Making car parts used to be a tough but pretty straightforward business.
Consultants? Support groups? Who needed them?
Then along came Inaki Lopez, the manic Spaniard who tore up auto parts suppliers’ contracts with General Motors Corp., demanded impossible price cuts and shared their blueprints with competitors.
Ford Motor Co. Chairman Alex Trotman shook the industry again last year, when he told suppliers they had to have factories around the world to keep up with his global auto company, or kiss their Ford business good-bye.
Suddenly everyone needed help and Donna Parolini, an earnest and energetic young consultant from Grand Rapids, Mich., seemed to be asking the right questions.
How does the door handle you make fit into the door panel? Should you be making just the handle, or should you expand into making the entire panel? If you don’t have a factory in Europe or Mexico or Taiwan, why not?
In the past four years, Parolini has created five support groups for small and medium-sized Michigan suppliers trying to keep up with a changing industry. They have annual sales ranging from $35 million to $800 million. Many are family-owned. Most are privately held.
They swap war stories about their dealings with the major automakers. They try to glean design details about future cars and trucks. Mostly they try to make sense of the staggering change whirling around them everyday.
Members of Parolini’s groups tour each other’s plants. They talk strategy. The hot topic now is how to expand globally, especially if you do business with Ford.
Kris Pfaehler, director of sales for Troy, Mich.-based Talon Automotive Group, offers this explanation for his involvement in one of Parolini’s four Detroit-area groups: “For many years suppliers didn’t want to talk to each other. But now the supplier base has shrunk so much that those of us who are still in business must survive by pooling our knowledge and experience,” Pfaehler says. “We’ve got to turn all this rapid change into an advantage.”
Parolini a former saleswoman for DuPont plastics, launched her consulting business while working on a management degree.
Her goal was to help auto suppliers develop long-term business plans and strategies. But she was openly skeptical when Tom Gavin, a vice president with Lacks Industries, suggested she ask a dozen or so companies if they wanted to cooperate in that effort.
Despite some initial misgivings, the program has been a success.
“What we’re trying to do is to have the supply base be an industry unto itself,” Parolini says. “They have control over almost the whole vehicle, but many feel they don’t have control over their own destiny.”
What’s the biggest decision each member must make? Where does my company fit in the new supplier system being created by the auto companies?
Carmakers are slashing the number of suppliers they deal with directly by pushing more design and assembly work onto the biggest suppliers.
“Companies like TRW or Prince, what we call tier 1 suppliers, will become more like miniautomakers, handling design, development and administration,” Parolini says. “Just below them you’ll have a second tier of manufacturers who are the lowest-cost producers of their specific part.”
Second tier suppliers will work for those big suppliers, not the car companies.
Expanding overseas is another hot topic when the councils meet.
Last month, Parolini spent two weeks in France, trying to interest French companies that make plastic auto parts to team-up with Michigan-based companies.
The effort already has had some success. Mike Doherty, head of strategic planning for Tower Automotive, has hired a former Ford Europe executive to find Tower a European partner.
“The companies that don’t step up to being international will fall by the wayside,” Doherty says. “Being part of this council has made that very clear to us.”
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