In this November-December 2010 issue, we take a look at the role of Tier suppliers and how they have developed the manufacturing processes behind four radically different products; convertible car top systems, interior electronic components, hybrid drivetrain systems and turbochargers.

While OEMs are looking to reclaim ownership of previously out-sourced part and module production, and despite the different fields of expertise, to a one these companies noted that it is a combination of part production cost savings and in-house skills that will see them remain independent, yet integral parts of the automotive supply chain. Expanding on this, these companies deliver parts that would take possibly years of development by an OEM to develop by themselves, while the cost of such development would be, in the short-term at least, prohibitively expensive, both in terms of capital investment and man hours of research needed to deliver these products from scratch.

Another drawback to bringing these processes back in-house would be an unavoidable dip in part quality. Whether an OEM is delivering entry-level or premium models, vehicle build quality is a key differentiator in the buying process; should there be any drop in the perceived performance of a given vehicle in this area, customer dissatisfaction would be hard to avoid, making repeat business that much more difficult to regain.

Then there is the cost. Of course, businesses can hit hard times, giving an OEM the opportunity to take control of the part supplier, which in turn means an automatic head start in the race to deliver useable technology of the required quality – such is the case with Volkswagen moving in to take over areas of Karmann as the part and module supplier attempts to remain a viable concern. Yet purchasing the company does not mean that that the in-house technology will be offered as part of the package. The proprietary technologies and processes delivered by a Tier supplier could well be separated out in any takeover deal.

Should the Tier supplier be purchased in a leverage buyout, the expertise might also be unavailable. While engineers would be horrified to even consider such a situation, some of the processes in part manufacture are not on disc or paper, but in the head of the worker assembling the parts. Lose the disenfranchised employee and purchasing such a company would be like buying a secondhand jigsaw - with a piece missing.

So while OEMs might prefer to have a larger percentage of parts delivered from within their own facilities – and indeed, many will succeed in regaining such processes - delivery of complex bespoke parts will largely remain in the hands of the Tier suppliers. Considering the benefits these companies offer, a change to the underlying perception that they are part of the problem is long overdue, as they are clearly part of the solution.