, the industry is in a stretch where production should be more consistent now that semiconductors are more available, and vehicle demand remains high.
"I had a supplier once tell me, 'Mike, we make money when we can turn the knob up to five and a half or six days a week and let it sit there,' " he said.
This summer should provide some of those hay-making sunny days.
But it likely won't last for the remainder of the year, because contentious labor negotiations will get serious in the second half of September.
The risk of a strike — maybe more than one — by the UAW or Unifor against one or more of the Detroit 3 hangs over every supplier's fourth-quarter outlook.
And that harkens back to the beginning of this tumultuous almost-four-year period, to the UAW's 40-day strike against General Motors in the quarter before COVID-19 became a pandemic.
"That sort of got the ball rolling," Robinet said. "And since then, it's been one endless calamity after another."
At a time when UAW locals are striking two suppliers to domestic automakers, no one should question the willingness of union leadership or members to stop work and apply pressure to companies' top lines. Calamity season may come back with a vengeance in the fourth quarter.
But if there's one hopeful thought out of our conversation: Once all six of these contracts get ratified, there should be labor peace in North America, by and large, for the next four years.
Maybe then, we can all switch to another Bill Withers classic: "Lovely Day."
