Vitesco Technologies CEO Andreas Wolf said last week during the Detroit auto show that the maker of engine control units and EV charging hardware has been passing on increases in its materials costs to automakers.
“It’s clear the (automakers) have the chance to increase the prices of new cars, we have increased on the materials side, (and) in many cases were are able to give those increases to our customers,” he said.
At the same time, Wolf said, Vitesco has teams assigned to keep watch for suppliers in its own network that could be having financial problems because of rising costs.
Many suppliers can’t move fast enough, offering trailing contracts that leave them squeezing costs and accepting lower profit margins when prices spike.
“It’s hard to get out in front of it,” said Bill Berry, owner of Die-Tech & Engineering. “Our cost of raw materials has skyrocketed from an historical perspective.”
Berry has raised some prices, but is sensitive to competition from overseas.
Automakers have faced a series of supply chain issues over the past two years that have repeatedly delayed vehicle production, including semiconductor chip shortages.
“Ford’s announcement shows that we are not yet out of the woods,” Morgan Stanley analyst Adam Jonas said in a note. “It was only a matter of time before supplier cost recoveries began to flow.”
Suppliers say things won’t likely change any time soon.
“It’s the new economic reality and we’ll continue to fight for (financial) relief,” said Joe Perkins, CEO of Michigan engineering and machining firm Mobex Global.