PLASTICS IN AUTOMOBILES
Plastics industry profits from buoyant demand for new cars / Global concentration process shows no signs of ending / New challenges for converters from the internet and e-commerce
The party´s not yet over for the European automobile industry. The booming demand for new cars seen in 1999 has continued into 2000 and has put the plastics industry, the automotive sector´s most important supplier, in a festive and optimistic mood. It would be putting in modestly to call 1999 a record year. In western Europe alone, the number of new car registrations rose by nearly 5% to 15.1m. Volkswagen (1.73m), Renault (1.66m), Opel/Vauxhall (16.5m) and Ford (1.41m) led the list. Korean carmakers had the highest growth rates last year (22.3%), followed by Peugeot (6.7%), Seat (14.4%), Skoda (13.6%) and Toyota (10.2%). By contrast, Fiat, Nissan, Rover and Lancia saw registrations decline – by 7.7%, 9.1%, 16.8% and 19.1% respectively.
For 2000, European carmakers expect a similar picture, with new car registrations holding steady at last year´s high level. Added to this will be the expected boom in sales of commercial vehicles, which traditionally use a higher volume of plastics. So is everything coming up roses for the auto suppliers in the plastics sector? Polymer producers, most of them multinational companies for whom the automobile industry is a key account, certainly have nothing to worry about. Their business will grow at the same rate as automobile consumption, if the share of plastics in cars continues to increase as it has in recent years and the new car boom doesn´t suddenly end.
Both plastics and automobile producers are globally active giants. But what about the plastics converters among auto suppliers? The demands placed on them by their customers continue to grow tougher and force these often medium-sized companies into the globalisation race. The big players among the converters are growing even bigger, and this on a worldwide scale. The newest illustration of the trend is the move by Solvay and Plastic Omnium to pool their activities in production of plastic fuel tanks and systems. Industry observers assume that the process of concentration is by no means at an end. The Ford subsidiary Visteon Automotive Systems (HQ: Dearborn, Michigan /USA) is an example of the sheer size such companies have taken on. In 1999, the company increased sales 9% to USD 19.4bn, with operating profit at USD 1.2bn.
In its latest report on the automobile industry, IKB Deutsche Industriebank AG (Wilhelm-Bötzkes-Str. 1, D-40474 Düsseldorf) points to a substantial expansion of business for the industry´s suppliers. However, the bank says the considerably higher sales did not result in a significant overall profit improvement for the medium-sized companies. Only the smaller companies saw any noticeable improvement. This points up the extent to which suppliers continue to be subjected to competitive and cost pressure. Many firms feel obliged to invest huge sums in plant and equipment as they must react to the changes in the division of labour between manufacturers and suppliers as well as securing their own competitive position through strategic reorientation. – IKB industry report (German): PIE-No. 44402.
New threats to medium-sized auto suppliers have cropped up from activities and developments not thought of a year ago. The world´s largest car manufacturer, General Motors, has announced plans to conduct all of its spare parts sales through its “TradeXchange” website. The new e-commerce platform is designed for use not only by GM and its own suppliers. The automaker plans to offer the system to the motor industry at large, to bundle orders and thus reduce prices through the sheer volume of transactions. GM expects business worth a whopping USD 600bn to be conducted through “TradeXchange” by the end of 2001.
Even if e-commerce does not fulfil the high-flying expectations of some of its most enthusiastic supporters, it still will be difficult for small and medium-sized companies to keep their heads above water in the fast-moving stream. How can European automotive suppliers react to such developments if they don´t even have internet access – and many of them don´t. On the other hand, medium-sized suppliers do need to recognise the potential of internet and e-commerce for their own business activities. One way of participating in the system could be for companies that are not competitors to form alliances, and not only to master the electronic challenge. As PIE´s research has shown, the instrument of cooperation is not being exploited by the plastics conversion sector to its full potential.
For 2000, European carmakers expect a similar picture, with new car registrations holding steady at last year´s high level. Added to this will be the expected boom in sales of commercial vehicles, which traditionally use a higher volume of plastics. So is everything coming up roses for the auto suppliers in the plastics sector? Polymer producers, most of them multinational companies for whom the automobile industry is a key account, certainly have nothing to worry about. Their business will grow at the same rate as automobile consumption, if the share of plastics in cars continues to increase as it has in recent years and the new car boom doesn´t suddenly end.
Both plastics and automobile producers are globally active giants. But what about the plastics converters among auto suppliers? The demands placed on them by their customers continue to grow tougher and force these often medium-sized companies into the globalisation race. The big players among the converters are growing even bigger, and this on a worldwide scale. The newest illustration of the trend is the move by Solvay and Plastic Omnium to pool their activities in production of plastic fuel tanks and systems. Industry observers assume that the process of concentration is by no means at an end. The Ford subsidiary Visteon Automotive Systems (HQ: Dearborn, Michigan /USA) is an example of the sheer size such companies have taken on. In 1999, the company increased sales 9% to USD 19.4bn, with operating profit at USD 1.2bn.
In its latest report on the automobile industry, IKB Deutsche Industriebank AG (Wilhelm-Bötzkes-Str. 1, D-40474 Düsseldorf) points to a substantial expansion of business for the industry´s suppliers. However, the bank says the considerably higher sales did not result in a significant overall profit improvement for the medium-sized companies. Only the smaller companies saw any noticeable improvement. This points up the extent to which suppliers continue to be subjected to competitive and cost pressure. Many firms feel obliged to invest huge sums in plant and equipment as they must react to the changes in the division of labour between manufacturers and suppliers as well as securing their own competitive position through strategic reorientation. – IKB industry report (German): PIE-No. 44402.
New threats to medium-sized auto suppliers have cropped up from activities and developments not thought of a year ago. The world´s largest car manufacturer, General Motors, has announced plans to conduct all of its spare parts sales through its “TradeXchange” website. The new e-commerce platform is designed for use not only by GM and its own suppliers. The automaker plans to offer the system to the motor industry at large, to bundle orders and thus reduce prices through the sheer volume of transactions. GM expects business worth a whopping USD 600bn to be conducted through “TradeXchange” by the end of 2001.
Even if e-commerce does not fulfil the high-flying expectations of some of its most enthusiastic supporters, it still will be difficult for small and medium-sized companies to keep their heads above water in the fast-moving stream. How can European automotive suppliers react to such developments if they don´t even have internet access – and many of them don´t. On the other hand, medium-sized suppliers do need to recognise the potential of internet and e-commerce for their own business activities. One way of participating in the system could be for companies that are not competitors to form alliances, and not only to master the electronic challenge. As PIE´s research has shown, the instrument of cooperation is not being exploited by the plastics conversion sector to its full potential.
29.02.2000 Plasteurope.com [17511]
Published on 29.02.2000