Auto plant reopenings bring supply chain fears
DETROIT -- It's the quiet before the storm.
Next week, when Chrysler begins ramping up production again, industry watchers say they fear smaller suppliers may begin buckling because they don't have the cash to start making parts.
Such companies need money for wages and materials to deliver parts as they're needed, but don't see income from the parts for up to 45 days.
Smaller suppliers have been managing to hang on so far, says Jim Gillette, an industry analyst with CSM Worldwide. He's been checking bankruptcy filings daily for signs of stress in the industry, but there've been few. Two large suppliers, Lear and Cooper-Standard, have defaulted on loans, however, and have until the end of the month to renegotiate or file for bankruptcy-court protection.
Many suppliers hitting difficulty won't be able to restructure, he says. "It's going to be 3-to-1 or 4-to-1 liquidations vs. bankruptcies."
Chrysler says it's doing what it can to work with troubled suppliers so they can gear up for the restart of seven assembly plants on Monday. Chrysler ceased all production on April 30 when it filed for bankruptcy-court protection. "We are anxious to restart production and get our plants and our suppliers' plants back to work," said spokesman Max Gates. "Ultimately, getting production going is the best thing we can do at the moment to begin stabilizing the supply base."
Chrysler on Thursday sued TRW Automotive in bankruptcy court, saying the supplier was refusing to supply parts and jeopardizing the restart.
But it doesn't help the smaller suppliers that make parts for components the big suppliers assemble and ship to automakers. A rear-view mirror missing its glass could stall an assembly line.
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