Bailout Plan's Effects on Auto Part Suppliers & Aftermarket

Will U.S. Bailout Plan Work? Will it Work For the Supply Chain?

The automobile market resumed its recovery after the Obama administration's bailout plans. GM's 125 pages of brilliant business recovery plan have saved this 100-year-old automaker, the "old GM", which will soon become a "New GM" as soon as 2010 comes. The auto task force also helped broker the sale of Chrysler LLC to a group led by Italy’s Fiat SpA. Ford stands alone as an independent company and, potentially, a Detroit survivor. Ford Motor is still losing money, like nearly every other car maker, but it shows signs of recovery. How is the supply chain under those big car manufacturers doing? When General Motors and Chrysler said last year that they were in danger of bankruptcy if they didn't receive government loans, many suppliers had trouble using those receivables as collateral with banks. Auto parts suppliers, which are in desperate need of fast cash, want that lag reduced from 45 days to 10 days and car makers' crisis hit hard on their survival. Therefore, auto part suppliers of those big car makers were facing the declaration of bankruptcy including Visteon, Delph, Collins & Aikman Corp., Tower Automotive Inc., Intermet Corp., Oxford Automotive Inc. and Citation Corp. Even though the bailout worked, the bankruptcy car makers are saved, the major influences on vertical supply chain is still unavoidable.

A functioning auto industry relies on not only viable car manufacturers but on an automobile industry supply chain of auto parts suppliers that design and build the components that go into our cars and trucks. As the top three U.S. auto enterprises have been caught up in the economic crisis, the whole auto industrial chain is suffering from the impact including the auto part suppliers from Asia like China, Taiwan and Japan, where the most auto components are made and shipped to various regions in the world.

Taiwan provides a major share of the world's high quality, reasonably priced aftermarket (AM) auto parts, accounting for over 80% of the collision replacement parts market in the U.S. The automobile electronics industry can take much credit by bringing innovation in automobile electronics and green technology. In the future, it is expected that Taiwan automobile electronics, intelligent transport system and electric cars with its competitive advantages in ICT will develop value services for a variety of onboard accessories. Taiwan auto part suppliers are mainly focusing on Automotive Gears, Automotive Rubber Parts, Plastic Injection Molds For Auto Parts, Auto Fittings( Trailer Fittings), Engine Parts, Automotive And Motorcycle Pistons, Automotive Pulley, Automotive Cylinders( Aluminum Metal Castings ) and Automotive AC Compressors, etc.

China is rapidly grabbing orders for replacement parts sold to repair garages. The Wanxiang Group of China is already building up its distribution in the United States by buying and making deals with automobile companies. China is showing their ambition for entering the car market in U.S. and Europe. China's auto part exports have increased more than sixfold in the last five years, nearly topping $1 billion in April and emerging as one of the fastest-growing categories of Chinese industrial products sold overseas. After market components share in mechanical parts are 56%, electrical part is 23% and electronic part is 22%. Domestic manufacturers like Wonder and the Wanxiang Group are relying on the same inexpensive Chinese assembly-line labor as multinationals like Delphi Automotive and Visteon.

Taiwan Auto Part Suppliers Are Well-Managed to The Situation

Are auto part aftermarket suppliers recovered from the crisis? There are factors influence the market potential for aftermarket services, including the number of vehicles on the road, mileage driven and the average vehicle age. For instance, financial crisis broke up the enthusiasm to buy a new car; more and more people are turning to the maintenance of old vehicles. Growth in brakes and exhaust parts and service will come primarily from increases in the 6–10 and 11+ vehicle age groups, which are expected to grow at 1.2 percent and 4.6 percent respectively, between 2008 and 2010. Replacement events for these two groups of older vehicles are twice as prevalent as for vehicles under 6 years old. Statistics show that the car owner had hold onto their vehicles longer from 37.2 months in 2002 to 46.3 months in 2008, a 24 percent increase. That says, the aftermarket suppliers will enjoy the increase number of routine maintenance from the aged cars and the automotive suppliers might have slightly increased number of new car buyers due to the recent economic recovery.

Demand for electronic controls and modules will remain strong, despite continued quality increases, as more vehicle systems shift to electronics. Components that could become electrically-driven include brakes, steering, engine valves, suspension control and the water pump. Mechanical products, which include non-electrical/ electronic engine hard parts and chassis, drive-train and suspension parts and components, will continue to be the largest aftermarket product category.

During the financial crisis, Taiwan auto parts suppliers were adapting their products to cope with the difficult situation. With the recovering market, we are more than ready to compete in terms of the quality and production capabilities, and our orders are back to 85% of the normal rate, Ben Kuo from Clutch Bearings Industries Co., Ltd., one of the most successful Taiwan Automobile Pulley and Bearing suppliers, claimed.

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