Smaller suppliers are struggling to survive, lobby group chief says

Smaller suppliers are struggling to survive, lobby group chief says

PARIS — The supplier industry can best weather the coronavirus crisis by remaining unified and honoring financial commitments as much as possible, said the new president of the European suppliers lobby group, CLEPA.

Thorsten Muschal, head of sales and program management at Faurecia, was elected to lead Brussels-based CLEPA in January, and he was immediately confronted with the auto industry’s biggest challenge in recent memory. Most automakers and major suppliers have halted or scaled back production in China, North America and Europe.

“What we are experiencing right now shows that a European voice and aligned behavior joined in a shared policy approach is more needed than ever before,” Muschal said in an interview with Automotive News Europe.

“We are all getting the lesson that globalization is a challenging topic, and we see how difficult it is to keep our supply chain working,” he said.

The suppliers’ group is doing its best to support its members, who range from global Tier 1 suppliers to smaller, national or regional companies, by providing information about unemployment measures and financing, for example.

“The big members such as Bosch, ZF, Continental have put task forces in place to manage social systems and protect their people in different countries,” Muschal said, referring to government unemployment plans. 

“Our members are looking for coordinated political and financing support. It’s key to make sure that everybody pays to keep the supply chain up and running so the smaller companies don’t fall into bankruptcy,” he said.

For smaller companies “it’s more a direct question about survival,” Muschal said.

The best way to manage cash flow issues is to stick to agreed payment terms, he said, including automakers to Tier 1 suppliers, and Tier 1 suppliers to their own supply chains.

“The first thing we say is that nobody should take advantage of this situation,” Muschal said. “We have seen in a crisis that not everything is rational. We need to push this discipline. It’s a question of ethics.”

But he said it was inevitable that some suppliers would not be able to meet contract terms or fall into a cash crunch, with nearly all production in North America and Europe at a halt. He said the coronavirus outbreak was falling especially hard on suppliers who were suffering from a sharp downturn in the Chinese market in the last 18 months.

The question of financial relief “needs to be managed in an organized way,” he said. “With financing measures and liquidity from the governments and loans from the banks, but there should also be discussions between suppliers and customers.”

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