Auto parts suppliers and auto parts retailers have come under scrutiny in the wake of a string of car crashes.
The latest victim of these investigations is Mercedes-Benz, which was hit by a vehicle in Germany in March, killing four people.
It has been in the news in recent weeks for its alleged poor safety record, but it’s unclear how the investigation into the death of two young girls at a Mercedes-AMG plant in March could have a bearing on whether the company should face a recall.
Auto parts companies have been under fire for years over safety issues, and automakers have increasingly taken a hard line in addressing safety issues.
That has created a dangerous environment for companies to be in, said Steve Bauers, senior analyst at research firm J.D. Power and Associates.
The auto industry has long been the safest industry in the world, and the problem with safety is that people are going to drive recklessly, he said.
“You’ve got to keep driving, and you’ve got the incentives to do it.”
The auto parts business is a $3.9 trillion business, according to data compiled by Baues estimates.
It accounts for over half of all U.S. auto sales, with auto parts selling for about $2.6 trillion, according the Automotive Dealers Association.
In 2016, auto parts accounted for just over 30% of all auto sales.
That’s down from the peak of nearly 40% in 2007, when auto parts were responsible for more than half of the total sales.
The industry is now seeing some of its largest losses in decades.
The overall number of auto parts and accessories sold dropped 8.6% in the first nine months of 2018, the biggest drop in the industry, according a study from auto parts retailer R.J. Reynolds.
Auto manufacturers have had to rely on parts suppliers to keep up with demand, but a shortage of parts means the industry has struggled to maintain its profitability.
In 2017, the industry reported losses of more than $300 billion.
That figure includes sales of vehicles, parts, and parts accessories, according in a Baurs report.
It also includes non-automotive items such as spare parts and parts used in other cars.
In the last three years, the auto parts industry has seen more than 20% of its profits come from non-traditionally-invested businesses, like suppliers of parts to manufacturers and suppliers of accessories to consumers, Baures said.
That trend is not new.
During the recession, demand for automotive parts and other automotive components fell, leading to a sharp decline in demand for the traditional auto parts businesses, Baus said.
The drop in demand caused some automakers to close their auto parts operations, which resulted in the loss of tens of thousands of jobs.
The downturn has hurt the bottom line of the auto companies, especially those that make parts, Bauer said.
Auto suppliers and retailers, meanwhile, have been hit hard in the crash.
Mercedes-AMS announced in March that it would lay off 1,300 workers, which it said could affect 1.2 million people.
R. J. Reynolds has laid off 1.5 million people and expects to reduce more than 500 jobs in the U.K., where it has more than 300 plants, according The Guardian.
Baus said companies in this business can’t afford to be lax.
“They have to be very diligent, and they have to take action,” he said, “and they have a lot of incentives to make sure that it’s being done right.”