Why EV programs are causing problems for auto suppliers

As the number of planned full-electric and hybrid models rises, so is the complexity facing supplier program managers — a new reality that is translating to higher costs and missed timelines for companies already reeling from supply chain woes.

With the influx of new electrified vehicle programs, the average supplier is between 30 percent and 50 percent behind schedule, or running above cost targets, or both, said Dave Opsahl, CEO of Actify, a Detroit-based program management solutions provider. Opsahl drew the findings from a supplier study it conducted with ABI Research last year.

"If you're an automotive supplier and you have a situation like that, it's hard to run a predictable business because you just don't know how things stand at any one time," he said.

The bottleneck is compounding the cost pressures suppliers have been under over the past two years as they grapple with unstable raw material prices and parts shortages. According to a recent PwC report, about 42 percent of suppliers worldwide reported being in some level of financial distress in the first half of 2022, up from 27 percent in 2021.

The number of distinct programs a typical automotive supplier now manages has risen dramatically as automakers increase the number of EV and hybrid models. According to the Actify-ABI study, suppliers were working on 1.66 million automotive and parts programs in 2021. A program could be a single trim piece for a specific cup holder. And there's a whole lot of them.

The study found that with the influx of new EVs, programs are increasing at a high speed. From 2021 to 2025, the jobs will increase by about 66 percent to a total of 2.75 million programs, according to the study.

That sharp rise is putting a strain on the individual program managers who are tasked with tracking and coordinating highly complex programs, ensuring they meet customer quality and durability standards, as well as delivery and internal profit goals.

As more programs fall into their laps, it's getting harder for program managers to meet their targets, said Terry English, director of program management for plastic injection molding, finishing and tooling company at EG Industries, a Tier 1 supplier.

"You still have internal combustion engine vehicles that are being produced, and then you have electric and hybrid versions sometimes being produced on the same platform," English said. "You can't put a different program manager on each version because there are too many crossovers. You don't want three people working on what is basically the same project, just different variations on it. So all that does is multiply the number of programs one manager needs to take care of."

The ABI survey found that, on average, more than 80 percent of the work time that program managers spend in a given day adds "no value at all" to a supplier because they spend so much of it simply tracking down and relaying information for various programs, Opsahl said.

To address the issue, companies, including Actify as a solutions firm, are looking for ways to automate much of that information-collecting process, to help program managers stay focused on hitting the targets.

"The information program managers need generally lives somewhere else, and there's automation out there that will help you connect to where that information is and can automate the collection and reporting part of that," Opsahl said.

Making program managers' lives a little easier could also help suppliers retain their top talent. The human element of production bottlenecks is expected to remain an "ongoing issue" for suppliers in 2023 as they struggle to fill many positions, said Michael Robinet, executive director of automotive advisory services at S&P Global Mobility.

"If anyone thinks there's an ample supply of labor, especially in the U.S. at the wage rate suppliers are at, that's a very difficult equation," Robinet said.

EG's English agreed that there is a "shortage of good program managers" at the moment, making it critical to keep each one a company has.

"If someone on my team leaves, it'll be a struggle to replace them, and we understand that," he said. "So we're trying to find ways to make their lives easier if we can."