Car production in Europe this year will fall to levels not seen since the early 1990s -- with disastrous effects for suppliers. The ranks of automotive suppliers are likely to be seriously thinned as orders for components fall along with new vehicle output.
If orders continue to go down, I fear hundreds of companies will go bankrupt in the first half of this year, said Lars Holmqvist, CEO of Clepa, the European Association of Automotive Suppliers.
Already weakened by years of cost-down pressures from automakers, and struggling with higher raw material and energy costs, many suppliers are in no shape to endure a reduced order bank.
The speed of the crisis unfolding makes it hard for companies to cut costs to deal with the lower orders. And suppliers are finding it no easier than automakers to get emergency loans from banks.
Ford of Europe Chairman John Fleming said he was absolutely concerned about the future of the supply base.
We can see an increasing number of suppliers are getting into trouble worldwide. We are worried about that. They are having to find ways to take their capacity down as well, Fleming told Automotive News Europe.
The situation is only going to get worse. Ford said Thursday it expected its European production to go down by 213,000 units, to 325,000 in the first quarter. That will naturally have a ripple effect among the supplier community.
I think we are going to see a lot more consolidation than would happen naturally, said Fleming said.
In the wake of BMW introducing short-time working at the Dingolfing and Regensburg plants in Germany during February and March, exhaust systems specialist Boysen has announced that it will also halt two of its production plants in Germany.
We have no alternative than to shut down production temporarily at our factories in Turmfeld and Salching, said Boysen President Rolf Geisel.
UK supplier GKN announced a further 1,400 layoffs last week, and said it plans more cuts in 2009. The company also issued two profit warnings within three weeks toward the end of last year.
In Sweden, around 10,000 jobs have been lost since November, out of 90,000 people employed by the automotive industry.
Little good news ahead
There is little good news ahead. Many companies face financial troubles next month after they receive payments for sharply lower orders in the last quarter of 2008.
The number of profit warnings among quoted British auto suppliers rose from one in 2007 to nine in 2008, according to research from consultants Ernst & Young.
The big five auto producing countries -- Germany, Italy, France, Spain and the UK -- all reported drops in production during 2008, according to CSM Worldwide. All five countries are expected to suffer further falls this year.