AM Online

Auto suppliers urged to diversify in order to survive

Automotive suppliers in the UK, hoping the sale of MG Rover will bring them new business, have been urged to look outside the car market for customers or face going bust themselves as the European and US motor industry struggles.

Credit insurer Atradius says the collapse of MG Rover is the most recent of problems faced by automotive firms in Europe and the US. In its latest industry risk index, Atradius says that giant carmakers such as GM and Ford are seeing sales and profits fall as they attempt to cut costs, while equipment suppliers and component manufacturers are being undercut by imports from China and India.

The only real bright spot in the current automotive market is the growing demand for accessories such as alloy wheels and in-car sound systems by 'boy-racers' souping up their suburban hatchbacks.

But rather than hoping that MG Rover’s new Chinese owners, Nanjing, will restart production in the UK, Atradius says suppliers should explore other industry sectors for new business.

Will Clark, Atradius’ regional director for UK and Ireland, NAFTA and Australasia, said: "The interest shown in MG Rover by buyers from China reflects the growing presence in the automotive sector of developing countries. The European and US dominance of the motor industry is coming to an end and suppliers need to wake up to this and develop new products for new customers in other industries."

MG Rover went bust owing millions of pounds to suppliers across the UK. But despite being bought by Nanjing for around £60 million, Atradius says creditors will have to wait many months to see any money and are unlikely to be reimbursed in full.

Clark said: "The motor industry is struggling worldwide. Dealers are slashing price tags to sell cars, so makers are being forced to cut their own prices, whilst coping with high labour and manufacturing costs.

"As a result, car companies are turning to component makers and original equipment manufacturers in China, India and the Far East to save money, which puts the squeeze on firms here and in Europe. In fact the only real growth areas in the automotive industry are specialist suppliers and the booming after-sales market selling bolt-on equipment for drivers souping up their cars."

  • For a copy of the Atradius guides on credit insurance and credit management, or for more information on any of Atradius’ products or services, contact Atradius on 0800 21 21 31 or visit the website www.atradius.co.uk
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