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Auto Suppliers Next To Go Bankrupt?

Posted By admin || 14-May-2009

According to an article in the Star-Telegram, auto suppliers are appealing to the government for help as many face the prospect of closure (or bankruptcy) as automakers struggle to survive.

The article said:

Several suppliers said they would be left vulnerable by Chrysler's decision to idle all of its plants in the U.S. until it completes its sale to Italian automaker Fiat Group SpA. GM, which faces a June 1 deadline to restructure or file for bankruptcy, has already announced plant closings and extended shutdowns this summer.

"A recovery plan for Chrysler and GM is simply not viable unless it takes into account the entire automotive supply chain," said Chris Norch, president of Denison Industries, a metal casting company that employs 125 workers in Denison, Texas.

The government has already launched a $5 billion financing support program to provide government guarantees for financing auto parts; but the program is designed to mostly help the larger auto suppliers. That means many smaller auto suppliers who often employ 100 - 200 workers will most likely face the prospect of bankruptcy if another automaker files Chapter 11 bankruptcy and/or cuts production. If that happens, many workers such as those working for the Texas auto supplier mentioned above will most likely face job losses.  If those unemployed workers aren't able to find new employment quickly we could be looking at a new round of foreclosures and bankruptcies fueled by the auto industry contraction.

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