NEWS
Original Equipment Suppliers Association
2017 Third Quarter │ Edition 3
IN THIS ISSUE... 3 4 6
The Suppliers' Voice 2017 OESA Annual Conference Industry Outlook
8 9 10
New Technology Legal Corner OESA Council Membership
This edition is sponsored by
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OESA Events Calendar of Events
AGILE. RESPONSIVE. POWERFUL. ROADTESTED. We get the automotive industry. That’s why multinational Fortune 500 companies to family-owned suppliers look to Warner Norcross for counsel. Through strategic guidance, we maneuver relationships between parts suppliers and vehicle manufacturers, automotive regulators and the emerging autonomous vehicle market. For more information about our experience and expertise in the fast and furious automotive market, visit wnj.com.
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A BETTER PARTNERSHIP‰
Voice
The Suppliers’
Julie A. Fream
President and CEO
OESA’s Annual Conference Offers Key Industry Insight
The automotive industry is evolving more rapidly and expansively now than any other time in the past 100 years – and the momentum continues. Connected vehicles, automated driving, shorter design cycles, vehicle innovation, the need for new talent, ride-sharing and ongoing government discussions continue to change the fundamentals of the industry. It is in this new era that we host our 2017 Annual Conference: The Industry’s New Landscape on November 13, 2017. OESA’s Annual Conference offers a thought-provoking agenda – with the supplier perspective in mind. Some of the industry’s key decision makers and thought leaders will share important trends, explore the outlook of the industry, address the impact of the new U.S. administration, and provide relevant information for suppliers to thrive in the industry’s new landscape. Confirmed speakers include:
Steve Kiefer, Senior Vice President, Global Purchasing and Supply Chain, General Motors
Mahesh Kodumudi, Executive Vice President, Purchasing, Volkswagen Group of America
Sachin Lawande, President and CEO, Visteon
Sherif Marakby, Vice President, Autonomous Vehicles & Electrification, Ford Motor Company
Robert S. “Steve” Miller, President, Chief Executive Officer and Director, IAC
Dr. G. Mustafa Mohatarem, Chief Economist, General Motors
Ziad “Z” Ojakli, Group Vice President of Government & Community Relations, Ford Motor Company
Michael Robinet, Managing Director, Automotive Advisory Services, IHS Markit
RJ Scaringe, CEO, Rivian Automotive
Susan Smyth, Chief Scientist, Global Manufacturing, General Motors
Shinichi Yasui, Senior Vice President of Toyota North America
Bob Young, Vice President, Purchasing, Toyota Engineering & Manufacturing North America
John Murphy, Managing Director & Lead US Auto Analyst, Bank of America Merrill Lynch
I hope you will join us at the 2017 OESA Annual Conference. As always, please feel free to contact me at 248.430.5963 or jfream@oesa.org.
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2017 OESA ANNUAL CONFERENCE
2017 ANNUAL CONFERENCE THE INDUSTRY’S NEW LANDSCAPE November 13, 2017 • Suburban Collection Showplace, Novi, MI
Agenda Highlights KEYNOTE PRESENTATIONS: Autonomy & Electrification: Driving Ford’s Future Sherif Marakby, Vice President, Autonomous Vehicles & Electrification, Ford Motor Company The Automotive Influence in Washington, D.C. Ziad “Z” Ojakli, Group Vice President of Government & Community Relations, Ford Motor Company Ann Wilson, Senior Vice President, Government Affairs, MEMA The Future of Automotive: A New OEM’s Perspective RJ Scaringe, CEO, Rivian Automotive Toyota: Perspectives from the President Shinichi Yasui, President, Toyota Engineering & Manufacturing North America BREAKOUT SESSIONS AND PANEL DISCUSSIONS: Preparing for the New Mobility Landscape Sachin Lawande, President and CEO, Visteon Steve Miller, President, Chief Executive Officer and Director, IAC Cycle Dynamics: The Industry Outlook Panel Dr. G. Mustafa Mohatarem, Chief Economist, General Motors John Murphy, Managing Director & Lead US Auto Analyst, Bank of America Merrill Lynch Michael Robinet, Managing Director, Automotive Advisory Services, IHS Markit Next Generation OEM/Supplier Relationships Steve Kiefer, Senior Vice President, Global Purchasing and Supply Chain, General Motors Mahesh Kodumudi, Executive Vice President, Purchasing, Volkswagen Group of America Bob Young, Vice President, Purchasing, Toyota Engineering & Manufacturing North America Advanced Vehicle Technology: Separating the Reality from the Hype Susan Smyth, Chief Scientist, Global Manufacturing, General Motors Jerry Lavine, Vice President, Advanced Product Development, Magna
For more information and to register to attend, visit oesa.org or call 248.952.6401.
