As car sales surge, U.S. automaker suppliers experiencing robust demand

Companies that act as component suppliers for automakers are experiencing torrid demand amid a surge in new vehicle sales.

NPR reports that the surge in new car sales in the U.S. and elsewhere around the world has fueled demand for suppliers. As a result, such manufacturing and distribution companies have had to ratchet up hiring, as they expand their payrolls in an effort to fulfill massive sales orders from carmakers such as General Motors, Ford and Chrysler.

U.S.-based suppliers are racing to fill orders from carmakers, as aggressive discounts and pricing schemes have helped fuel the industry's recovery in the wake of the worst economic contraction since the Great Depression. Suppliers in the U.S. were nearly driven out of the business during the lull in activity prompted by the financial crisis and resulting recession, but their fortunes have taken a sharp turn thanks to improving automaker prospects.

GM, Ford and Chrysler, among other carmakers, have overhauled supply chain management over the past year. The earthquake and tsunami that battered Japan in March 2011 caused substantial damage to many of the nation's manufacturing plants, on which carmakers incongruously relied for critically important components. After procurement auditing programs determined they were overly reliant on companies located outside of the U.S., some automakers emphasized the need to revamp supplier contract negotiations.

Myriad U.S. suppliers, accustomed to the drop in demand for their goods and services, had already sought to improve efficiency and output as they endeavored contend with a new normal. Their commitment to scrutinizing spend management and other aspects of their businesses has paid off, according to the news provider, as they have maintained the same focus while rehiring workers they formerly laid off.

Though U.S. suppliers are currently experiencing robust demand, prompting them to quickly expand their payrolls and augment production capacity, there are still concerns over whether such firms will be able to continue to meet a projected uptick in demand over the coming years, according to Center for Automotive Research economist Sean McAlinden.

McAlinden conceded that hiring among suppliers has risen quickly over the past year, but he said the sector will need to add another 174,000 workers by 2015 if it is to keep pace with demand from carmakers. He said that it is difficult for such firms to attract qualified candidates, especially ones with backgrounds in engineering and machinery. Moreover, he said that many suppliers are concerned that the latest recovery will not be sustained, as painful memories of the last business downturn linger.

"They don't know whether to believe the recovery is real," McAlinden said. "We're here living it, and we've been living it long enough now, for two years, that we know that it's real."