DETROIT — The automotive supply ranks have been shrinking rapidly, but not fast enough to prevent another round of mergers and acquisitions, according to International Business Development Corp., a Troy, Mich., automotive consultant firm.
Research conducted by the company shows that the number of suppliers has thinned from 30,000 in 1988 to 8,000 projected by the end of 1997. During the past 22 months alone, the firm estimated that 320 mergers or acquisitions have occurred, with $32 billion changing hands.
To put the consolidations in perspective, the supply base will be about one-third the size it was in 1988 at the end of next year, President Donna Parolini said at a Feb. 14 news conference.
However, the industry might not be downsizing quickly enough to fit the tastes of automakers, Parolini said.
``Ideally, they'd like to work with no more than 5,000 suppliers,'' Parolini said. ``They've set that number to get the economies of scale needed to lower costs.''
The company estimated that it will take another two years of mergers and acquisitions to reach the 5,000 figure. Most of the new acquisitions will be of smaller, Tier 2 suppliers or of companies in Europe and Asia to gain more of a global presence, she said.
Parolini also warned that with all the merger activity, suppliers now must focus on integrating the new companies into their culture and corporate structure.
``That's not always an easy task for an independent, American supplier used to working in a certain style,'' she said. ``It doesn't always translate overseas.''
The company also reported that worldwide system and component sales are expected to increase from $362 billion in 1988 to about $737 billion at the end of 1998.