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2017 OESA ANNUAL CONFERENCE SPONSORS
PRESENTING SPONSORS
PREMIER SPONSORS
PRINCIPAL SPONSORS
CONFERENCE EXHIBITORS
SUPPORTING SPONSORS
Sponsorship opportunities are still available. Contact Drew Rhodes at drhodes@oesa.org or 248.430.5961.
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INDUSTRY OUTLOOK
DRIVING MARKET OPPORTUNITIES WITHIN THE LUXURY SECTOR Mike Jackson Executive Director, Strategy and Research 248.430.5954 │ mjackson@oesa.org
As the demand of luxury brand entries in the U.S. and beyond continues to outpace total market sales, this segment represents a unique opportunity for suppliers. Through June 2017, U.S. light vehicles sales slipped 2.1 percent to 8.45 million units. During the same period, luxury brand sales in the U.S. grew by 2.3 percent to 1.0 million units, or a 12 percent share. Despite considerable policy uncertainty in Washington, D.C., the market continues to experience strong fundamentals including historically low interest rates, tight employment markets, low energy prices, a recordhigh stock market and sharply higher home values – all of which enhance the wealth effect and bolster consumer sentiment. This is important as luxury brands typically command a meaningfully higher price point within respective segments, offering additional profit potential.
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INDUSTRY OUTLOOK
Suppliers also benefit from increasing global luxury segment demand as automakers leverage their U.S. production to export more vehicles. BMW and Mercedes-Benz now export an average 70 percent of their annual output of their wildly popular, U.S. manufactured sport utility. A key factor for luxury brand supremacy is for an OEM to have sufficient coverage across all product categories. The dramatic shift in consumer preferences toward sport utilities has resulted in declining sales for luxury brands with incomplete product portfolios. In evaluating sales of the top U.S. luxury brands through June 2017, the dramatic increase in sport utility demand helped push emerging brands higher as newer entries, including the Jaguar F-Pace, the Tesla Model X and Infiniti QX30, posted sizable gains. At the same time, more established manufacturers with stronger passenger car portfolios experience declining sales. The growth of luxury brands offers unique opportunities for suppliers to be affiliated with and to contribute to the prestige, refinement and performance of vehicles that encompass opulence, exclusivity, and aspirational appeal. Supplying the needs of luxury customers highlights an organization’s ability to meet rigorous quality parameters and may open the door to new opportunities across a wider range of prospective customers. OESA News - 2017 Third Quarter
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NEW TECHNOLOGY
NEW TECHNOLOGY
BRINGS EXCITEMENT/CHALLENGES TO AUTO INDUSTRY Brian Daugherty Chief Technology Officer │MEMA 248.430.5966 │ bdaugherty@mema.org
We are fortunate to live in exciting times – especially regarding new vehicle technology. The Tesla Model 3 “launch” (with initial sales only to employees) is now upon us and many questions will be answered over the next 12 to 18 months: Will the 325,000 potential customers that put down $1,000 deposits take delivery of their vehicles or change their minds? Can Tesla ramp up to efficiently produce a high-quality, mass market vehicle and make a profit? Will sales of the Model S and X decline as a result? Interestingly, the Tesla Fremont plant currently uses approximately seven times the employees per vehicle produced than the previous Toyota/GM operation at the same site. Automated vehicle (AV) technology discussions have dominated industry press coverage for several years and now the hype has reached a fever pitch. This area will continue to be exciting as the next generation of Advanced Driver Awareness Systems (ADAS) and SAE Level 2 automated technology becomes more commonplace. However, we have seen many OEM statements regarding the timing and capabilities of automated vehicles get misinterpreted or exaggerated. Unfortunately, as higher levels of automation continue to progress, the difficulty curve is not even close to linear. Reality will start to creep into the discussion as the press realizes that true SAE Level 5, all-weather, go anywhere, driverless vehicles are still quite a long way in the future. In the meantime, public trials of Level 4 vehicles (cars, SUVs and buses) with limited operational environments will continue. The U.S. Congress is currently drafting legislation to govern testing and production requirements for AVs to avoid a patchwork of conflicting state laws, and MEMA is actively involved in these critical efforts. Additionally, the new administration is reviewing the recently issued Final Determination of the Mid-Term Evaluation of GHG standards for MY 2022-2025 lightduty vehicles. As a result, changes in the Corporate Average Fuel Economy (CAFE) program could significantly impact the industry’s ongoing powertrain electrification and hybridization efforts. On a related 8 │ OESA News - 2017 Third Quarter
note, MEMA is actively working to allow vehicle suppliers to directly submit fuel-saving advanced technologies for evaluation and approval as off-cycle CAFE credits. These off-cycle credit technologies could then be used by multiple OEMs. We are still awaiting the Trump Administration’s view regarding NHTSA’s January Vehicle-toVehicle Communication (V2V) Notice of Proposed Rulemaking. The NHTSA proposal would require 5.9 GHz Dedicated Short Range Communications (DSRC) technology on all light vehicles sold in the U.S. and is an important step forward in advancing vehicle safety. The DSRC technology enables low-cost, real-time collision warnings and integrates with existing invehicle sensors to provide improved ADAS features. Unfortunately, the 5.9 GHz spectrum band used for this technology is also coveted by Wi-Fi providers, which has led to a battle at the FCC between faster movie downloads and vehicle safety. Any sharing of this spectrum will lead to interference with V2V messages and therefore reduce vehicle safety. MEMA continues to advocate that the FCC reserve the current 5.9 GHz Vehicle Safety Spectrum bandwidth only for V2V communications.
LEGAL CORNER
DOES A TERMINATION FOR CONVENIENCE CLAUSE REALLY MEAN WHAT IT SAYS? Michael Brady Partner │Warner Norcross & Judd LLP Mbrady@wnj.com │ 248.784.5032 The standard purchasing terms and conditions of essentially every Original Equipment Manufacturer and Tier One supplier contains a termination for “convenience” provision. This clause states, in sum, that the buyer can terminate the contract at any time, at its option and in its sole discretion. These clauses typically state that if the customer chooses to terminate, it will only be responsible for finished products already ordered, usable work-in-process and other discrete costs. This can seem harsh and potentially unjust, particularly when the supplier was anticipating a long-term agreement, agreed to per-part pricing to reflect that understanding and has sunk hard costs into its manufacturing facility. But if the supplier takes a deeper look at the contract terms and conditions with its customer, more than likely it will find this provision included in the contract. Despite the straight-forward language of a termination for convenience provision – that the buyer can terminate for any reason or no reason at all – this can run counter to other aspects of the law governing supply agreements. This is where the law can get a bit muddled. Many supply agreements are set up as “requirements” contracts. These contracts are recognized as enforceable under the Uniform Commercial Code (UCC) even though there is not a set quantity that the buyer must purchase. The UCC recognizes the practical reality – particularly in the automotive world – that a buyer may not always know how much product to order. So under a requirements contract, the buyer commits to a per-part price to purchase all (or a percentage) of its requirements for that part from the seller. However, while the buyer has flexibility to only order what it needs, it must still order products in good faith. This means that the buyer must operate and conduct its business “according to commercial standard of fair dealing ...” (UCC 2-306, Comment 2). For example, “a shut-down by a requirements buyer for lack of orders might be permissible when a shut-down merely to curtail losses would not.” Id. As some courts have observed, to satisfy this good faith duty, a buyer cannot simply have second thoughts about the terms of the contract and stop ordering products to get out of it. But, if the buyer has a legitimate business reason for eliminating its requirements, as opposed to a desire to avoid its contract, the buyer acts in good faith. See Empire Gas Corp. v. American Bakeries, 840 F.2d 1333 (7th Cir. 1988).
