Turkish Auto Supplier Industry Suffers Due to Slowdown: Time to Increase Ties with D-8 Automotive Manufactures

Istanbul, TUrkey | October 29, 2008 by D-8 Secretariat

Contraction in the automotive sector has major negative affects in the supplier industry. As automotive producers’ orders for the Turkish supplier industry decline 30 percent, the sector loses hopes for the upcoming year, as quoted by Turkish media sources.

Decline in the production and growth rate of Turkey’s automotive sector due to falling global demand has also hurt the supplier industry, which collects $28 billion in annual revenues and employs approximately 260,000 workers. Particularly, the disruption of orders from Europe has hit companies that export a substantial proportion of their production. As automotive producers cut orders from the Turkish supplier industry by 30 percent, many companies have begun dismissing workers.

Alarm bells are tolling in the automotive industry, said the Association of Automotive Parts and Components Manufacturers, or TAYSAD, calling on those in the industry to create an urgent action plan. The supplier industry, which previously created the automotive sector’s production target of 2 million units for 2010, has now started to make crisis plans.

Bells toll

Some 52 of the 55 TAYSAD members who are among Turkey’s largest 1,000 industrial concerns report continuing profits, TAYSAD said in a written statement last week. “However, these will inevitably remain as virtual profits, because it is not in line with investments and staff increases, and energy costs rose severely throughout the year,” the statement said. “Therefore, alarm bells have started to toll for the automotive industry, which is the country’s export leader.”

The impacts of the decline in orders began after August, said Alper Kanca, deputy managing director of Kanca, a supplier to many automotive brands.

The decline in orders from overseas customers, such as Ford and Audi, ranged from 10 to 20 percent, he said. “We prepared ourselves in line with the uptrend in the automotive sector. We increased our capacity and staff. This sudden decline has affected us immensely, as we were not prepared.”

The credit crunch in the United States and Western Europe would spill over to the real economy, he said. “At present, the top three U.S. automotive firms are facing tough times, which reveals that the crisis will not last for only a few months. It is likely to last until the end of next year.”

Calling on companies to take urgent action, Kanca said they should reduce stock, revise orders as well as staff and premium pay. Firms should also cover their bank loans, Kanca said, adding that even workers should follow the same path.

The government, meanwhile, should introduce tax reductions and revitalize the domestic market, he suggested. “Companies in Turkey are powerful enough for purchases abroad. European companies need us, and it is also crucial to enter markets such as Russia and Iran.”

Autolive, an international supplier firm, started restructuring and revising costs in July, said Mustafa Alaca, the firm’s managing director. Autolive will dismiss 3,000 staff globally, he said, adding that the decision on Turkey will be given after October. The company faces a 10-percent shrinkage, he said, and the most urgent measure was to increase competitiveness.

Basic industries throughout the world were trying to invest in Russia, said Doğan Gülaydın, board member of Yemenici, an automotive parts manufacturer. “There is always noteworthy demand [in Russia]. However, due to the recorded structure in the sector in Turkey, taxes are very high.”

Goodyear stops production for eight days

Goodyear Lastikleri, the Turkish unit of Goodyear Tire & Rubber Co., said it will stop production at its factories in Turkey’s industrial northwest, Adapazarı and İzmit, for eight days. The company will close its plants from Oct. 3 for eight days, Goodyear Lastikleri said in a filing with the Istanbul Stock Exchange on Sept. 26 after the markets closed, citing a slump in domestic and export orders.

Iran’s car will enter Turkish market

Meanwhile, Khodro, a major Iranian car manufacturer, plans to introduce new products under its Samand brand at the Istanbul Auto Show 2008, which will be held Oct. 10 to 19 at the CNR Expo Center.

The company plans to exhibit a new limousine model, Sarir, as well as a new car, Soren, during the fair.

“With Sarir, we introduce an element - the limousine — that does not yet exist in the Turkish market. We aim to make an impact with Soren as well,” said Yigit Seskir, general manager of MYS Otomotiv, which is the Turkey distributor of Samand.

Both models will be put on sale as the auto show closes, said Seskir, adding: “We believe that Turkish consumers would appreciate these two new models. The growing interest in Samand, which was introduced onto Turkey’s market last year, encourages us to expect this. I also believe our market share would increase in Turkey, particularly with Soren.”

“The prices will be announced during the fair,” said Seskir. “We plan to introduce both gasoline-based and LPG-based engine versions of Sarir and Soren. Hotel administrations and industry chambers have already begun demanding Sarir, which has many security and comfort features, such as ABS brake systems, a TV, a DVD player, an MP3 player, remote-controlled central lock system and parking distance sensors.

With the credit crunch in the United States and Western Europe that spill over to the real economy, that has started to result in the decline in the production and growth rate of Turkey’s automotive sector due to falling global demand, D-8 Organization delivered its hope that the cooperation among memberstates ought to be increased. The organization said that they has developed certain structure such as senior official meeting and expert meeting to facilitate decision making process through establishment of Working Groups. One of those Working Groups is WG on Industry (WGI), which has become an official forum to explore areas and forms of cooperation on prospective industries since the 1st meeting of the WGI.

The D-8 Working Group on Industry will be held on 27-28 October 2008, in Bali, Indonesia. This will be the 4th meeting after the 3rd Working Group on Industry which was held on May 2007 in Kuala Lumpur, Malaysia, where members have reached a number of deliverables.

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