Although German carmakers have expressed willingness to offer aid to suppliers in an effort to avoid disrupting production, it is more likely such measures would be taken for part suppliers rather than logistics companies which find themselves in financial trouble, Automotive Logistics has learned.
The failure or bankruptcy of a supplier could put a carmaker’s production at risk, especially in supply chains that stretch around the globe. Daimler, VW and BMW have recently announced that they could take extraordinary measures to help such suppliers, whether through cash injections, more flexible payment arrangements or through consultation.
BMW’s Dr Herbert Diess, board member for purchasing, said in a statement that the company was working closely with the purchasing departments of other premium carmakers to support suppliers in precarious situations and has expanded the team that monitors supplier risk. Nicole Rubba, a spokesperson for Daimler, told Automotive Logistics that Mercedes-Benz Cars and Vans has intensified its “supplier risk management processes”.
“This means that we analyse the development of the economic situation of the suppliers thoroughly, so that in cases of a supplier bankruptcy we can adopt measures to secure our production and supply processes on time,” she said.
In the case of LSPs, such measures would include improved payment processes for providers or even paying them in advance. Further actions could assist a supplier to restructure, or to lend management support; for example, Daimler could hold negotiations with the LSP’s creditors.
To date, however, the carmaker has not pursued such measures with its transport providers. While Rubba said Daimler treats LSPs on the same terms as part suppliers, most emergency measures are for suppliers who provide the carmaker with production material, in particular components for which it does not have multiple suppliers. “The industry tends to use a single source, the more complex or innovative a technology is,” said Rubba.
She confirmed that in the case of a financially faltering LSP, Daimler would be more likely to switch providers than to issue aid.
Following recent growth in Europe, many providers have invested in new capacity, for trucks, rail, ports and ships. Some providers are now facing the perilous scenario of high building costs, over capacity and collapsed demand. Without additional help or compromise from shippers, a prolonged downturn and fall in prices is likely to lead some logistics providers into administration or consolidation.
