[jcommin]

I work for a Tier 1 part supplier that supplies many parts to the OE's. I'm not defending the practice but it goes something like this:

An OE gets quotes for a part from many Tier 1s. The contract is typically 3 to 5 years. A price point is established for the first year and typically a price reduction of xx% for each year contact is part of the agreement. After the contract expires, it can either be renegotiated, usually at a lower price or the product movers to another mfg. If it is a stamped/molded part, the OE typically owns the tooling/mold and they can take their tooling anywhere.

A Tier 1 that signs up for a contract, knowing of the price reductions needs to figure out how they can make a profit from the part. The OE isn't interested in inflation, raises, increases in materials utilities or energy costs. That is for the Tier 1 to figure out. How do they do it? Increase productivity, reduce headcount, cheaper materials, outsource, renegotiate part/raw material supplier contracts.

BTW, this is a delicate dance because sometimes the OE wants the additional cost savings passed onto them especially if parts or components can be obtained thru outsourcing.

I don't know anything about the part quality from Denso but their OE parts must comply to the standards the OEs set. Most if not all the engineering drawings for OE parts, I have seen in my facility, come from the OE themselves. My facility makes the parts that comply to those drawings. We don't deviate from that.