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Auto industry supply chain is shrinking

Employees work on the production line of a factory of the European car parts maker, British Wagon automotives, which makes car parts for groups including troubled U.S. giants General Motors and Ford

TEXT OF STORY

Stacey Vanek-Smith: The U.S. and China are meeting today for their annual trade meeting. Trade, of course, has long been a sore spot between the two countries. Last month, the U.S. slapped tariffs on Chinese-made tires. And The FT reports this morning China is now looking into whether government subsidies have given the U.S. auto industry an unfair advantage.

The struggles of our car companies, of course, have gotten lots of attention. But the companies that make parts for those cars have been struggling, too, as Alisa Roth reports.


Alisa Roth: If you're in the car right now, take a look around -- it's a good bet the inside was made by Johnson Controls. You may not recognize the name, but they're the world's biggest maker of car interiors. And yesterday they reported a big jump in third-quarter profits.

Other suppliers are reporting earnings in the next couple of days.

Mark Gardner's in charge of the auto practice at Deloitte Consulting, and he's expecting good news.

Mark Gardner: The suppliers are holding their own, and I think it's evidence of the fact that they've been under some very aggressive campaigns and programs to consolidate and collapse costs and to try to stick with lower volumes they've been seeing for the last year.

Gardner says the industry is shrinking, but slowly, and it could be awhile before it finishes shaking out.

Doug Harvey is a partner in the automotive division at the consulting firm AT Kearney.

Doug Harvey: There still is probably a significant amount of consolidation that we're going to see in the supply base because the overall industry is a smaller industry than it was.

That'll mean fewer, bigger suppliers. But probably a more stable industry overall.

I'm Alisa Roth for Marketplace.

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