Big drop seen in car component firms

The number of big automotive suppliers in the world will shrink to as few as 20 within the next seven years as technology reduces the number of parts in a car and manufacturers move increasingly towards collaborative relationships with component firms, according to a study released today.

The analysis, carried out by IBM Consulting Services, predicts that the massive investment required to exploit the technological advances will either force suppliers to the wall or push them into joint ventures with one another.

It forecasts that the biggest change will come from the increased use of software and drive-by-wire technology in cars which will enable manufacturers to replace entire mechanical sub-systems within vehicles.

The study also says that the increased use of sophisticated technology in cars will break down the old relationships between manufacturers and suppliers whereby component firms are relentlessly squeezed on price so car companies can keep down costs.

Instead, car makers will become more interdependent with suppliers, perhaps setting up "collaborative clusters" of component firms who work together with manufacturers in a "community".

Japanese car makers have already adopted this philosophy in part. But the IBM study predicts that it will become more widespread as the automotive industry is dominated by fewer and fewer big car groups. Today, 90 per cent of world car and light truck output is controlled by just nine manufacturers. Of these the top six account for 80 per cent of production and they will extend their market dominance in the next decade, the study says.