It seems a quarter does not go by without the latest doom and gloom report on the North American automotive market. If the Putin-esque behavior of US automotive OEMs toward their suppliers isn’t enough to challenge the viability of the industry -- on top of bullying, the sector must now face the wrath of the invisible hand which, thanks to rising oil prices and slumping domestic spending, is taking a major toll. According to this press release announcing a new Grant Thornton study "as many as one-third of automotive suppliers in North America are at risk of bankruptcy." You can read the full study here if you’re so inclined.
What types of suppliers are most likely to become insolvent? According to the study, those suppliers that are "heavily reliant on large SUV and truck volumes, located only in North America, concentrated on domestic OEM sales, have a significantly large SUV and truck platform part sourcing, [and are] exposed to increases in raw material cost without the ability to pass it on to customers" (emphasis added) are most likely to go bankrupt. But it's not just the automotive OEMs that should be concerned. And that's because when you get down to the tier two and tier three levels in the automotive supplier world, there's a high degree of overlap with other areas of industrial manufacturing. So if you're working with US suppliers in the A&D or broader industrial manufacturer area, you should be especially vigilant about supply risk when it comes to lower-tier suppliers.
- Jason Busch