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Auto Parts Maker Files Chapter 11 Bankruptcy

Posted By admin || 7-Jul-2009

According to an article in the Star-Telegram, struggling automotive parts supplier Lear Corp. has filed for Chapter 11 bankruptcy. Lear which had $13.6 billion in sales in 2008 is a key automotive parts supplier for General Motors and Ford Motor Co. Of course GM has filed bankruptcy and Ford is still struggling financially despite avoiding a bankruptcy filing. Lear is the first major automotive parts maker to seek bankruptcy protection since Visteon Corp., filed for Chapter 11 bankruptcy in May 2009.

The article said:

"Parts suppliers have been hammered by the recession as consumers continue to shun new car purchases and automakers slash production. Lear's troubles stem partly from its heavy dependence on the slumping North American and European auto markets, with 36 percent of its sales coming from North America and 49 percent coming from Europe."

The bankruptcy filing of Lear is not much of a surprise. All three U.S. automakers have been hit hard by the recession, experiencing a huge slump in car sales. All three had to reduce their car production levels to avoid total collapse. Automotive parts makers such as Lear are heavily dependent on the high volume needs to GM, Ford and of course Chrysler.

With little wiggle room financially, the slump in automotive parts demand has devastated the automotive parts industry, affecting everything from the value of these companies to the number of job losses they've been forced to implement. If the recession continues and consumers remain fearful about buying new cars we may see more automotive parts companies file bankruptcy in the coming year or two.

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