The current slowdown in auto sales has put as many as one-third of North American automotive suppliers at risk of bankruptcy but should not claim any of the Big Three as victims, according to a
report issued Friday by Grant Thornton LLP's advisory and restructuring services group.
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The report said that parts suppliers at risk include those who are heavily reliant on supplying sport-utility vehicle and truck components and those located in North America or who are concentrated on domestic automakers. General Motors Corp. and Ford Motor Co. combined to lose $23 billion in the second quarter, including charges, as a consumer shift away from gas-guzzling large vehicles hit their bottom lines.
Despite their issues, Grant Thornton called bankruptcy concerns about GM and Ford "overblown." Kimberly Rodriguez, principal of the firm's automotive platform, said both companies have enough cash on hand to survive until 2010 when new, more fuel efficient products, should hit the showrooms.
A filing "would start a domino effect of bankruptcies throughout the supply base, and it would tank consumer confidence in their brands, even in markets like Asia, Europe and South America where they are profitable and growing," Rodriguez said. "The bankruptcy process carries too many risks, so they're going to have to look at all financing options available, including government loans, joint ventures, foreign investment and other financing in capital markets."
Private equity-backed Chrysler LLC is also not at risk, she said, because in a worst-case scenario the value of its assembly plants, retail network and other assets would prove tempting to a foreign buyer like Shanghai Automotive Industry Corp., Tata Motors Ltd. or Renault SA. The automaker is reportedly in talks about strengthening ties with Renault-affiliate Nissan Motor Co. - Lou Whiteman
See complete report
See Dealscape post on Chrysler's reported ties with Nissan
See Dealwatch: Autos
