WHITE SULPHUR SPRINGS, W.VA. - Automotive suppliers scrambling to merge into megasuppliers may be in for a shock: That's not what customers want. So say the top purchasing executives from Ford and Chrysler.
The Big Three purchasing czars say the merger mania sweeping the global auto parts industry is not in the carmakers' best interest - and probably is not in the suppliers' best interest, either.
``We're certainly not telling our suppliers that they need to merge and become large systems suppliers,'' said Carlos Mazzorin, vice president of purchasing for Ford Motor Co. ``Our feeling is that it can work to their detriment. You can end up too big with too cumbersome an organization, where perhaps you can no longer react to market needs quickly.
``In the long run, you may end up extending yourself to acquire operations you don't really need.''
Tom Stallkamp, executive vice president of procurement and supply at Chrysler Corp., echoed Mazzorin.
``Merger mania kind of bothers us,'' he said. ``Why is it happening? These suppliers are reacting to what they think we want them to do. But we don't want them to merge, and we're not asking them to. They say they're trying to `capture' profits. I don't even like what that word implies: How does it benefit anybody to `capture' profits?''
Industry consultants predict the consolidation of 1,500 or more of the world's first-tier suppliers into just a few hundred companies by the end of this decade. Each week brings news of more buyouts and mergers.
Many in the auto industry espouse the idea that companies will succeed as first-tier suppliers only if they can offer integrated parts systems. Rather than selling an instrument panel to an auto-maker, the thinking goes, a Tier 1 supplier will have to deliver a complete auto cockpit, containing electronics, wiring, steering controls, signal stalks and other components.
The Big Three executives raised a red flag on the trend this month, speaking to suppliers at a meeting of the Detroit Chapter of the Society of Automotive Engi-neers in White Sulphur Springs.
Stallkamp said Wall Street is partially to blame for the rise in supplier mergers. He criticized the financial community for encouraging automotive companies to buy and sell. The moves benefit investment bankers rather than the auto industry, he said.
``This kind of vertical integration is not necessary,'' Stallkamp said. ``We need to cooperate rather than buy each other.''
Stallkamp said that both carmakers and suppliers will be served better by loose partnerships that allow companies to move toward innovations and new technologies wherever they occur. Otherwise, he warned, suppliers will become locked into relationships that do not prove innovative.
But Charles Fine, co-director of the Massachusetts Institute of Technology's International Motor Vehicle Program, offered another spin on the automakers' reaction to merger mania. Fine interprets supplier consolidation as a shift in power away from auto assemblers - a shift that threatens the auto companies.
Addressing the same audience, Fine warned that suppliers will become increasingly powerful in the near future. As a result, he said, automakers risk losing traditional areas of control to their parts providers and surrendering core technologies to outside vendors.