The merger that shook the automotive industry last week also could send tremors to plastic parts and material suppliers.
Several suppliers and analysts say the $38 billion, transcontinental deal between Auburn Hills, Mich.-based Chrysler Corp. and Daimler-Benz AG of Stuttgart, Germany, could kindle another round of supplier consolidations and drive home the urgency of moving globally with carmakers.
That would make the ranks of suppliers both smaller in total number and larger in company size. One analyst said the next wave of acquisitions is expected among midsized Tier 1 suppliers with annual sales between $100 million and $1 billion.
The Chrysler-Daimler merger, announced May 6, also could be good for the development of innovative plastic auto parts — on the design tables of both companies — while exerting downward pressure on resin prices.
The deal would create a company, called DaimlerChrysler AG, capable of making about 4 million vehicles annually. It would be the world's fifth largest maker of vehicles; third in terms of sales, with revenue of about $130 billion. The carmakers would cross paths in both Michigan and Germany to design and engineer new vehicles, while preserving their separate brand identities.
Initially, the move will propel Chrysler to Europe, and Daimler-Benz, the maker of Mercedes-Benz vehicles, into North America. That should spur the development of common vehicles for both continents, said Robert Albert, North American division president for supplier Siebe Automotive, a division of Windsor, England-based Siebe plc.
``Both companies will be able to replicate technology globally and reduce costs for development,'' said Albert, based at Siebe's Southfield, Mich., office. ``They should be more open to suppliers interested in developing engineering programs in different parts of the world.''
Firms that do not have the resources to move globally could be left out of the equation, he said.
Yet, few suppliers currently work with both companies, said partner Craig Fitzgerald of Southfield-based consulting firm Plante & Moran LLP. That could cause a scramble for new business.
``The potential winners are supply companies that are both in North America and Europe but who have a relatively small presence in the second country,'' Fitzgerald said. ``They could leverage that relationship into a larger amount of business.''
The deal could accelerate the trend of supplier firms making acquisitions or forming joint ventures on both continents, he said.
Yet, those plans are afoot already, said Thomas Gavin, vice president for sales and marketing with plastics molder Lacks Enterprises Inc. in Grand Rapids, Mich.
``I don't think [the merger] will force acquisitions more than what's already happened,'' he said.
Two weeks ago, Plymouth, Mich.-based Johnson Controls Inc. announced plans to buy Becker Group Inc. of Sterling Heights, Mich., largely to gain access to Becker's hefty European interior-parts business. Also in April, interior supplier Lear Corp. of Southfield purchased two Italian auto-parts molders, and Dearborn, Mich., auto-parts extruder Standard Products Co. announced a new plant in Poland.
Relations with suppliers around the globe will become increasingly critical, said President Kevin Alder of plastics parts producer Cambridge Industries Inc. of Madison Heights, Mich.
In addition, the deal might spur more efforts toward recycling plastic parts, Alder said. The issue is much larger in Europe, where regulations are stricter.
``When you start working together on world cars, recyclability has to become a bigger issue,'' Alder said. ``You can't do one type of design in Europe and another in North America.''
German automakers have already brought some of their key plastic-parts suppliers to the United States, said Robert Eller, president of plastics consulting company Robert Eller Associates Inc. in Akron, Ohio.
Such European suppliers as Sommer Allibert SA, Compagnie Plastic Omnium SA and Rehau Inc. either have plants or engineering and sales offices in the United States. The merger is likely to accelerate that shift by strengthening the German-U.S. connection, Eller said.
Chrysler and Daimler-Benz also could cut prices for some parts and materials. The companies together purchase about $46 billion in outside parts. They expect about 1 percent savings, or about $500 million, the first year of the merger as they reap economies of scale. That figure could grow, Fitzgerald said.
The merger also could put more pressure on material suppliers to cut resin prices as the automaker seeks global purchasing contracts, Eller said.
``They have a lot of buying power,'' Eller said. ``The companies can together buy four times as much plastics as before. When the volume goes up, they can control customer prices in the United States and Europe.''
The plastics industry could benefit from new products developed by the combined carmaker, said J. Erik Fyrwald, director of engineering materials with DuPont Automotive in Troy, Mich.
Chrysler is developing one of the industry's first structural, plastic-skinned car bodies that does not require a sheet of steel underneath. Daimler-Benz expects to unveil its Micro Compact AG Smart car this year in Europe. The two-seater Smart car is expected to use plastic exterior body panels.
In addition, Chrysler unveiled one of the industry's earliest plastic air-intake manifolds, in a project with Auburn Hills-based Siemens Automotive LP, and also plastic bumper fascias using in-mold color, Fyrwald said.
Daimler-Benz, working with German supplier Mann + Hummel GmbH, recently introduced a flat air-cleaner housing for heavy trucks that is one of the largest parts ever to use gas-assisted injection molding.
``Both companies are very innovative in the use of plastics for vehicles,'' Fyrwald said. ``We expect that to continue. They should be able to take ideas wherever they occur in the world and spread them around the globe.''