Starting point: Act now or die later

To be a supplier in the automotive industry is both a blessing and a curse. High volumes and long-lasting product life cycles were typical in the past. Once you had accepted the rules and set-up the respective processes and systems, RfQs came in regularly. This was the case, if you were able to navi­gate through the past industry downturns which washed away the weakest players and often resulted in a new wave of consolidation, both at the OEM as well as the supplier level.

However, the current cycle is different. Too many parameters are changing at the same time. The fu­ture propulsion technology is unclear, the investment in new business models are huge and its success is unforeseeable. Furthermore, the menace of CO2 emission reduction lays heavily on the automotive industry.

At the same time, a phalanx of well-established and technically versatile mid-sized companies, most of them originating in Germany, carry a portfolio of technical and technological capabilities that have been continuously improved in the past decades. Today, they are highly competitive and at times world-leading manufacturers of certain components, parts, aggregates, systems.

The key questions during the last automotive downturn were the same as today:

• Is your company really operating at its full potential?
• If your gut feeling says no, then how can you explore your set of capabilities?
• How can your technical expertise help solve problems in other industries or lead to more appro­priate solutions as well as better or more effective products? Can you enter these markets eco­nomically and sustainably?
• This inevitably leads to the following questions: Which are the potential industries that are highly attractive in terms of growth and profitability and at the same time use your technologies? Where do the capabilities of your company offer an additional customer advantage and a competitive edge compared to the players already supplying these industries?

Solution: Go and move on to pastures new

Our recommendation:

• Tear down existing boundaries
• Exploit the full potential of your technical expertise
• Leverage your skills to venture into a new industry

Most companies supplying the automotive industry today, did not start as automotive suppliers. Their true expertise is a certain production technology or the production of a certain component. The un­derlying conviction should be that your company is for example, an expert in high precision injection moulding plastics parts or has a unique expertise in producing sophisticated valves, filters, pumps, lights etc.

The emerging key question is: In which other industries could your technical expertise be honoured? Typically, this is not a new question and even though your experience with diversification in the past might have been mediocre, many peers have done it successfully. The reasons for past failures or limited success are typically manifold. Therefore, it might be useful to engage with external industry experts like us that have been working in potential target industries for decades. Our experts can help you take a critical look at your company’s degree of preparation, range of skills and approach to potential customers.

Santiago Advisors have just completed the 20^th successful repositioning initiative at mid-sized automotive suppliers, supporting the restructuring of their operations and paving the way for these suppliers to enter highly attractive markets such as the production of components for medical, electrical and , semiconductor industry, only to name a few.