Rationalise, refocus and regenerate. That is the strategy for ArvinMeritor, the Michigan-based auto parts supplier, Chip McClure, chairman and chief executive, told shareholders at the annual meeting last month.
His comment could be applied throughout the global parts industry as it struggles to adjust to a brutal business environment.
The big question is which of the companies will survive the pain of rationalisation and refocus for long enough to enjoy the fruits of regeneration.
Parts makers are being squeezed from both ends of their business. Spiralling steel, resin and other commodity prices have raised their raw material costs sharply. ArvinMeritor, which produces suspensions, brake systems and doors, expects to pay Dollars 30m more for steel in the first three months of this year than compared with the same period a year ago.
The problem for the suppliers is that, with only a handful of exceptions, they are having trouble passing those higher costs on to their customers, whether vehicle manufacturers or other parts makers which integrate components into more complex systems.
As Chris Ceraso, analyst at Credit Suisse First Boston in New York, puts it: "Higher steel costs roll downhill, with little interest from the big guys in saving the necks of the little guys at the bottom of the hill."
The exceptions include companies such as Germany's Robert Bosch. Its technological lead in automotive electronics enables it to call at least some of the shots.
Most Japanese parts makers continue to report buoyant earnings thanks to their tight cost controls and the success of Toyota, Honda and Nissan vehicles in the market.
"You need to be strong to pass price increases on to the original equipment manufacturers," says David Vasak, a consultant at PA Consulting in Frankfurt.
For now, many suppliers are weak - so weak that four sizeable US parts makers have filed for protection from creditors in the past six months.
The latest, Tower Automotive, which specialises in vehicle frames and structures, chassis and suspension components, has annual revenues of Dollars 3bn and employs about 12,000 people on four continents.
Among the most vulnerable companies are those with a sizeable exposure to General Motors and Ford.
The two Detroit companies are trimming production on both sides of the Atlantic as they try to bring down swollen inventories, adjust to shrinking market shares and restructure troubled operations.
Visteon, which relies on Ford for two-thirds of its business, suspended its dividend early last month after losing Dollars 1.5bn last year. Delphi, a former GM subsidiary, reported a fourth quarter loss of Dollars 102m. Analysts have cut earnings estimates for several other parts makers in recent months.
Martin King, analyst at Standard & Poor's, foresees that "automotive suppliers with thin profit margins, a high concentration of sales to General Motors and Ford, a highly fixed cost structure, or exposure to raw-material price fluctuations are likely to face increased financial stress during 2005".
The squeeze along the supply chain has also reinforced what Mr Vasak calls a "cycle of mistrust" in the industry, where companies balk at sharing sensitive information for fear that they will come under even heavier pressure to shave prices and margins.
The tough times prevailing in the industry have also strained relations within companies. Tens of thousands of workers have lost their jobs. According to Mr Vasak, tensions have risen in many research and development teams where members do not always take kindly to being told to build a bumper with 12 parts instead of 35.
The change in bumper design is just one example of the upheaval in the parts industry.
Vehicle manufacturers are asking suppliers to take on increasingly complex tasks. Toronto-based Magna International already assembles entire cars. Its plant in Graz, Austria, is due to start production of DaimlerChrysler's popular Chrysler 300C saloon later this year. It will be aimed at markets outside North America.
Last year, Siemens, the German electrical group, broadened its expertise in powertrain electronics, vehicle instrumentation and driver information by buying two automotive electronics plants in Huntsville, Alabama, from Daimler-Chrysler.
Most North American and European parts makers are moving, to a greater or lesser extent, to "lean manufacturing" techniques, such as just-in-time production and team-based organisations, which have given their Japanese rivals a strong reputation for quality, reliability and efficiency. A growing number of companies are also taking action on a broader front.
Delphi is working to transform itself from an auto parts maker into an electronic systems supplier. Visteon is likely to close or sell several operations in coming months as it focuses on interiors, climate controls, and lighting and electronic systems. Delphi has adapted its automotive expertise to an array of other uses, from satellite radios to stability controls for wheelchairs, respiratory monitors and washing machine switches. It has sold or shut about 75 plants and product lines since it was spun off by GM in 1999.
Many other companies are seeking to cut costs by shifting their centre of gravity. Mr Vasak estimates that about half of all German suppliers now have operations in eastern Europe.
Faurecia, the French group, has seven plants in Poland employing more than 3,000 people. In North America, the momentum has been towards Mexico.
ArvinMeritor has singled out Europe and Asia as prime growth areas. It built a car door factory in Poznan, Poland, last year. Almost 40 per cent of its workforce is now outside North America.
But ArvinMeritor failed in 2003 with a Dollars 2.7bn takeover bid for Dana, one of its chief competitors.
As Mr McClure and many of his counterparts have discovered, the road to regeneration is a bumpy one.
