The bankruptcies of General Motors and Chrysler have added more uncertainty to an automotive industry reeling from precipitous
sales declines. The OEMs' troubles are already rippling through the parts supply chain, which could have significant consequences
for dealerships, the aftermarket and the auto manufacturers themselves when production increases.
PHOTO COURTESY: PETER GRIDLEY/GETTY IMAGES
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If major suppliers begin collapsing, the OEs will have a hard time finding parts once they're ready to ramp up production
again. Repairers and dealerships may also have trouble finding new OE or aftermarket parts, depending on how long the supply
base struggles.
Auto parts suppliers have been hit hard by the drop in auto sales, bankruptcy-related production slowdowns at GM and Chrysler,
tightening credit markets (which have deprived them of working capital) and dealership closings. Visteon and Metaldyne have
already filed for bankruptcy protection, and Lear and TRW Automotive Holdings are now haggling with creditors.
There has been some good news. In June, the Supreme Court allowed the Chrysler bankruptcy to move forward by lifting a stay
it had imposed on the sale of the company to Fiat and other investors. Had the Court stopped the sale, Chrysler would have
been liquidated, putting hundreds of suppliers at risk. Auto suppliers met with Congress and the Obama administration's Auto Task Force the same week, asking for the government to
guarantee $8 billion to $10 billion in loans so banks would lend to the suppliers. The Original Equipment Suppliers Association
and the Motor and Equipment Manufacturers Association (MEMA) were involved in the meetings.
Both GM and Chrysler have promised that "critical suppliers" will be paid as part of the bankruptcy restructuring, but that
designation could leave many Tier 2 and Tier 3 suppliers out in the cold—a situation that could ultimately impact Tier 1 suppliers
down the line. And GM has already indicated it plans to trim its supplier base by as much as 30%.
"Open receivables that had not been paid prior to the bankruptcy were accelerated by GM in May, but those were only to suppliers
that GM designated as critical," says Steve Handschuh, president and COO of the Automotive Aftermarket Suppliers Association
(AASA) and vice president of MEMA. "The balance of the supplier community is waiting to see what happens during bankruptcy
while all of this restructuring is taking place."
With questions remaining about exactly what Chrysler and GM will look after restructuring, and with suppliers struggling,
dealership parts managers have braced for shortages by stockpiling parts and, in the case of Chrysler dealers, buying up the
inventories of closed dealerships.
Some dealership parts managers are already feeling the pinch for certain models. According to Richard Garrison, a GM parts
manager and blogger ( http://agmpartsmanager.blogspot.com/), some dealers have had problems getting parts for GM's Duramax engines, as well as interior trim pieces.
"What used to take two to three days is taking a week to ten days now," Garrison says.
GM's decision to discontinue the Pontiac brand, and to sell off Hummer and Saturn (which is being purchased by the Penske
dealership chain) could also cause complications for parts managers.
"When GM drops a model, they drop support for it pretty quickly," Garrison says. "With Pontiac, you have to wonder how quickly
the parts will get scarce, especially for models like the G3, which was only out there a year."
Garrison says that his biggest concern will be getting trim pieces. "Mechanical parts are not a huge problem. We can get 99%
of them pretty easily through GM, salvage yards or the aftermarket," he says. "Trim's going to be the big issue."
According to Garrison, previously mothballed brands have posed support issues for dealerships, citing the Chevy SSR. "Just
a few years later you can't get parts for that thing," he says. "When that model was two years old, you couldn't get a lower
dash pad. And you still can't. I've had two on back-order for three years."
