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Creaking Auto Supply Chain Ready for “Implosion”

As many as 500 suppliers may need to go to avert catastrophe.

by on Mar.12, 2009

As many 500 of the 1,700 automotive suppliers could fail in 30 to 90 days, an "implosion" that could bring assembly lines to a standstill.

As many 500 of the 1,700 automotive suppliers could fail in 30 to 90 days, an "implosion" that could bring assembly lines to a standstill.

Nearly a third of the automotive industry’s suppliers could be forced to consolidate – or to go out of business entirely.  Without this shake-up, says a leading specialist in corporate restructuring, the entire supply chain could collapse, bringing automotive production to a screeching halt.

The crisis on the parts manufacturing side of the business is even more severe than what has happened on the auto assembly side, says Laura Marcero, a partner with Grant Thornton LLP, even considering the potential collapse of both General Motors Corp. and Chrysler LLC.

“We believe 30 to 40 percent of all suppliers are at high risk…and must come out of the base,” Marcero declared during a meeting of the Automotive Press Association, on Thursday.”

Suppliers have largely run out of cash, Marcero noted, as their customers – carmakers like GM, Toyota and Mercedes-Benz — have been forced to slow their assembly lines and curtail parts purchasing.  Making matters worse, banks and lenders have clamped shut supplier credit lines.

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