The transformation of the automotive industry is taking its toll – the need for restructuring is increasing

Munich, July 2023

The transformation of the automotive industry is taking its toll - the need for restructuring is increasing

Munich, July 2023

he current circumstances in the automotive industry place special demands on the restructuring process, which must be understood by all stakeholders as an opportunity.

The automotive industry is in the grip of a change crisis and auto suppliers are among those most affected. The key trigger is the transition to electric drives, but that has been compounded by the Covid-19 pandemic and the war in Ukraine – and the stress inflicted on suppliers is already visible in high-profile supplier insolvencies, such as Dr. Schneider and Borgers. The case for holistic supplier restructuring has never been stronger. The mechanism remains the same as before, but the measures taken should be adapted to become more holistic.

Suppliers are left behind

Structural change is a theme in the automotive industry and suppliers are among the biggest losers in this era of transition. Although production volumes have been falling, OEMs have been able to record profits amid the crisis by focusing on high-margin vehicles. Suppliers, however, have not been so lucky. In 2022, OEM margins were on average one-third higher than those of suppliers (in the second quarter of 2022 in particular, many suppliers recorded a margin decline).

The premium strategy of many domestic car manufacturers means that suppliers cannot expect volumes to recover, while the transition to electrified vehicles means that several structural components are unneeded. The map of the auto value chain is being redrawn as the focus shifts from hardware to software: only suppliers who adapt to this new reality will be in a position to withstand the pressure from new competitors entering the market. New competitors can be exceptionally potent: a supplier such as battery manufacturer CATL was still an unknown start-up 10 years ago, yet now is dominant in its segment.

It is not surprising that established suppliers want to secure a larger piece of a cake that is getting smaller. This competition for share suits OEMs, because it ensures lower purchase prices. After OEM risk-management departments were taken by surprise by the Covid-19 crisis, they have done their homework on the new supplier environment and appear to agree about which supplier bankruptcies to risk.

Suppliers with already weakened equity ratios face the challenge of competing for future platform business and of carrying the high investment costs of developing new products for such platforms. At the same time, dramatic increases in refinancing costs since the end of 2021 (see Figure 2) and stricter requirements for credit applications have made it more difficult for medium-sized family businesses in particular to maintain their independence and avoid a liquidation crisis.

Rethink necessary

As demonstrated by the insolvencies of German auto interiors specialist Dr. Schneider and auto soundproofing materials maker Borgers, the current crisis can affect even large established companies. The lesson is that it is critical for suppliers of any size to recognize and respond to problems early on. Many companies make the mistake of trying to keep their turnover constant despite falling profitability, and they operate plants at maximum capacity to maintain contribution margins or lease payments. 

This approach assumes a stable business environment, but is currently inappropriate. Instead, companies should prepare themselves for the fact that the environment will continue to remain volatile. They are often better equipped for change when they recognize this and adjust and manage their capacities flexibly. A focus on profitable core business and swift measures to reduce costs may be necessary.

Yet this kind of adjustment is not easy, creating as it does an environment in which all decisions are based on emotion. So-called IDW S6 reports – the control instruments used for many restructurings, frequently demanded by banks – can also contribute to financial stress by demanding positive turnover performance at a time when that approach may not be conducive to sustainable restructuring.

Holistic perspectives

A sustainable restructuring process needs to be understood by all stakeholders as an opportunity to future-proof a company and focus on profitability. It is important to consider three fundamental aspects:

  • Leadership and strategy need to adapt to the new reality in the car industry and avoid short-term solutions. It is important to recognize an emerging company crisis early on and react to it appropriately.


  • Operational interventions are important to ensure that the company achieves an appropriate level and quality of output as a contribution to restructuring. A sophisticated suite of operating methods is essential so these measures can achieve maximum efficiency.


  • Finances need to be brought under control. Perseverance and tolerance on the part of all stakeholders is crucial because restructuring measures can shrink the business by as much as 50%.

The restructuring wheel
360° – approach

Source: Berylls Strategy Advisors

Current developments in the auto industry are putting fundamental assumptions to the test for many if not most auto companies. It is vital in these circumstances that managers and shareholders understand that simple short-term solutions are not enough to achieve sustainable restructurings. Experience has shown that a comprehensive and holistic approach is the only approach that will optimize companies and rebuild their organizations at all levels in a sustainable way.

Philipp Stütz

Associate Partner

Anton Knaus


Philipp M. Stütz

Philipp M. Stuetz (1981) joined Berylls at the beginning of 2021. He has over fifteen years of experience in the automotive industry. Thereof he spent seven years at an international automotive supplier with assignments in Spain, the USA and Mexico and over eight years in consulting. His focus is in operations excellence, especially in large transformation programs, process optimizations and efficiency improvements in administrative functions and indirect operations areas. He counts suppliers and OEMs to his clients alike.

Philipp M. Stuetz graduated in business administration from the universities of Stuttgart and Strasbourg.