- Only 43 percent of the automotive suppliers surveyed were able to pass on the cost increases
- 30 per cent have planned a hiring freeze, 40 per cent want to postpone or stop investments
- Current figures only harbinger of strategic crisis in key German industry
The respondents report increased costs especially in the areas of energy (85 percent of manufacturing companies), personnel (81 percent), logistics (71 percent) and materials (69 percent). Among automotive suppliers, cost increases hit particularly hard in energy (87 percent), materials and intermediate products (80 percent) and services (70 percent). 71 percent of all companies surveyed also report that price and interest rate increases are having an impact on their supply chains, with 80 percent in the automotive industry saying this.
"The cost increases among automotive suppliers are hitting a core German industry that also has major problems on the sales side," says Ralf Winzer, Senior Partner and aMember of the Board at FTI-Andersch, the consulting unit of FTI Consulting in Germany that specialises in restructuring, business transformation and transactions. "Because the manufacturers have recently presented good economic figures themselves. However, they are selling significantly fewer new vehicles than before the pandemic. This has created considerable overcapacities. The disruptions in the supply chains have also not been completely overcome and thus still lead to greater fluctuations in delivery call-offs."
Automotive suppliers at the bottom of the list of industries that can pass on price increases
It is therefore not surprising that only 43 per cent of the companies surveyed in the automotive sector were able to pass on the cost increases to their customers - the sector thus has the lowest rate of the industries surveyed (compare consumer goods: 51 per cent; mechanical engineering: 47 per cent).
"However, the average masks the sometimes extremely different starting positions of the companies," says Heiko Rauscher, Senior Partner and automotive expert at FTI-Andersch. For example, only almost a quarter (23 per cent) of the companies surveyed from the automotive industry were able to pass on a maximum of 20 per cent of the costs. And while in the manufacturing industry in general, 38 percent of the companies were able to pass on 61-100 percent of the increases to their customers, this is again only 23 percent in the automotive industry. The average compensation for all manufacturing companies is just under 50 percent, in the automotive sector 43 percent - with the lowest value of the sectors surveyed (compare consumer goods: 51 percent; mechanical engineering: 47 percent).
"The figures make it clear that a significant minority still has major problems in containing price increases," says Heiko Rauscher. "Many are at risk in terms of their liquidity."
Strategic crisis of suppliers just starting to gain momentum
Consequently, 30 percent of the surveyed companies from the automotive industry have planned a hiring freeze (26 percent across all sectors). But: only 17 percent have already imposed it. Other measures planned or already implemented by suppliers in the short term to combat cost increases: 93 percent want to reduce procurement costs, 90 percent want to improve energy efficiency, 40 percent postpone or even stop investments. Sourcing in low-wage countries is planned by only 13 per cent of companies in the automotive sector (24 percent across all sectors).
"The figures collected by Kantar illustrate the current operational-financial problems at many automotive supply companies," says Ralf Winzer. "However, the strategic crisis in which the industry finds itself is not yet represented here. It will become much deeper and is just now picking up speed. Because whether the German OEMs will be able to reproduce the sales figures of the past is written in the stars and seems rather unlikely at the moment. Some have already said goodbye and switched to smaller quantities with higher profitability. In China, many are currently reaching their limits.
Ralf Winzer says: "For suppliers, this means that they have to develop new customer structures to a greater extent. In particular the increasingly dominant Chinese scene of electric car manufacturers. But strengthening activities in North America is also an interesting option for many German companies. For a large number of suppliers, the near future already presents an unprecedented challenge, which will in part mean a very profound transformation for the companies and the people working there. This also includes the adjustment of cost structures. The following applies: Those who take decisive action now have a good chance of being among the winners of tomorrow."
About the Kantar Public survey
On behalf of the management consultancy FTI-Andersch, the market research company Kantar Public surveyed 150 companies in Germany from the 'manufacturing industry' with a focus on automotive suppliers, mechanical and plant engineering and consumer goods by telephone as part of the 'Supply Chain Barometer 2023' study on current issues around locations, production relocations, cost increases and other supply chain topics.
The turnover of the companies is at least 50 million euros. About one third of the companies surveyed generate more than 500 million euros per year. The percentages were weighted according to their share of the manufacturing industry by sub-sector. The survey period is the second quarter of 2023.
FTI-Andersch is a management consultancy that supports its clients in the development and implementation of sustainable future/performance and restructuring concepts. FTI-Andersch actively accompanies companies that have to deal with operational or financial challenges and change processes - or want to align their business model, organisation and processes for the future at an early stage.
Clients include in particular medium-sized companies and corporations that operate internationally. FTI-Andersch is part of the FTI Consulting Group (NYSE: FCN) with more than 7,700 employees worldwide.