Supplier financials a cause for concern

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Recent quarterly results from some of the major tier ones make for grim reading, as company after company reports declining profits and cites common themes for these disappointing times

The story so far for automotive manufacturing in 2019 has featured tariffs between the US and China, falling consumer demand (and therefore falling vehicle production) in the major markets, especially China, rising and seemingly unending investment requirements in electric vehicles, emissions reduction and autonomous technology especially. 

Currency fluctuations do not help (but these have always been an issue for suppliers, so there is nothing new here) and the drive to reduce costs is intensifying.  Some tier ones – such as Borg Warner – have also blamed their own tier two and three suppliers for failing to cut costs.  

Looking at the scale of some of the falls in profit at the major players makes for grim reading. Visteon reported an 80% fall in Q2 income (attributed mainly to falling production), while Continental reported a 41% fall, attributing this to problems in China and investment requirements in electric and autonomous vehicle technologies.  ZF and Autoliv have issued profit warnings for the year as a whole, Valeo has implemented a major cost cutting exercise. 

There have been one or two outliers with positive results…

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