SUPPLIER EYE

Suppliers are learning several new and unwelcome lessons as the dynamics surrounding U.S. light vehicle trade and emissions legislation quickly shifts. Two major issues are at play here. As the industry continues to feel the impact of reduced or eliminated battery electric vehicle incentives in several North American and European jurisdictions and governments are retrenching on light vehicle emissions legislation - OEMs are questioning the size of the near- and mid-term market. Similarly, as of this writing, the saga surrounding future vehicle and parts tariffs between the U.S. and its major automotive trading partners continues. This unfortunate combination has driven OEMs to delay, extend and rescope future product programs. This jams a stick in the financial spokes of the supply base.

Some context is in order. Like clockwork, in the highly competitive global light vehicle market, our industry was trained to expect a regular cadence for product renewals and product cycles. The combination of strong competition, emissions and safety regulations driving a constant stream of innovative technologies, and the need to improve fuel economy led the industry to adopt a regimented product cycle for most light vehicle segments. OEMs and suppliers alike assumed a 2.5-5-7.5-10-year cadence for future product revisions. This outlined that once an all-new vehicle was launched, one should expect a mid-cycle enhancement (MCE) at year 2.5 and a major revision at year 5. At year 7.5 another mid-cycle enhancement, then an all-new structure would follow for year 10. This sequence allowed for a healthy dose of new technology and styling to attract new/repeat customers and improve efficiency and an ever-stringent regulatory environment. While some vehicles strayed from this timing, most OEMs adopted it.