The Original Equipment Supplier Association, or OESA, recently released its March 2012 “Supplier Barometer” report. In keeping with the previous survey—which was released in January—members are more optimistic than pessimistic about general business conditions, reflecting a more positive long-term outlook on the automotive market as whole.
Following are some highlights from the report:
- The Supplier Sentiment Index reached 64—a slight decrease from the January value (66), but still in positive territory. Although North American vehicle sales and production schedules are improving, several key issues—gas prices, the Iran nuclear situation, European debt concerns—are keeping the sentiment outlook relatively level.
- Suppliers remain confident in their internal and sub-tier supply chain strategies and effectiveness to mitigate chain shortages in 2012. Compared to 2011 levels, across most areas related to the understanding of production demand, capabilities, capacity and financials, most improved—with the exception of suppliers’ capability to respond to long lead-time items. However, even here, the year-over-year degradation was only slight.
- Complementing these findings, 92% of respondents feel confident that their company will be able to meet all customer releases over the next three months.
- Concern over direct material supply chain risk is improving. Specifically, companies indicating they have no suppliers on their “watch list” increased in 2012 to 23% from the March 2011 level of 19%.
- Regarding the 12-month outlook, more than half of the survey respondents—or 53%—are somewhat more optimistic about business (down slightly from 58% in January). By comparison, only 1% characterize themselves as “somewhat more pessimistic” about business conditions. Thirty-three percent said their opinions were “unchanged.”
- Within the category of those who describe themselves as “significantly more optimistic,” respondents point to several key factors. Among them: stronger automotive sales in 2012; likelihood that North American production volume will actually hit the projected 14.1 million-unit mark; and forecasts predicting parts production capacity will increase. Among those who are only “somewhat more optimistic” about business conditions, the primary concern is some OEMs are still showing signs of what they call “bad behavior” relative to capacity. Other issues of concern: a depressed auto market in Europe and the implications for North American producers.
All this begs the question: Is the high level of optimism currently sustainable in what is still a challenging global economic climate? Dave Andrea, senior vice president, Industry Analysis and Economics at OESA, shared his perspective: “With U.S. February vehicle sales numbers reaching a 15 million unit SAAR, there is greater support for sustained levels of optimism. However, for the supply base it is “cautious” optimism as the economic climate in Europe remains uncertain. The real concern is that while U.S. GDP growth of 2.8 to 3% is good, our global economies are not insulated and our growth is not that [strong] to absorb significant spillover from Europe. No one wants to build capacity that will not be used.”
With respect to the longer-term forecast of nearly 14 million units for 2012,1 followed by more than 14.1 million units in 2013, there is the possibility that recent developments could put a crimp on those estimates. Chief among them, according to Andrea: concern over the European debt crisis spilling over and slowing U.S. GDP growth; and rising gasoline prices and how this might change the car/truck mix or the sales of certain vehicles and powertrains. “All this impacts suppliers’ planning horizon and profitability,” he explained. “If gas prices rise rapidly and stay elevated, they eventually will impact total volumes.”
The complete March 2012 OESA Supplier Barometer report is available online.
- LMC/J.D. Power & Associates 2012 Automotive Forecast, January 2012.