European Automotive Newsletter - June
- Re-negotiations with OEM
- Cost optimization: what are key levers to address
- Quarterly update of financial KPIs
Restructuring of automotive suppliers – last resort OEM contributions?
In the restructuring of automotive suppliers, OEM contributions are seen as the last resort. Based on our extensive project experience, we show which key points need to be considered when involving the main stakeholders in a restructuring process.
The challenges are high and the pressure points on automotive suppliers are increasing. Transformation to e-mobility, increasing raw material and energy prices, supply bottlenecks and production stops are causing higher costs to be shouldered by an industry that is already struggling with lower profitability after the declines in production volumes of recent years. Additionally, call-off volatility increases, and challenges of the Corona crisis remain.
With volumes long term below normative level, the traditional approach based on a balanced effort is often no longer sustainable. Suppliers who want to survive in a highly competitive industry characterised by intense competition and permanent pressure to optimise processes and cost structures will need to develop a more focused portfolio pricing and rationalisation to survive.
In order to succeed in the long-term, supplier will need to consider to switch from a pure commercial approach to an approach which considers predominantly legal and financial aspects. Such approach should not only be considered in the event of an advanced earnings or liquidity crisis. If internal or equity financing resources have been already exploited, restructuring contributions from financiers, customers or employees are often necessary to enable the success of the restructuring. Entering in such discussions already before the crisis arises might be a way to reduce number of turnarounds during the upcoming and ongoing structural change in the automotive industry.
