Just How Many Automotive Suppliers Will Go Bankrupt?

The recent Chrysler/Plastech spat that idled production at four of the OEM's facilities is only the latest in a round of bankruptcy stories surrounding the U.S. automotive business (in fact, it's not the latest insolvency case anymore). According to a recent story from Detroit, we can expect significantly more bankruptcies -- each of which has the potential to cause supply disruptions -- in the coming year. According to the Chief Economist for Center for Automotive Research who is quoted in the piece, "We're looking at a tortured traditional U.S. supplier base in which 35 to 40 percent of the companies are on the verge of insolvency."

The challenge, for all those in the manufacturing world, is not at all surprising. "Rising commodity prices and a slowdown in production, primarily by the Detroit Three automakers, are severely squeezing many suppliers." Clearly, those domestic automotive suppliers that fail to break into the Japanese OEMs or branch out into other industries or export markets will be in for tough times ahead. Just make sure if you're working with them -- even if you're in another area of manufacturing that has a supply base overlap with automotive -- that you have an early warning process system in place to catch and confront potential disruptions before they occur.

- Jason Busch

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