“A lot of Tier 2, Tier 3, smaller suppliers have thrown contracts out the window and said, ‘This is what you’ve got to pay or you won’t get the parts,’ ” said Pat D’Eramo, CEO of Martinrea, a supplier of metal parts, assemblies and modules, and fluid management systems in 10 countries. “In other areas, like Europe, they don’t necessarily throw contracts out the window, but they go bankrupt. I think every week we have a bankrupt sub-supplier in Europe. It’s a very difficult situation with Tier 2 and Tier 3.”
Inflation, which stood at 9.1 percent in June, also is resulting in higher sticker prices. Kelley Blue Book reported a record average transaction price of $48,043 in June, compared with less than $36,000 five years ago. That, coupled with worries about a potential recession, is making some consumers withdraw from their new-vehicle search, according to Michelle Krebs, executive analyst at Cox Automotive.
Krebs appeared at the conference as part of a panel discussion titled “2023: A Return to Trend?”
“I’m glad ‘A Return to Trend’ has a question mark on it, because I think it’s very questionable,” Krebs told the audience. “Forecasting is really hard right now.”
She pointed out that Cox began this year with an upbeat forecast for 16 million new-vehicle sales in 2022. However, soon after that, production setbacks and complications from the chip shortage cut the expected full-year total to 15.3 million. At the end of March, Cox revised its forecast to 14.4 million.
This week’s underwhelming industry sales report for July has Cox considering another downward revision, Krebs said.
“Our current forecast is 14.4 million,” she said. “It could change tomorrow.”
Schuster appeared on the panel and echoed her words.
“The name of the game right now is real-time revision,” he said.