German supplier industry association ArGeZ (Düsseldorf; www.argez.de) took advantage of the “Hannover Fair” in Germany to point out the “fragile” situation in which the sector currently finds itself. In a joint declaration made by the eight industry associations organised within ArGeZ – including the German Association of Plastics Converters (GKV) – they said: “It is clear that suppliers are suffering from their sandwiched position.”

First, the cost increases for raw materials and energy are putting the companies under heavy pressure. Feedstock prices are “still at historically high levels”. In the opinion of Michael Weigelt, spokesperson for the management of GKV and the MD of GKV’s supporting association, TecPart, the SMEs in the suppliers’ association are additionally up against “powerful OEMs”, which, despite lower production figures, are making high profits.

This conflict situation is, in the long term, intolerable for suppliers, which is why the ArGeZ is calling on large buyers to adopt a policy of fair “burden sharing” and to “handle the joint challenges in a more partner-like manner”. Otherwise, predicts the association, “this unique structure of many innovative medium-sized supplier firms will cease to exist”. Even now, these companies are looking towards the future “predominantly with scepticism”.

Irrespective of this, the supplier industry concluded the first quarter of 2022 with an increase in turnover of 13% to EUR 63 bn. However, the ArGeZ attributes this growth solely to higher raw material costs. The increase was not reflected in better operating results. In fact, capacity utilisation and production had declined compared with the same quarter of the previous year.

The German OEM consortium ArGeZ is part of the European Association of Automotive Suppliers (Clepa, Brussels; www.clepa.eu).

Related: European automotive suppliers brace for further production slowdowns

According to Germany‘s ifo Institute (Munich; www.ifo.de), German automotive manufacturers’ expectations improved significantly in May. The indicator rose from minus 20.5 points in April to plus 38 points. “Automotive manufacturers continue to command high sales prices while expecting only minimal further constraints caused by the situation in Ukraine,” says Oliver Falck, director of the ifo Center for Industrial Organization and New Technologies. The indicator for price expectations remained high at 82.6 points, down from 86.1 points in April.

Automakers also feel positive about their current business situation, with the indicator rising from plus 11.9 points in April to plus 17.5 points. They also continued to rate their order situation as excellent, ifo says. Inventories, however, did decline somewhat month-on-month. “Despite the continued shortage of intermediate products, manufacturers are looking to increase production,” Falck says.

Automotive suppliers reported that their business situation is also somewhat better. Although business expectations have improved, that indicator remained in negative territory at minus 17.9 points. “Suppliers are facing higher purchase prices and hoping that they can add these onto their sales prices.”