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To: regli who wrote (58736)	10/30/2006 12:54:36 PM
From: TH	Read Replies (1) \| Respond to of 116555

regli, Are we going to see a flood of BK's with the automotive suppliers? I wish I had a factual answer for that question, but I do not. I can make this prediction. If we are entering a recession, and we have additional production cuts like Ford announced this morning, then suppliers with a high percentage of their sales with the big 2.5 are going to suffer severe cash flow and solvency concerns. Ford to cut N. American H1 output 8-12% yahoo.reuters.com One of my biggest customers (private company, and I should not discuss their name) keeps extending payment well beyond normal terms. They do not have sufficient revenue to cover costs and they cannot downsize as the capital is already invested. I know they have already secured additional lines of credit, and I think the limit for additional resources must be very near, or already exceeded. I am very concerned. I do not want to be too pessimistic, but I expect many BK's next year for these suppliers with high domestic sales. I will keep the thread posted on anything interesting I find. Thanks GT TH

To: regli who wrote (58736)	10/30/2006 1:15:43 PM
From: TH	Respond to of 116555

regli, Sorry, talking on the phone and got distracted so I didn't answer the second part of your question. The implication for the majors is difficult to address precisely. The type of part in question is key. For example, if an injection molder of interior trim goes bk, then the OEM can quickly find an identical supplier to pick up the tool and supply production. When there are significant declines in production volume, finding another molder is not difficult and the new molder is very motivated to accept the work at a competitive price. If the part in question uses a very specialized process or proprietary capital equipment, then it can very difficult for the OEM to find a quick replacement. In that situation, the OEM can provide assistance to the supplier (money) while they tool up a replacement (with the same or different technology) at a competitor. Something like an air bag system with long lead times for validation might require keeping a supplier on life support while an alternative part is developed, produced, and certified to Federal FMVSS standards. When you go BK can make a huge difference in the survival. C&A went belly when sales were still fairly robust. As a result the available capital within the supply base was limited and the OEM could not make wholesale moves of existing programs from C&A to other suppliers. As volume declines, flexibility in the supply base increases. Thanks TH