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By David Bailey
DETROIT (Reuters) - More than half of the top U.S. auto parts
suppliers could file for bankruptcy protection in 2009 with at least
one million job losses, according to a study by global consultants A.T.
Kearney.
Those suppliers, which ship parts directly to automakers, are
pressured from above by production cuts by the automakers and from
below by increasingly fragile companies that supply them with
components, the study found.
The survey encompassed 60 top North American auto parts suppliers,
but did not name any of the suppliers. It was compiled through
interviews with senior executives at suppliers in the United States.
The U.S. government has pledged up to $5 billion to aid financially
stressed auto parts makers that are crucial to General Motors Corp and
Chrysler.
Chrysler, about 80 percent controlled by Cerberus Capital
Management, and GM have accepted $17.4 billion of emergency government
loans and are looking for an additional $22 billion.
Ford Motor Co, which has not sought emergency government assistance,
said on Thursday that it was not participating in the supplier relief
program at this time.
"Absent significant financial assistance from the government, we are
headed toward a scenario that is going to be 50 percent or more of the
supply base going through bankruptcy," Doug Harvey, an A.T. Kearney
partner in its automotive practice in Detroit, told Reuters in an
interview.
A.T. Kearney looked at three scenarios for the supply base. The
other two scenarios include a "soft landing" resulting in 35 percent of
the companies restructuring in bankruptcy and a "pessimistic" reading
pushing that to 70 percent or more with many liquidations.
The "soft-landing scenario" looks more like "wishful thinking" at
this point, with the industry heading more toward the middle ground and
leaning toward pessimistic, Harvey said.
"To whatever extent the government provides relief to prevent them
from going into bankruptcy, that number goes down," Harvey said.
In each scenario, the study found that suppliers faced increased risk of bankruptcy through 2010.
U.S. auto parts makers have come under increasing financial pressure
in recent months with steep production cuts by their customers starting
toward the end of 2008 that have severely constrained revenue from the
beginning of the year.
Auto sales have slumped for more than three years, but the declines
accelerated as the recession deepened last year and monthly rates have
plunged to the lowest levels in 27 years.
The study found that the larger suppliers expect up to 23 percent of
the smaller companies that supply them with parts to face financial
distress within a year.
Most of those smaller companies are privately held and do not
disclose their finances publicly, making it difficult to probe the
depths of the stresses in the vast supply base. Continued...
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Isa 52:15 - "So shall he sprinkle many nations; the kings shall shut their mouths at him: for that which had not been told them shall they see; and that which they had not heard shall they consider."
