ANN ARBOR, MI—Faced with the growing costs of sales incentives and pension liabilities, automotive OEMs are demanding that their suppliers reduce their 2003 prices by 2% to 10%.

According to the Altarum Institute’s Center for Automotive Research (CAR), Tier One and Tier Two suppliers must agree to the price cuts on existing contracts before bidding on new work. Suppliers that cannot meet the cost-cutting demands risk losing business to manufacturers in Asia and Mexico.

CAR also found that most suppliers are not prepared to meet these requirements and maintain profitability.