By Bridget Levitz, Truth Staff
While Elkhart County is at the heart of the RV industry, the handful of manufacturers supplying parts to the automotive world are affected by the changing car industry. And as foreign vehicles continue to climb in sales, one analyst says suppliers to the auto industry need to keep pace.
"Suppliers that are going to continue are going to have to start supplying the Hondas and the Toyotas of the world," Indiana University's Timothy Slaper said.
Slaper is the director of economic analysis at the Indiana Business Research Center of the Kelley School of Business at IU.
Components makers in the United States have lost business in recent years as Asian automakers with their own supplier networks gained market share, according to Indiana Economic Digest.
"Our suppliers traditionally supply U.S. cars," Slaper said. "U.S. cars being clobbered in the market share by foreign cars resulted in a precarious situation."
Speaking from a statewide perspective, Slaper says the state of auto suppliers is fairly grim.
The price of vehicles versus the price of raw materials needed for parts is creating a difficult business landscape.
From 1999 to 2006, the price of metal went up 60 percent and plastic material costs jumped 66 percent, while the cost of new vehicles to dealers dropped 3.5 percent.
"Imagine what this does to suppliers," Slaper said. "The price of vehicles are flat or dropping but materials are rising."
This has been a leading cause in Chapter 11 filings among suppliers, he said.
Forty-one percent of the suppliers in the Americas -- including Mexico and Canada -- are in fiscal danger, Slaper said.
Suppliers must be willing to diversify who they'll do business with, he said.
Honda Motor Co.'s decision to build a $550 million automobile plant in Greensburg gives a boost to the state's economy. But what is really needed now, said Slaper, is someone who can supply the parts Honda will need for the four-cylinder vehicles that will be under production in fall 2008.
"Having a Honda plant or the Toyota plant in Lafayette, Ind., could help the state's car supply industry -- but only if we're able to supply them with the parts they need," Slaper said. "If we can get a Toyota parts plant or Honda, that's a feather in our cap."
Kyle Hannon of the Greater Elkhart Chamber of Commerce agreed.
"When Honda announced it was opening a plant in Indiana we hoped it would be good for our companies that supply the car industry," he said.
One local company landed a contract with Honda last year. CTS Corp., headquartered in Elkhart, will build accelerator pedal modules in one of its China facilities beginning later this year.
CTS expects the contract to generate sales of more than $7 million per year by 2008, with a total projection of $40 million, according to the company Web site.
"When we have companies supplying the car companies that do well -- that's good news," Hannon said.
CTS is a designer and manufacturer of electronic components and sensors in the automotive, computer, communications, medical and industrial markets.
While Elkhart's not known as an automotive city, it has the tools to be competitive, Hannon said.
"We have good manufacturers that could adjust to make just about anything the car industry could need," he said.
Locally, said Hannon, Elkhart's suppliers to the car industry include CTS, ASA Electronics, Pro Air, Dexter Axle Co. and KIB Enterprises.
Products range from electronic sensors, air conditioning, heating and audio systems, and other electronic components.
Siemens VDO, another local supplier, announced last year that it will move its manufacturing operations and about 180 jobs to Mexico sometime this year.
The closing means about 180 workers in Elkhart will lose their jobs.
Local suppliers are expected to announce their 2006 fourth-quarter earnings in the coming weeks. These figures will paint a better picture of what's happening at the local level.