Suppliers fuming over shift towards in-house production of hybrid and EV parts

Not too long ago, most automakers saw no reason to produce components like electric motors for hybrids or electric vehicle batteries in-house. That's what outside suppliers were for. This decision was largely based on cost. For major automakers, producing parts for hybrids and EVs on a small scale simply did not make financial sense. Now, as both the hybrid and electric markets have evolved and display a promising outlook for future growth, automakers have gradually shifted towards in-house production of vital hybrid and EV components. Unsurprisingly, this move has made some suppliers less than happy.
In particular, Remy International Inc., makers of electric motors for hybrid and EV applications, has lost several contracts as its potential customers have been entering into the electric motor business themselves. Remy chief executive officer John Weber worked up plans to produce electric motors a long time ago. His plans should have put Remy in the position to lead the industry in electric motor production, but the company's fate now rests in the hands of automakers.

The big companies such as Toyota and Nissan have turned to in-house production of nearly all components for advanced vehicles. Even General Motors, a long time Remy customer, will eventually bring electric motor production in-house. As you can bet, companies like Remy are displeased at the situation. Remy CEO John Weber told Automotive News:

Does it annoy me that GM's going down this path? It annoys the hell out of me. Especially given how much they've crawled around our plants and gone through our supply base. The strategy driving it is: 'We need to own this technology,' and that doesn't make sense. Under that argument, they should also get into windshield wiper motors and window motors because they're also part of the vehicle experience. They buy fuel injectors and tires from different people, and yet they're part of the driving experience. My prediction is that GM is going to spend a billion dollars and there's going to be blood all over the floor while they try to figure it out. And in five years, somebody smart is going to say, 'Why are you doing all this?' And then they'll outsource it.

It's evident from the testy words of Weber that he's none too pleased with the current shift towards in-house production and he believes that automakers are setting themselves up for failure. Weber closed with:

I've created about $20 million worth of scrap trying to figure out how to build a hybrid motor. They're very tough to do. If somebody else thinks they can get in and best us at it -- hey, knock yourself out.

Tough words for sure, but Weber almost seems convinced that automakers can't do it better and, if that's truly the case, then eventually they will come back to Remy begging for motors once again. We'd venture to bet that despite Weber's harsh words, he'd gladly sign contracts with all of the automakers if given the chance.

[Source: Automotive News – sub. req.]