As Many as 500 Big Auto Suppliers May Fail, Firm Says (Update2)
By Alex Ortolani and Bill Koenig
March 12 (Bloomberg) -- As many as 500 of the largest U.S. automotive suppliers may be at risk of failing because of plummeting U.S. car and truck sales, the consulting firm Grant Thornton LLP said.
More than 10 such companies already have gone into bankruptcy or had to liquidate this year, Laura Marcero, a partner in the firm’s corporate advisory and restructuring team, said at an Automotive Press Association event today in Detroit. Those at risk represent up to 40 percent of so-called Tier 1 suppliers, according to Grant Thornton.
“Companies are locking their doors on a week’s notice,” Marcero said. A rash of such closures “would impact every automaker,” with costly production shutdowns likely at companies such as General Motors Corp., Chrysler LLC and Toyota Motor Corp., she said.
The Grant Thornton report may bolster efforts by supplier trade groups to get as much as $18.5 billion in U.S. government aid for the industry. Production cuts by automakers including GM and Chrysler in December and January are expected to squeeze suppliers’ revenue this month, because payments for parts often arrive 45 to 60 days after the components are shipped.
Parts companies, automakers, banks and the U.S. government should cooperate on an “orderly consolidation of the supply base,” Grant Thornton said in a statement.
The suppliers themselves must “step up and act quickly” to either acquire struggling peers or seek stronger companies to take over their business, Marcero said.
The U.S. Treasury should implement a trade group request to back payments from automakers to suppliers, known as receivables, she said. That would help the parts companies use such payments as collateral to continue business.
To contact the reporters on this story: Alex Ortolani in Southfield, Michigan, at aortolani1@bloomberg.net; Bill Koenig at wkoenig@bloomberg.net
Last Updated: March 12, 2009 16:17 EDT |