But, what if a requirements contract also contains a termination for convenience clause, and the buyer simply decides to terminate the contract? Is that decision a failure by the buyer to order products in good faith, or merely one party utilizing an agreed upon provision to end the contract? The law is unclear, with courts answering this question differently. In Metal One America, Inc. v. Center Manufacturing., Inc., 2005 WL 1657128 (W.D. MI 2005), the court considered whether Center’s termination for convenience of a requirements contract constituted a breach. The court found that it did and concluded that Center chose to end the contract and stopped ordering parts, not for lack of orders but because Center was attempting to “curtail losses.” In the court’s view, this constituted a bad faith breach of the contract. The court was also swayed by the fact that the parties had an established course of performance. Center regularly placed orders for products and then abruptly terminated after placing its most recent order. In contrast, the court in Q.C. Onics Ventures, LP v. Johnson Controls, Inc., 2006 WL 1722365 (N.D. Ind. 2006) (applying Michigan law) took the opposite view. In that case, JCI was sued because it terminated a requirements contract, pursuant to a clear termination for convenience clause. The plaintiff argued that because the contract was a requirements contract, JCI could not terminate for convenience, and was required to exercise good faith when determining its requirements. The court flatly rejected this argument and concluded that the obligation to buy in good faith on one hand, and the contractually agreed upon right allowing JCI to terminate for convenience on the other, were two separate concepts. JCI was not claiming in bad faith that its requirements were now zero, but was instead relying on the termination clause for its decision. JCI was required to order its requirements in good faith while the contract was in effect, but it could properly end the contract for any reason. In reaching its decision, the court rejected the analysis in Metal One America. There have been few other decisions on this topic. So where does that leave suppliers? As the Q.C. Onics Ventures case recognized, it is difficult to conclude that a clear termination for convenience provision means something other than exactly what it says. A termination done the right way – with payment of costs and appropriate advance notice, none of which was done in Metal One America – will be much more defensible in court. But each situation is very fact specific. When deciding whether to terminate a supply agreement or face a situation where your supplier or customer is threatening to end the contract, it is prudent to examine the contract documents very carefully before making any decisions. Do you have a “requirements” contract? Are applicable terms and conditions properly incorporated into the contract and, if so, what do they say regarding termination? What was the parties’ course of performance and how will that impact the interpretation of the contract? The answers to these questions will dictate how to proceed in a way that makes the most business sense while complying with your legal obligations. OESA News - 2017 Third Quarter
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OESA COUNCIL MEMBERSHIP
REMANUFACTURING OPPORTUNITIES FOR OE SUPPLIERS, OCT. 3-4, METRO DETROIT Remanufacturing Opportunities for OE Suppliers: Learn More at the MERA Technology Forum and MERA-Golisano Remanufacturing & Sustainability Conference, Oct. 3-4 Automotive suppliers looking to diversify their product portfolios or expand their service parts offerings should consider remanufacturing as a potential avenue for future growth. This expanding manufacturing sector presents an excellent opportunity to control your product—and sell it again profitably—after the initial application on a vehicle. MERA, our sister division within MEMA dedicated to representing the business interests of remanufacturing companies, will host two key remanufacturing events in October.
