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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory

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From: TH	7/9/2008 1:08:45 AM
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North America automotive suppliers are dropping like flies. I've never seen anything like what has happened in my segment in the past year. I was directly involved with six major suppliers that are gone. Not reorganized, but GONE. And, in this segment, there were only about a dozen to begin with, so let us say that half are gone. In one year. The bombshell was the one that disappeared just ten days ago. Absolutely the fast bk I've ever seen. This was not a minor player. This was a big, big, dog. What happened (at least the part that I can post in a public forum) is that this big tier one expanded operations to snack up some of the business that was available from the other five competitors going bk. There was just one major problem, and that was that the vast majority of their current production was GM trucks and SUV's. The American Axel strike killed their cash flow and basically killed them in about three months. Just two weeks ago I know that Ford Purchasing was extremely confident they would survive, as this big dog was involved in at least five major platform developments that 100% would have gone into production. They were essentially the supplier of record doing the advanced engineering for Ford with the arrangement of contract payment for engineering and the ultimate reward of control/integration of the supply chain for those major component systems. Turns out things were much worse than Ford thought and the rumor is that GM refused to help this big dog with a very positive history with GM and a focus on innovation. This is a major loss for the company I work for, as our relationship with this big player was very good and at least a dozen doors were open for activity on both short and mid-term developments. Now the remaining players are picking over the pieces. It is so crazy that a senior buyer (who I've never met before) called me today to ask my opinion about HIS SUPPLIERS!. All I can say is that this is extremely bizarre, as the OEM should never be jumping downstream to ask questions about upstream. It is just that there is that much confusion and concern over what to do to address this huge void. Detroit has moved past recession. I think depression is not too far away. GT TH

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