Auto supply chains are wary during bankruptcies

Lindsay Chappell, Automotive News

Birmingham, Alabama -- Transplant automakers remain vulnerable to supply chain interruptions caused by the General Motors and Chrysler LLC bankruptcies, and are keeping in close communications with their suppliers.

The auto companies are monitoring the situation daily, according to an industry panel at the Automotive News Manufacturing Conference here.

If cash-strapped parts makers miss payments from their customers during the next few weeks, it could be enough to push them into insolvency, said manufacturing and supply-chain consultant Laurie Harbour-Felax. She says small firms are already struggling.

"You're going to see a tremendous amount of additional bankruptcies in that market -- $20 million to $50 million in revenues," she predicts. "We've had clients who filed for bankruptcy, but it hasn't been in the media."

Ashley Frye, production director at Hyundai Motor Manufacturing Alabama LLC, acknowledged the industry's ripples reach his plant in Montgomery Alabama.

"Our purchasing guys are working diligently to develop plans in case suppliers should take a fall," he says. "We're very concerned about the health of our suppliers."

Dan Bednarzyk, vice president of manufacturing at Nissan North America's multi-product plant in Canton, Mississippi., is trying to keep suppliers and purchasing in close contact.

"You've got to have good communications," Bednarzyk says. "We have our Nissan Supplier Restructuring Group looking at strategic issues."

The industry worries find BMW Manufacturing Co. LLC in Spartanburg, South Carolina, in the midst of an expansion to launch X3 production in North America.

"We're trying to make sure our suppliers are sound and profitable," says Richard Morris, assembly manager at the plant. "Your supplier relations have to be mutually beneficial.

Despite the concerns, the panelists agreed that components had so far continued to flow normally after the potentially catastrophic bankruptcies of GM and Chrysler.

"The big hurdle has been jumped," said Keith Updike, a managing director at the international supplier consulting firm BBK. "It is amazing that a lot of folks have hung on longer than most people would have expected. It's a tribute to them that they've gotten through this."

From Automotive News (A Crain publication)