Auto suppliers fear White House bailout ignores them
— -- As the Bush administration prepares to throw a life ring to Detroit automakers, industry parts suppliers fear they will be left to drown.
Many of the companies in the $240 billion business are surviving by using IOUs from automakers for parts already delivered as collateral for bank loans, he says — IOUs they hope the automakers survive to pay. The White House may settle this week on an aid plan to get GM and Chrysler through the first quarter, but press secretary Dana Perino said Tuesday, "We are not going to be rushed into it."
With all automakers — domestic and foreign — slashing production to match falling sales, however, suppliers' 2009 revenue will shrink regardless. Their health, too, is vital to the industry, with as many as 300 suppliers contributing parts to a single vehicle. But the impact on the supplier base is already being felt:
•Bankruptcies. Key Plastics, a major supplier, filed a pre-packaged bankruptcy reorganization plan Tuesday "in the face of today's economic conditions," said COO Ralph Ralston in a statement.
A venture of Chrysler and supplier Getrag to make fuel-efficient transmissions in a new Tipton, Ind., plant filed for Chapter 11 reorganization last month after Chrysler canceled the contract.
•Offshoring. Norway-based Kongsberg Automotive cited the "global automotive market collapse" Saturday for a decision to close parts factories in Van Wert, Ohio, and Haysville, Kan., and move operations to Mexico. "These cuts are necessary to align our manufacturing to the new market realities," said Olav Volldal, CEO of its holding company.
