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More Auto Supplier Bankruptcy Expected

Posted By admin || 16-Jun-2009

According to an article in the Star-Telegram, more auto suppliers may be headed to bankruptcy after GM and Chrysler temporarily close factories for three months.

The article said:

Now, though, many are at risk of trouble again with GM and Chrysler temporarily shutting down some factories for up to three months due to growing inventories. If the factories aren't running, suppliers have no income, and there's a 45-day lag between when they ship parts and when they are paid again.

Forty-five days of no income could push more of the already cash-strapped auto supply companies into bankruptcy. Visteon Corp. and Metaldyne Corp. have already have filed for Chapter 11 bankruptcy and some analysts predict that Lear Corp. may also file bankruptcy as automaker demand for auto part decline due to decreased car sales.

Auto sales have already dropped from a peak of 17 million cars sold to a mere 9 million last year and car sales volume is not expected to increase significantly due to the high number of job losses . At least in foreseeable future, automakers cannot sustain their previous demand for auto parts. This could mean more bankruptcies for auto suppliers who depend on the auto industry's high demand.

And with over 500,000 workers employed directly in the auto supply industry, job losses and bankruptcy in this industry could send our unemployment rate soaring even higher.

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