• Brad Oleshansky, Founder and CEO, M1 Concourse • Joe Mejaly, Sr. Vice President, Operations, Sales, Strategic Planning and Marketing, DENSO Products and Services America • Shawn Zwicker, Global Operations Leader, Remanufacturing, Cummins • Paul Traub, Senior Business Economist, Federal Reserve Bank of Chicago •
...and more!
To learn more about the programs or for registration assistance, call 248.750.1280 or email info@mera.org.
• Oct. 3 | MERA Remanufacturing Technology Forum, Wayne State University, Detroit • Oct. 4 | MERA-Golisano Remanufacturing & Sustainability Conference, Michigan State University MEC, Troy, Mich. Speakers will include: • Thomas M. Gartland, Former President, North America, Avis Budget Group • Troy A. Clarke, Chairman, President and CEO, Navistar
OESA ACCEPTING NOMINATIONS FOR THE YOUNG LEADERSHIP COUNCIL Attracting and retaining key talent remains a top strategic challenge at most OESA member companies. OESA created the Young Leadership Council (YLC) to assist member companies in retaining key employees and provide a forum to develop those employees. OESA is pleased to announce the formation of the YLC6 for 2017-2019 and is seeking nominations. The council is open to OESA supplier and affiliate member companies and provides a forum to develop and retain key personnel on a management track. Nominees may come from any functional area including finance, sales, marketing, manufacturing, human resources, purchasing, logistics, communications or engineering. For more infomation, please contact: Ginger Juncker Executive Director, Councils and Member Programs │OESA 248.430.5953 │ gjuncker@oesa.org
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OESA EVENTS
FCA NORTH AMERICA TOWN HALL MEETING | SEP 12 OESA is pleased to host the 11th Annual FCA North America Town Hall meeting for OESA members and FCA suppliers on Sept. 12, 2017, at the Laurel Manor in Livonia, MI. This meeting is an opportunity to hear directly from key FCA decision makers in supply chain management; purchasing and supplier quality; and engineering and manufacturing. Scott Thiele, chief purchasing officer, FCA – Global, will provide an FCA North America Purchasing and Supplier Quality Update, which will an update on key initiatives in purchasing and supplier relations and FCA’s 2017 top priorities. Wendi Gentry-Stuenkel, head of supply chain management, NAFTA, FCA North America, will provide the FCA Supply Chain Management Outlook, and Jim Morrison, head of Ram Brand North America, FCA North America, will provide the current Ram brand strategy update. ► EXECUTIVE SPONSORS
OESA Board of Directors Executive Committee Chairman of the Board Mike Mansuetti President Robert Bosch LLC Immediate Past Chair Samir Salman CEO NA Region Continental Automotive Systems, Inc. Vice Chairman Ramzi Hermiz President and CEO Shiloh Industries, Inc. Officer Julie A. Fream President and CEO Original Equipment Suppliers Association Officer Steve Handschuh President and CEO Motor & Equipment Manufacturers Association
Directors Oscar Albin Executive President INA, Industria Nacional de Autopartes A.C.
HONDA NORTH AMERICA TOWN HALL MEETING | SEP 28 Register now for the 7th annual OESA/Honda Town Hall meeting on Sept. 28, 2017, at the Laurel Manor in Livonia, Mich. The event will feature lunch, networking and presentations by senior Honda executives, followed by a question and answer session and continued networking. For registration assistance, contact OESA at 248.952.6401 or info@oesa.org. ► EXECUTIVE SPONSOR
Paul Barnett President Principal Manufacturing James Bradbury President Grand Rapids Controls Company LLC Françoise Colpron Group President Valeo North America Frederick Cartwright Executive Director Clemson University International Center for Automotive Research (CU-ICAR) David C. Dauch Chairman and CEO American Axle & Manufacturing, Inc. (AAM) (Continued on page 12)
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OESA EVENTS & YLC OESA Board of Directors Executive Committee
OESA OEM TERMS & CONDITIONS & CURRENT LEGAL ISSUES | SEP 14
Jacqui Dedo Co-Founder Aware Mobility, llc
OESA announces the 2017 OEM Terms & Conditions and Current Legal Issues Event on Sept.14, 2017, at the MSU Management Education Center in Troy, MI, and via live webinar. This meeting will provide attendees with updates on OEM terms and conditions, as well as interrelated information to consider when working with contracts. The event includes two Q&A segments as well as a networking lunch to enable attendees to further expand their understanding of the topics and make connections with the speakers.
