Uphill battle for auto suppliers

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As practice lead for automotive and heavy duty at Kotler Marketing Group, Steve Rose has spent the past five years working with clients—including Arcelor Mittal, BASF, Goodyear Dunlop, Kostal, Mulimatic, PPG, Siemens, Tower Automotive and Valeo—to document and demonstrate the value of their products. Prior to joining Kotler, Rose spent 28 years in sales and marketing roles at Michelin Tire. BtoB recently spoke to Rose about how auto suppliers can best address the challenging conditions they currently face. BtoB: How has the recession—and the auto industry meltdown—affected auto suppliers? Rose: They've been run over by a truck, to use a metaphor. There have been serious declines in volumes, to the tune of 30% to 50%. ... They're sitting on inventory that [previously] would have gone in two or three months, and that same inventory is sitting there for six months. They've had to drastically alter their production and lay people off. There's a tremendous business squeeze on cash and receivables for these suppliers to stay alive. Not to mention they're being called in for meetings weekly with [automakers'] purchasing [departments]. Now the argument from purchasing is "We're in survival mode and, unless you can give us a survival discount, we don't know what we'll be able to do.' A lot of people are writing that to go forward, everyone is going to have to share in the pain, which brings the [automakers] back to the supplier for a discount. BtoB: How can auto suppliers survive in such an environment? Rose: Those suppliers that understand the value of their offering and can document the value with sufficiently high-quality data that will be accepted by the OEMs are the ones who will be favored with positive decisions. ... They need to be able to put this information in front of [OEMs'] purchasing [departments] and say, "My purchase price is X, which might be higher than you can get elsewhere, but here's why it's worth it to you.' If all you are is a piece price and a part, get ready to close your plant in North America and move somewhere else. BtoB: Whom should suppliers be marketing to at the automakers? Rose: They can't skip purchasing. You're going to get a P.O. signed by purchasing. But if your value benefits are in different areas, and they almost always are, you have to make your case to many different parts of the organization. [For example,] if your quality is better, and your defect rate is lower than your competitors', you need to call on the warranty department, visit the plant and actually sell your value. You just can't go to purchasing; it's a dead-end street. You've got to go to where you can quantify your value.
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