The liquidity of automotive suppliers was a top concern as automakers ratcheted up vehicle production. But beyond that, uncertainty was the only certainty as suppliers wrestled with challenges ranging from establishing safe workplace guidelines to potential supply chain disruptions.
What topped the list of concerns about returning to business? Respondents to the April survey conducted by the Automotive News Data Center cite managing automakers’ uncertain production schedules (57 percent), followed by implementing operational changes in response to a “new normal” (52 percent) and flexing operations in response to fluctuating recovery scenarios (51 percent).
Liquidity was more a future concern last spring than a current worry. Because suppliers furloughed employees and haven’t been buying materials, many were “flush with liquidity” because they eliminated roughly 75 percent of their expenses, said Dietmar Ostermann, senior partner and U.S. automotive advisory leader at PwC. “The big question is how much liquidity is required to start up production,” he said.
Agreeing with that assessment was Wilm Uhlenbecker, CEO of Brose North America. “There will be liquidity problems going forward, especially in July and August with more cash outflow to buy parts,” he said. “Fixed costs versus low volume clearly is a concern.”
In mid-May, a survey by the Original Equipment Suppliers Association found that 20 percent of respondents had less than eight weeks of liquidity left, said Julie Fream, the group’s CEO.
On the positive side, the fiscal crisis could spur industry efficiencies, said Bo Andersson, CEO of Yazaki North & Central America. “I say to our people at Yazaki, if customers want us to be more competitive than ever, we need to sharpen our knives and make sure that we’re competitive in quality and in productivity in our supply base,” he said.
Fream agreed, noting that despite the tragedy, the pandemic is accelerating some needed industrywide changes. “It has put us on a much faster pathway to get there,” she said.
Said Brose’s Uhlenbecker, “This situation has opened our eyes even further about accelerating innovations and efficiencies to become more competitive in the future.”