Friday Rant: Don't Let Parts Suppliers Fail

Thank goodness our lame duck Republican congress -- unlike our current President -- has the good sense to resist the pan-handling from two businesses which will eventually go bankrupt in current form with or without government assistance. The only question is the timing. Chrysler and GM have continually proven themselves to build cars that people don't want with resale values less than their foreign competition. There's a reason a good friend of mine -- and a reader of this blog -- purchased her new Honda Odyssey last week over a Chrysler or GM equivalent.

It's simple -- the Honda is a better vehicle in every way: how it drives, its resale, its safety are all superior. Seriously, letting GM and Chrysler declare Chapter 11 is letting history run its course. Meddling with bridge loans will only delay the inevitable until management is out and both organizations go through a massive product, strategy and labor overhaul.

Unfortunately, until this happens, suppliers will be left paying for GM's mistakes -- at least in part unless Congress and Bush do something specifically for them (which I support). As the above-linked New York Times article notes, "As Washington fights over a plan to rescue Detroit's auto manufacturers, industry experts anticipate a third of auto parts suppliers may go out of business in the next 3 years ... General Motors and Chrysler, for example, owe their suppliers a total of roughly $10 billion for parts that have been delivered. G.M. has held off paying them for weeks, and Chrysler is paying in small increments."

The problem is that all automakers (e.g., Ford, Honda and Toyota) will be hit as the flow of goods is "disrupted because suppliers typically sell their products to both American and foreign brands with plants in the United States." So why can't we carve out a plan to help the parts suppliers weather these times while also putting the big horses out of their misery?

As I wrote a couple of weeks back, "Methinks the better path here to rebuilding Detroit is most certainly to let suppliers with viable business models tap into some type of government aid to see themselves through the transition period when GM, Ford and/or Chrysler file for court protection from creditors." Still makes sense to me. What do you think?

- Jason Busch

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