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March 21, 2019 02:00 AM

OESA Supplier index shows negative start to 2019

Rubber & Plastics News Staff
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    SOUTHFIELD, Mich.—The Original Equipment Suppliers Association's Automotive Supplier Barometer continues to show a negative sentiment for the first quarter of 2019.

    The measurement reflects the 12-month business sentiments of executives in the North American supplier industry, according to a OESA news release. The barometer index is a quarterly snapshot of supplier concerns on commercial issues, the business environment and strategies influencing the supplier industry.

    The supplier barometer index posted a negative reading of 35, fifteen points below a neutral level of 50, and the lowest reading since Q2 2009, despite low unemployment and high consumer confidence, said OESA. The reading is a 22-point reversal from Q1 2018 when tax breaks and planned infrastructure spending pushed the SBI reading to a positive reading of 57.

    The first quarter's pessimism is mostly because of uncertainty in global trade policies and persistent weakness in U.S. passenger car volumes, OESA said.

    According to the quarter's barometer results, trade policy is the most significant industry threat to automotive suppliers, and sub-tier material cost premiums are increasingly impacting suppliers' profitability. Research and development spending remains at 4 percent of total sales, holding at Q4 2018 levels.

    Trade policy concerns include tight supply chains, rising commodity prices, the impact of Section 232 and Section 301 tariffs, prospects for passage and implementation of the UCMCA trade pact, as well as limited availability of skilled labor, OESA said. Each concern adds uncertainty to the planning environment, and automakers and suppliers reassess, revise and potentially postpone incremental investments until greater clarity can be determined.

    Material cost premiums are impacting more than 80 percent of suppliers, up from 60 percent in 2018, OESA said. Shortages of components and raw materials are impacting a third of suppliers.

    About 80 percent of suppliers' R&D budget is allocated toward the development of specific programs, while 20 percent is allocated to researching future technologies, OESA said. Advanced materials and Industry 4.0 are the leading areas for future technology investment.

    The barometer is sponsored by RSM U.S. L.L.P.

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