(Continued from page 11)
Paul Doyle CEO Coastal Automotive John Dunn President and CEO, The Americas, Plastic Omnium Auto Inergy Division Douglas J. Grimm Industry Advisor Michael Haughey President North American Stamping Group, LLC Ken Hopkins President and CEO Neapco Holdings, LLC
Cynthia Haffey, shareholder, Butzel Long, will an update on OEM terms and conditions, and discuss new case law and regulations to be aware of. The updated OEM terms and conditions are included in the 2017 edition of the “OESA OEM Production P.O. Terms and Conditions Comparative Analysis,” publication. This publication will be available for purchase at a discount with event registration or on site the day of the event. ► SUPPORTING SPONSOR
Don Manvel Chairman AVL Americas Chris Obey President, Automotive Flex Lon Offenbacher President and CEO Inteva Products Michael Robinet Managing Director Automotive Advisory Services IHS Markit Dan Sceli President and CEO Peterson American Corporation Wes Smith President and CEO E & E Manufacturing Co., Inc. Armando Tamez CEO Nemak Jim Teets President and CEO ADAC Automotive James Verrier President and CEO BorgWarner Inc.
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OESA & HARBOUR RESULTS, INC. 2017 AUTOMOTIVE TOOLING UPDATE | NOV 2 The Original Equipment Suppliers Association (OESA) and Harbour Results, Inc. (HRI) announce the 2017 Automotive Tooling Update on Nov. 2, 2017, at The Dearborn Inn, Dearborn, MI. This meeting will provide attendees with automotive tooling market intelligence and insights critical for the health of the entire automotive industry. For registration assistance, contact OESA at 248.952.6401 or info@oesa.org. ► SUPPORTING SPONSORS
OESA EVENTS
CALENDAR OF EVENTS UPCOMING EVENTS Sep
12 Sep
14 Sep
28
FCA Town Hall Laurel Manor Livonia, MI OESA OEM Terms & Conditions and Current Legal Issues MSU Management Education Center Troy, MI OESA Members Only Honda Town Hall Laurel Manor Livonia, MI
Nov
02 Nov
13 Dec
01
OESA and Harbour Results, Inc. 2017 Automotive Tooling Update The Dearborn Inn, A Marriott Hotel Dearborn, MI 2017 OESA Annual Conference The Industry’s New Landscape Suburban Collection Showplace Novi, MI SAVE THE DATE! OESA Members Only Ford Town Hall Ford World Headquarters
UPCOMING OESA COUNCIL MEETINGS* Sep
Sales Executives Council Somerset Inn Troy, MI
Sep
Young Leadership Council 4 OESA Conference Center Southfield, MI
Sep
Chief Information Officers Council OESA Conference Center Southfield, MI
07 07 12 Sep
19
Tooling Council OESA Conference Center Southfield, MI
Sep
Chief Financial Officers Council OESA Conference Center Southfield, MI
Sep
Enterprise Leadership Council OESA Conference Center Southfield, MI
20 21 Sep
26 Sep
28
Advanced Technology Council OESA Conference Center Southfield, MI Warranty Management Council Laurel Manor Livonia, MI
*Open to peer group council members and invited guests. For more information and to register for OESA events and council meetings, visit oesa.org, or call 248.952.6401. OESA News - 2017 Third Quarter
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Original Equipment Suppliers Association Check out our online publication at www.oesa.org/news
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