COBURG, Germany -- The global economic downturn has forced German partsmaker Brose to take drastic steps to keep its product lines running.
The door system and seat adjuster supplier has had to provide support to five of its Tier 2 partsmakers and a top executive says that five others will need help soon.
Stabilizing our supply chain is our first priority right now, Brose Deputy CEO Klaus Deller told Automotive News Europe.
Deller declined to say what kind of support Brose is providing, but it is known that a number of Tier 1 suppliers are helping their Tier 2 counterparts by temporarily paying more for parts or paying in advance for components.
Brose also is creating a special risk management team that will monitor the health of its sub-suppliers. The companys 2008 global procurement budget was 1.8 billion.
Suppliers are suffering because automakers are slashing orders by up to 50 percent in response to a steep decline in new-car sales around the world.
Lars Holmqvist, CEO of the European suppliers organization CLEPA, has estimated that 500 European partsmakers could go out of business in the first quarter of this year. That would be 10 times more than in an average year.
He said that 500 is a very conservative figure.
The economic slowdown has hit Brose, too. Some of Broses customers have reduced the volumes of their orders by 30 percent since last November, according to the companys in-house newsletter.
Broses 2008 sales target was 3.1 billion. Deller said the total will be about 2.9 billion.
The company will report its 2008 results in about two weeks.
Broses aim is to boost sales 10 percent a year, and have a 5 percent profit margin.
Despite the troubles, Brose is in a better position than many of its suppliers because of a key acquisition it made last year.
In April 2008, the privately-held company bought the former Siemens VDO Automotives electric motor business from Continental.
Continental took over Siemens VDO in December 2007.
The deal gave Brose expertise in electric motors for window regulators, antilock braking systems, heating and ventilation systems, engine cooling and electric power steering.
The company also gained new contracts to provide electric motors for:
-- Cooling fans in all Daimler models and the recently launched sixth-generation Golf
-- Heating and cooling system actuators in VW group premium segment models
-- Transmission actuators in 250,000 VW cars starting this year
We discovered that small motors are the basis for a lot of new products, Deller said.
Brose estimates that the electric motors division had sales of 520 million last year.
The company sees great potential for the division as automakers replace hydraulic parts that require constant electric power to maintain pressure, such as the steering system, with more frugal all-electric systems.
Thats called consumption on demand, Marcus Klopp, Broses vice president of new product development, told ANE. Its key for CO2 reduction and it is very important for electric cars in the future.