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Cost-cutting crucial to survival of UK parts suppliers

Pressure from vehicle manufacturers to reduce costs and the threat of losing business to European competitors are putting severe downward pressure on the UK's autoparts suppliers.

In order to secure future business all domestic parts manufacturers will have to improve productivity and reduce their prices.

The warnings come in a new report entitled Autoparts, which examines the key trends and developments in the parts' market.

The report says: “BMW, which is building a new version of the Mini, is insisting on being invoiced in euros and will be reducing its consumption of British-manufactured parts. Nissan is to receive a substantial subsidy from the Government to encourage the building of new models at its UK plant, but the company is not obliged to buy its parts from UK suppliers and has stated that over half its needs will be met from 'eurozone' countries.

“Other manufacturing companies have also expressed an interest in buying a larger proportion of their future requirements for parts from the eurozone because of their lower cost.

“These developments, combined with the recent downturn in car and commercial-vehicle production, has unwelcome implications for the domestic parts manufacturers operating in the OE market.”

Evidence of this change in the operational environment is seen, the report says, in the imminent closure of car assembly plants at Dagenham and Luton.

The report's publishers Key Note, forecasts that the value of the apparent UK market for autoparts will grow by 12.1% between 2001 and 2005, but that manufacturers' sales will decline by 9.2%. Imports are expected to grow by 18.2% as new contracts being negotiated outside the UK take effect.

“The replacement market has increased in importance because of the problems experienced in the OE market. However, while this sector has the potential to generate higher profit margins, OE manufacturers have to compete with independent UK companies, which are skilled at duplicating the more frequently changed parts, as well as with foreign manufacturers. Price competition is also very intense and as the original parts improve in quality the replacement cycle becomes longer,” says the report.

'Autoparts' is available from Key Note on 0208 481 8750, priced £310. An executive summary is available at www.keynote.co.uk

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