As car sales continue to decline, automotive suppliers would do well to pick and choose what vehicle programs they bid for, suggests forecaster Mike Jackson.
Suppliers need to prioritize profitable programs as automakers adjust their lineups, said Jackson, executive director of strategy and research for the Original Equipment Suppliers Association, speaking Tuesday at the seminars.
Jackson forecasts that new-vehicle sales will fall about 5 percent - or 900,000 vehicles - between now and 2024. Most of that decline will come in the small, midsize and full-size car segments.
"We're looking at a taper," Jackson said.
Separately, Automotive News reported Tuesday that U.S. light-vehicle sales dropped 6.9 percent in July from a year earlier, and car sales declined 15 percent.
Jackson's longer-range forecast calls for pickup and van sales to remain stable, utility sales to jump 16 percent, but car sales to plummet 30 percent, or 2 million vehicles.
Production forecasts also show declines for cars, while utility and truck production will grow.
Jackson said automakers and suppliers need to prioritize building profitable vehicles such as trucks and utilities, which have significantly higher average transaction prices than cars.
"My key message here is having a priority," he said. "You have limited resources, scarcity in terms of technical talent and financial resources. Where do you want to allocate those? The point here is to focus on profitability."
Automakers such as Ford Motor Co., General Motors and others have been increasing car production in Mexico because of lower labor costs there. But if car production is scaled back in the coming years, Jackson said that could lead to market volatility, especially if automakers decide to ramp up utility production in Mexico.
Jackson noted each of the Detroit 3 is taking a different approach to its car strategy.
Fiat Chrysler Automobiles is cutting back in the segment, ending production of vehicles such as the Dodge Dart and Chrysler 200. Ford decided to move North American Focus production to China, and Jackson said the automaker will end production of the Fiesta and Taurus sedans, although Ford has not made an announcement about either of those products.
GM remains a question mark, Jackson said, and needs to review some of its vehicles that he said represent a "cost constraint" going forward.
"The U.S. remains at a very strong level in terms of overall demand, but we're seeing great divergence in overall performance," he said, addressing parts suppliers. "You have to be far more aggressive, far more mindful and far more engaged in terms of looking at future opportunities to make sure your business is going to remain relevant. You have to prioritize."