As the crisis in the automotive industry widens, the outlook for the industry’s suppliers is looking increasingly fragile. Germany – Europe’s and one of the world’s largest car markets – is being rocked not only by GM subsidiary Opel’s appeal for state cash. A leading OEM supplier, noise insulation specialist Stankiewicz (Adelheidshof; www.stankiewicz.de) with 2,100 employees worldwide, including 1,300 in Germany, is teetering on the brink of insolvency.

Stankiewicz, owned by Dutch private equity investor Gilde Buy Out Partners (www.gilde.com) – see Plasteurope.com of 01.03.2006 – said last week it had inadequate liquidity, despite full order books. However, before the company had to apply for creditor protection – and shortly after the German automotive manufacturers’ association VDA (Frankfurt; www.vda.de) criticised the banking sector for cancelling small and medium sized companies’ loans – the supplier’s creditor banks agreed to put debt service temporarily on hold. VDA pointed out that many banks were applying a double standard, as they themselves were accepting state bail-out packages.

Agreements between OEMs and their suppliers usually foresee a fluctuation range of around 20% for vehicle unit production and call-off of parts. In busy times, temporary workers fill the gap or company employees extend hours within their working time corridor. But when the range widens to 30% and beyond, as appears to be the case at present, short time working or even redundancies inevitably are the consequence. The number of German automotive industry players applying for short-time working under the country’s labour laws is growing daily. In mid-October, as the financial crisis began to wash over into the sector, around 100 companies planned to reduce working hours for nearly 30,000 employees – the numbers will be updated at the end of November.

Lighting specialist Hella (Lippstadt; www.hella.com) already has placed employees at Recklinghausen on shorter hours for the equivalent of 19 days between 17 November 2009 and 28 February 2008. The plant will be closed from 24 December until 2 January 2009. Rehau plans to cut working hours, cables manufacturer Leoni has announced shorter shifts and short time working is planned for Draxlmaier workers. The Plattling / Germany site of International Automobile Components Group (IAC, Palm Beach Florida / USA) will be closed for five weeks. AKT Altmärker Kunststoff-Technik (Gardelegen; www.akt-ag.de) has reduced working time for 187 of its 1,110 employees, as orders have slipped by around 30%.

The horizon looks somewhat brighter for lighting producer Odelo (Schwaikheim; www.odelo.net) and Röchling Automotive. Plant closures do not appear likely, an Odelo spokesman told PIE, adding that “we have adjusted our output to demand.” Röchling expects a sales decline of 20-30% in the fourth quarter of this year. It is currently asking workers to take their vacations and agreed days off. According to a spokeswoman, the company may also switch to a four-day week in some places.

Despite the tense situation in Germany, its automotive sector companies may be somewhat better off than competitors in other European countries, according to a study by PRTM Management Consultants (Frankfurt / Germany; www.prtm.com) of 26 major worldwide auto suppliers, including 40 German players. Altogether, the global market is ripe for consolidation, the consultants say.

In seating, PRTM sees Faurecia (Nanterre / France; www.faurecia.com) joining forces with number two Lear (Southfield, Michigan / USA; www.lear.com) or, alternatively, being taken over by global market leader Johnson Controls (JCI, Europe: Burscheid / Germany; www.johnsoncontrols.com), which could be seeking a stronger foothold in Europe. Grammer (Amberg / Germany; www.grammer.com), long a mooted takeover candidate, could also be in play. Equally, US investor Wilbur Ross – the force behind IAC – might take advantage of market weakness and a stronger dollar and go on a buying spree.

At present, there seems to be no indication that companies in emerging OEM countries China and India could pose a threat to European automotive companies. Tata and other Asian companies have their own financial problems that would keep them from becoming predators.