Automotive Suppliers Face Uphill Struggle

(Akron/TR) Cutbacks, fast rising raw material costs and marketshare battles by US automakers have created a crisis among auto part and component suppliers, according to a Detroit News report today.

The story said: “signs of distress – plummeting stock values, credit ratings cuts, profit warnings and Chapter 11 filings – are mounting on an almost daily basis. Companies that once seemed bullet-proof are struggling to survive the turmoil. Many weaker players face the prospect of bankruptcy.”As a result of the crisis, which has been brewing for years, tens of thousands of American workers may soon find themselves without jobs.

“This is undoubtedly the most difficult and economically pressured time I’ve ever seen in the automotive industry anywhere in the world,” Steven Brown, CEO of BBi Enterprises in Bloomfield Hills, told the newspaper. The auto interiors component supplier filed for Chapter 11 bankruptcy protection last week.

Citing production reductions by GM and Ford, American Axle & Manufacturing Holdings told investment analysts on 9 March that it had to lower its first quarter profit forecast. Lear Corp, which produces auto interiors, also dropped its earnings forecast.

Industry watchers said that Lear and American Axle had been among the OE supplier industry’s strongest operations. “If Lear can’t make any money, imagine what’s going on at the other companies,” Stephen Girsky, an analyst with Morgan Stanley, told the newspaper.

Delphi and Visteon, which had been spun off by GM and Ford, respectively, have also struggled mightily, the report said. Continuing financial problems and a new accounting problem pushed Delphi’s stock fell to an all-time low on 9 March, prompting one industry analysts to suggest Delphi should file for bankruptcy.

The industry saw numerous bankruptcy filings in 2004, said the report, quantity of bad news mounting up in 2005 does not bode well. Delphi has already announced that it will cut some 8,000 jobs, and Visteon, which has not turned a profit since spinning off from Ford in 2002, is planning a significant restructuring, the paper said.