The Original Equipment Suppliers Association (OESA) recently released its 2013 Annual Report which includes an interesting and positive “State of the Industry.” Modest growth is projected for both 2014 and 2015, pushing expected annual North American Production levels over 17 million units. This is especially positive because OESA also notes that the “break-even point of the supply base is 12.7 million units.” Thus, the supply chain in North America should continue to be profitable and positive, even if it were to contract 25%.

OESA also noted that its Automotive Supplier Sentiment Index has been positive and maintaining favorable momentum from 2013 into the first quarter of 2014. After generally increasing throughout 2013, the Index eased down slightly heading into 2014. However, it is still positive. OESA sees it staying that way “[w]ith a sustainable North American market and a stabilizing European market, supplier sentiment is likely to remain in positive territory.”

Short-term Challenges for Suppliers

Not all was perfect in OESA’s State of the Industry. Some short-term challenges were identified for suppliers. The three issues identified were:

  • Human resource talent shortages for skilled labor and technical skills
  • Manufacturing constraints within their own plants and sub-tier suppliers
  • Cost pressures associated with incremental production requirements and product launches

Suppliers that are able to best navigate these challenges will put themselves in position to best take advantage of strong demand to grow their businesses and position themselves for long-term growth.