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Parts Makers in $ Squeeze

24 February 1998

Automotive Suppliers Under Further Pressure to Cut Costs As They Take on Additional Design Responsibilities

         Study by KPMG Consulting and the Automotive Consulting Group
         Measures the Performance and Processes of 150 North American
                      And European Automotive Suppliers

    DETROIT, Feb. 24 -- Automotive suppliers are under pressure
from all sides to cut costs, according to a study conducted by KPMG
Consulting, a part of KPMG Peat Marwick LLP, and the Automotive Consulting
Group, but the best-in-class are responding with innovative processes that are
letting them survive and even thrive.
    A summary of results of the 1997 study, which includes data from 150
automotive suppliers in North America and Europe, was announced today at the
Society of Automotive Engineers International Congress and Exposition in
Detroit.
    Automotive suppliers are being asked to assume greater responsibilities in
engineering, product development, warranty and global support while meeting
stricter standards of quality, technical performance and timing under tighter
cost pressures, according to the study.
    "The automotive industry's structure has changed dramatically, with
suppliers being squeezed from all sides," said Brian Ambrose, KPMG's National
Industry Director of Industrial Products and Automotive.  "The good news is
that suppliers are responding with new product development processes that
focus on what we are calling integrated supply-based management.  They're
responding with tighter integration, and a very different work environment and
management culture."
    Based on the performance measures of quality, cost and timing, the study
identified those management processes determined best-in-class in comparison
to the rest of the field.  According to Ambrose, the best-in-class suppliers
exhibit proficiency in five core competencies:  senior management involvement
and focus; integrated development tools; high-performance cross-functional
teams; international leverage; and integrated supply-based management.
    For example, senior executives in 70 percent of those deemed best-in-class
participate in the concept development phase of product development, compared
to only 40 percent in other companies.  High-performance suppliers also have
greater involvement with their customers and suppliers during the concept
development phase.  Best-in-class suppliers rely more heavily on active
involvement of systems suppliers, with 70 percent of systems suppliers
involved, compared to only 10 percent involved in non best-in-class.
    "We've identified the best performers in the industry," said Dennis Virag,
Managing Director of the Automotive Consulting Group, "and they will continue
to innovate and drive the expectations of the original equipment manufacturers
(OEMs); other suppliers will have to really work to catch up.  Product
development, now and in the future, is the basis for competitive advantage."
    KPMG Consulting's Detroit office is currently seeking automotive suppliers
for participation in the 1998 survey.

    About the Automotive Consulting Group
    The Automotive Consulting Group (ACG) is recognized internationally as a
leading management consulting firm serving the global automotive industry.
Specializing in strategic planning, integrated supply-based management,
technology and product development, market and competitive analysis and
industry trend analysis, the company helps clients trough a combination of
project consulting and management briefings.  ACG's worldwide address is
http://www.autoconsulting.com, and is located in Ann Arbor, Michigan.

    About KPMG
    KPMG Consulting is part of KPMG Peat Marwick LLP, the U.S. member firm of
KPMG International, a leading professional services firm.  In the U.S.,
KPMG partners and professionals provide a wide range of accounting, tax and
consulting services.  As one of the foremost providers of information-based
value added services, KPMG serves clients with complex needs by capturing,
managing, assessing and delivering information to create knowledge that will
help maximize shareholder value.  KPMG International has more than 6,000
partners and 83,000 professionals in 153 countries and $9 billion in annual
revenues.  KPMG Consulting's Web site is: http://www.us.kpmg.com/consulting.

SOURCE  Peat Marwick LLP