Densco, Continental, Bosch, and Magna may not be as well-known to you as GM, Ford, VW, and Mercedes. But they can build almost every part of your car, they own the rights to tomorrow's technologies, and they are more profitable than the companies they sell to. Welcome to the world of the auto industry mega supplier.

Densco, Continental, Bosch, and Magna may not be as well-known to you as GM, Ford, VW, and Mercedes. But they can build almost every part of your car, they own the rights to tomorrow's technologies, and they are more profitable than the companies they sell to. Welcome to the world of the auto industry mega supplier.
An ever greater reliance on this small cadre of suppliers is changing the balance of power in the car industry. It is now the makers of the parts under the hoods, not the owners of the brand name on the grill, that are the dominant force. There are 16 major car manufacturers that sell more than 1 million vehicles a year. But those cars are built from parts supplied by just 10 major component makerslong dashmeaning that under the individually styled bodywork, cars are sharing more parts. Bosch, the world's largest automotive supplier, says that at least one of its parts is built into almost every new car sold anywhere in the worldlong dashregardless of brand, market, price point or geography.
Decades of carmakers' outsourcing their R&D to suppliers have left them more and more dependent on the expertiselong dashand manufacturing capabilitieslong dashof the supply chain. And the carmakers' need for suppliers to follow them into new markets and build their own factories in places such as China and Brazil, has meant only the largest and most cash-rich component makers have survived. Big suppliers now have the capability among them to build 85% of a car's internal systemslong dashleaving little more than the engine as the carmaker's sole domain. This has made the role of a car brand more that of an assembler, rather than a true manufacturer. Crucial parts for future vehicles, such as battery and electric motor management systems, are almost exclusively developed and built by suppliers such as Continental, Denso and Johnson.
Critical Thinking Questions
1. Four of the major auto parts suppliers are
A.
Densco, Continental, Fiat, and Bosch.
B.
Densco, Continental, Bosch, and Renault.
Your answer is not correct.
C.
Densco, Continental, Bosch, and Johnson Controls.
This is the correct answer.
D.
Densco, Continental, Peugeot, and Magna.

2. What is a primary reason why only the largest auto component makers have survived in recent years?
A.
Suppliers were being required by automakers to open plants near them in new markets.
This is the correct answer.
B.
Ultra-competitive small suppliers drove themselves out of the market by drastic price cutting.
C.
The automakers have colluded to shut out the small suppliers.
Your answer is not correct.D.
Regulatory changes have simplified the ability for large suppliers to force hostile takeovers.

3. What is the only major auto component remaining that carmakers manufacture themselves?
A.
the engine
Your answer is correct.

B.
the radiator
C.
the exhaust system
D.
Both A and B.

4. Which of the following statements represents a major implication of the current supplier network in the automobile industry?
A.
Manufacturers have a lot of choices for the supplier of each of their major components.
B.
Automobile supply chains are now fully vertically integrated.
C.
Suppliers now drive much of the technological innovation in the industry.
Your answer is correct.

D.
Manufacturers can no longer practice just-in-time production.