Automotive castings and forgings · Automotive and auto components
Recover the metal cost behind every automotive casting and forging your OEM indexes
An automotive casting or forging supplier is paid a piece price that moves with a metal index. The formula is the OEM's, and so is the approval of the process. We reconcile that formula against what your metal and energy actually cost. We also track the customer-funded dies and approvals that constrain how you can cut cost.
In one paragraph
Automotive foundries and forging shops work inside a price formula, a tooling arrangement and a process approval that all belong to the customer. They supply crankshafts, connecting rods, knuckles, housings, brackets, manifolds and other parts to vehicle makers and tier-1s. Most turn over ₹100–2,000 crore, often with an export share. Cost reduction and price recovery both run through the OEM. The managing director or chief financial officer usually leads the work.
Managing director or chief financial officer
The economics
How the money moves in this trade
Automotive castings and forgings are priced as a base piece price plus a metal adjustment. The adjustment follows a published index for steel, iron or aluminium, on the customer's formula, frequency and lag. The supplier buys scrap, pig iron, billet or ingot at today's price and recovers the movement one or more periods later. Recovery is often partial, because the index does not match the actual grade or charge mix. Energy, alloy additions and freight move too, but are seldom covered by the formula.
Dies and patterns are frequently paid for by the customer and remain its property, while the supplier maintains them. Each part and its process are approved through the customer's production part approval process. Changing a raw-material source, a process route or a sub-contractor for cost reasons therefore requires re-approval. Volumes follow vehicle programmes that can be extended, cut or ended with the model.
The problem
Where the numbers usually break down
Indexation does not match the actual input
The OEM's index tracks a reference grade while the supplier buys a different charge mix or billet grade, and the difference is never measured.
Indexation lag is unfunded
Metal cost rises are paid immediately but recovered a quarter or more later, and the working-capital cost of the lag is ignored.
Energy and alloy cost sit outside the formula
Power, ferro-alloys and fuel rise without any mechanism for recovery, and the erosion is not quantified for the commercial review.
Customer dies are maintained at your cost
Maintenance and refurbishment of OEM-owned dies and patterns is absorbed, with no record to support a recovery request.
Approval cost of change is not weighed
Cost-reduction ideas are dropped or pursued without costing the re-approval, trials and customer sign-off they require.
What we do
The work, and the result each part produces
Indexation reconciliation by part and customer
The customer's formula applied to the agreed index, compared with your actual charge-mix or billet cost for the same parts and periods.
The gap between index and reality is quantified and raised.
Lag and working-capital cost
The cash cost of paying for metal before recovering it, calculated per customer and settlement cycle.
Formula lag becomes a commercial point with a value.
Energy and alloy erosion report
Movements in power, fuel and alloy cost per tonne of good output, against the base assumed in the piece price.
Non-indexed cost rises are presented with evidence.
Customer tooling maintenance register
OEM-owned dies and patterns recorded with their maintenance, refurbishment and replacement cost.
Tooling upkeep is recovered or priced in.
Cost-of-change evaluation
Proposed source or process changes costed including trials, re-approval and customer validation.
Cost-reduction projects are chosen on their net value.
Part and programme profitability
Contribution by part and vehicle programme after indexation gap, energy, rejection and freight.
Programme renewals are negotiated from a number.
Where we start
The first steps of an engagement
Index formulas and charge records
We ask for each OEM's indexation formula and settlement statements, charge-mix or billet purchase records, power and alloy bills, and the register of customer-owned dies and patterns.
Index movement against actual cost
For the main parts, the movement the index delivered over recent periods is set against the movement in what you actually paid for the same inputs.
Die upkeep booked by die
Maintenance and refurbishment of customer-owned dies start being recorded against each die, and settlement timing is logged to measure the lag.
An indexation gap report
The first report shows indexation recovered against actual metal cost movement by part and customer, with the working-capital cost of the lag.
How it is measured
The reports the work is judged on
Each is recorded as a baseline before the work starts, so later reports have an honest comparison.
- Indexation recovered against actual metal cost movement
- Working-capital cost of indexation lag
- Energy and alloy cost per tonne, against base
- Customer tooling maintenance cost recovered
- Machining and customer rejection, by part
- Contribution by part and programme
Who it suits
Written for, and not the right fit for
- Your customers are mainly in industrial, valve or railway markets rather than automotive — our foundries and casting and forging pages are the closer fit.
- You need the auditor's certificate on a production-linked incentive claim, or a statutory audit — those are signed by an independently engaged CA.
- Ferrous and aluminium foundries supplying vehicle makers and tier-1s.
- Forging shops producing crankshafts, axles, knuckles and other automotive parts.
- Suppliers preparing for an OEM commercial review or an export programme.
Services
Services this work draws on
Costing and profitability
What each product, line and customer really contributes.
Explore service ↗MIS and financial planning
Reporting built around the questions you actually need answered.
Explore service ↗Internal controls and risk
Controls sized to your business, documented and actually tested.
Explore service ↗ESG and sustainability advisory
Sustainability data you can evidence before you commit to a target.
Explore service ↗Every other service, also available in this trade
Common questions
Questions owners in this trade ask
How can a supplier show an OEM metal index is unfair?
By comparing, part by part and quarter by quarter, the movement the index delivered with the movement in what you actually paid for the charge or billet. A consistent gap is much harder to dismiss than a general complaint.
Who should pay to maintain OEM-owned dies?
That's set by your agreement, and many are silent on it. A record of what upkeep has cost, by die, gives you the basis to raise it at the next review.
How do auto suppliers prepare the carbon data customers ask for?
We can build energy and emissions data from your consumption records in the form customers request. Any assurance on that data is provided by an independently engaged professional.
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