Automotive Suppliers: A Future with Changes in Corporate Culture
Germany's top automotive suppliers are well prepared: they have full coffers to drive forward the necessary transformations. However, the corporate culture must also change — this is a task that has to be taken seriously in the board rooms.
Ten years without a crisis - this could be the title of Berylls study "Global Top 100 Automotive Suppliers" in 2018. Growth is expected to continue unabated. Berylls predicts an increase of up to ten percent this year and in 2018. Continued positive economic data from Europe, coupled with robust growth in the USA (+2.0 to 2.5 % GDP) and solid figures from China (+6.5 % GDP), create a generally positive environment for car purchases.
Strong Financial Position
The consolidation process will also gain momentum, because the time for further mega-mergers is favorable: Most automotive suppliers' cash reserves are well filled after years of high returns, the company valuations are rather low compared to other growth sectors, and decisions for strategic realignment, triggered by the change in the automotive industry — such as CASE: Connected, Autonomous, Shared & Service, Electric - have already been made.
Many top managers in the supplier industry are eager to buy the right companies and sell off peripheral businesses. In 2018, it would therefore come as no surprise if the top 100 automotive suppliers hit the sales mark of one trillion euros. Then 55 % of all global supplier sales would be made by one hundred companies. The balance of power between OEMs and suppliers is slowly becoming more balanced. German automotive suppliers have already been able to improve their position among the top 100 in recent years. In 2000, the German top 100 companies accounted for just 15 percentage points of sales. By 2016, this figure had risen to just under 23 %.
The Americans, on the other hand, plummeted from 39 % to 17 % in the past year. This trend will continue and the Germans will be able to consolidate their position as number two behind the Japanese. All three of the largest automotive suppliers could then come from Germany: Bosch, Continental and ZF.
However, growth and investments in CASE & digitization innovations will be at the expense of profitability. It is already evident that the peak figure from 2015 (+8.3 % EBIT or operating income margin) will no longer be reached. Berylls expects to see a decline to a level of around seven percent — which is, however, still higher than the long-term average.
Nevertheless, the established automotive suppliers will not be allowed to rest on their laurels. In order to be able to play in the Top 100 League — the threshold will rise to around three billion euros by 2018 — in addition to the key success factors of globalization, networking, innovative strength, entrepreneurship and financial strength, two new areas of competence are crucial: digitization and transformation know-how. A study carried out by Berylls Strategy Advisors in collaboration with The Culture Institute provides answers to the question of the extent to which corporate cultures support or hinder the automotive suppliers in their digital transformation. Action is needed.
The results show that the consistent adjustment of corporate culture is increasingly seen as a matter for the boss, because culture is relevant to entrepreneurial success. However, there is still too often a lack of collective communication among senior executives on this important topic and the accompanying transparency about cultural strengths and weaknesses. In addition, it seems to be too much of a challenge for many companies to create a corporate culture against the background of digitalization.
Necessary Cultural Changes
Two-thirds of the companies have not yet anchored digitization in their functions. The study shows that necessary cultural changes in the context of digitization are hardly discussed. This is a risky strategy. After all, digitalization demands new cultural approaches from an organization. However, most companies do not have the courage to break new ground. Rather, they rely on the tried and tested, established habits and familiar processes. The willingness to create a suitable environment for "digital natives" within the company is correspondingly low. This is probably also because many companies continue to underestimate important aspects of digitization and the interaction with their own team's state of mind.
Conscious use of Big Data to streamline decision-making is not seen as a strategic option. However, this is necessary — and only one of the relevant building blocks, if traditional suppliers want to assert themselves against the agile newcomers of the Next 100 in the future.
Attractive Next 100
However, this will not prevent a rapid rise of the Next 100. The new CASE & digitization players will help the entire automotive industry enter a new era. In the next few years, some of them will probably make it into the top 100. And this is urgently needed, because the automotive industry has long enough been pigeonholed into the old economy. With the Next 100, the industry is not only gaining in attractiveness again — the (auto)mobile industry can even take the lead in the digital movement.
In the past, many products and areas of life have been digitized and revitalized — from dial-up telephones to smartphones, from calculating machines to tablets, from televisions to streaming media. The vehicle is changing too: from a motorized vehicle to a digital mobility product. The future is therefore emission and accident-free, electrical, autonomous and fully networked. The automotive suppliers will also be.
This article was first published by Automobil Industrie.
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