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Interiors put suppliers on the fast track

By Edmund Chew Automotive News EuropeLondon-Interior suppliers such as Johnson Controls Inc., Lear Corp. and Faurecia were among the fastest-growing suppliers in the industry last year. Sales at those three companies were up more than 8 percent in 2003 compared with 2002. Other leading global suppliers such as Robert Bosch and Delphi saw sales increase by less than 2 percent. Interior suppliers are benefiting from the consolidation wave of the 1990s. That’s when companies such as Magna International, JCI and Lear absorbed businesses that gave them expertise in interior areas such as overhead systems, door trim, floor covers and truck trim, as well as dashboard, cockpits and seating. The consolidation brought a range of capabilities under one roof. JCI’s sales of interiors grew 36 percent in Europe (16 percent when currency fluctuation is factored in) in the first three months of 2004 compared with the same period in 2003. Driving the growth is contracts for the Ford Focus C-Max, Volvo SC90, BMW X3 and Volkswagen Golf. Johnson Controls is one of the world’s most successful automotive suppliers-with profits of $879 million in its 2003 fiscal year, which ended 30 Sept. JCI’s sales increase 14 percent to $17.1 billion (currently Euro 14 400 million) last year. Overall, JCI expects growth of between 13 percent and 18 percent in its 2003-2004 fiscal year, helped largely by seating, interior and electronics business. Lear’s sales grew 9 percent in dollar terms to $15 700 million in 2003. The company is almost entirely focused on interiors-68 percent of Lear’s sales come from seating systems. Last year, Lear reported an operating profit of $534 million. French supplier Faurecia has experienced less overall growth because of the effects of changing raw material prices on the sales volume of its exhausts systems business. But its seating sales grew 8 percent to Euro4350 million in 2003, benefiting from more outsourcing by PSA/Peugeot-Citroen. Intier Automotive, the interior division of Magna, saw growth of 21 percent last year to $4700 million. Big suppliers have improved their ability to develop new systems and integrate Tier 2 companies. Today suppliers’ skills rival the capabilities of vehicle manufacturers and their growing range of competences has enabled them to offer more complex systems. Automakers are still primarily responsible for assembling a vehicle’s interior, but suppliers say their input is increasing. Suppliers are doing their own consumer research so they can have more input into the new product development process and design. When General Motors wanted to establish new quality standards for its Cadillac brand it called on suppliers that were familiar with the demands of high-end European carmakers. Intier managed the development of the interiors in conjunction with GM’s program team under the vehicle line executive Jim Taylor. Intier’s responsibility included management of the product cycle, consumer clinics, design engineering, manufacturing and the supply base management through to just-in-time sequencing. The result: interior quality that has performed particularly well in JD Power Initial Quality Surveys. Inside advantageSales growth at leading interior suppliers Companysales 2002 sales 2003% changeJohnson Controls*$15.0 bn$17.10 14Lear$14.40 $15.70 9Faurecia**E9.9E10.23Intier$3.90 $4.70 21*Johnson Controls result for financial year ended September 30**Faurecia result includes effect of fall in precious metal prices and deconsolidation of some of cockpit businesses to SASSource: Companies Smaller increasesSales growth at other leading suppliers Company sales 2002 sales 2003% changeDelphi$25.5 bn $26.20 2BoschE23.3 E23.61Visteon$16.90 $16.50 -2Dana$7.30 $7.90 8Source: Companies, Automotive News Data CenterEven European carmakers such as BMW and PSA, which have traditionally sourced interiors in-house, have been giving more responsibility to suppliers. Intier, for example, supplied the Mini’s cockpit module. The growing number of niche vehicles and the desire for greater brand individuality are leading carmakers to outsource more responsibility for the interior. One advantage is common sourcing from facilities where one module, such as seats, may already be delivered to a plant just-in-time. Supplier executives say support functions such as quality control and management can be put together, leading to potential savings. European interior market leader Faurecia has made modules the core of its business, and is integrating seat and cockpit delivery from its supplier operations at a new plant in Germany this year. The plant location has not been announced. “



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