Automobile Parts and Accessories Manufacture
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Industry Overview
The US auto parts manufacturing industry consists of about 4,500 companies with combined annual revenue of about $225 billion. Large companies include ArvinMeritor, Dana, Delphi, Lear, Visteon, and the automotive division of Johnson Controls. The industry is concentrated.
Competitive Landscape
Demand for auto parts is driven by new car sales, which are strongly affected by interest rates, and by the replacement market. Company profitability industry depends partly on the difficulty of manufacturing products and partly on demand volume, since many costs are fixed. Small companies can compete successfully by focusing on a small number of products or some highly technical ones.
The structure of the industry is complex, with most smaller companies (referred to as "tier 2" and "tier 3" suppliers) selling parts to larger suppliers (referred to as "tier 1" suppliers), who in turn sell component assemblies or modules to car and truck assemblers such as GM and Ford - collectively called OEMs.
Products, Operations & Technology
Auto part suppliers make components that are assembled by the car companies. Major product categories are transmission and power train components (17 percent of revenue); engines and engine parts (16 percent); metal stamping of body parts and trim (13 percent); electrical and electronic equipment (11 percent); seating and interior trim (9 percent); and brake systems (6 percent). Other products include steering and suspension components and air conditioning systems. Parts manufacturing plants are often located close to the assembly plants of the car companies, usually within 100 miles.
Because car and truck companies (or VMs - vehicle manufacturers) focus increasingly on design, assembly, and marketing operations (and less on actual manufacturing), the parts industry produces virtually everything that goes into a car or truck.
Tier 1 suppliers, of which there are roughly 1,000, usually concentrate in one or two distinct industry segments such as axles, power trains, brakes, exhaust systems, suspensions, electrical components, seating, engine parts, or accessories. OEMs still build most of their own engines.
The production process depends on the types of parts a manufacturer produces. Companies may buy components from suppliers or make products from scratch by working raw materials like metals and plastics. Companies may own one or several production plants and may have large inventories of raw and finished materials.
Companies often own the tooling needed to manufacture parts, but tooling may also be owned by the customer the product is being made for. Tooling used for simple production processes may be bought from other manufacturers; companies may also develop their own special tooling for making proprietary products or components.
Engineering and quality assurance are important in the manufacturing process, both for producing parts to the specifications required by the customer, and for achieving cost efficiencies. Industrial engineering technology is a rapidly evolving field. Computer systems are extensively used for designing parts and for process control and inventory management. Many suppliers are integrating supply chain systems with customers to support "just-in-time" (JIT) delivery of parts to assembly operations. Big car companies are requiring suppliers to upgrade their electronic data interchange (EDI) capabilities to increase supply chain efficiency.
