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July 13, 2016

Supplier bankruptcy could disrupt GM assembly plants

Reports in the US suggest that a supplier to General Motors that filed for bankruptcy protection last week could lead to widespread disruption of production at GM plants in North America.

Reports in the US suggest that a supplier to General Motors that filed for bankruptcy protection last week could lead to widespread disruption of production at GM plants in North America.

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The Detroit Free Press (DFP) said that the Massachusetts-based supplier, Clark-Cutler-McDermott (CCM), supplies acoustic insulation and interior trim products for automobiles, textiles and other transportation manufacturers. The report said that GM is its largest customer and Clark-Cutler-McDermott is losing more than $30,000 a day — and more than $12 million since 2013 — partly because what GM pays for those components “usually decreases annually,” CEO James McDermott stated in a court filing.

Reports say GM has no other supplier for the parts CCM provided and any interruption in delivery of those parts would cost the automaker “millions of dollars per day per plant,” GM reportedly said in another court filing. GM reportedly said in court documents that even a one-day disruption to its supply of parts could force it to close North American plants and cease vehicle production.

The DFP reported that GM obtained a restraining order last month compelling CCM to continue supplying those items specified in its purchase orders with GM, but that order expired July 1. CCM filed for protection under Chapter 11 of federal bankruptcy law on July 7.

The Detroit News reported that CCM stopped producing parts for GM after shifts on Friday and laid off its workforce.

A hearing will be held today to determine the next steps. Reports say CCM wants to sell its business and that GM wants to take possession of the supplier’s tooling and inventory to ensure continuity of production.

The case reawakens fears that some automakers are again placing excessive pressure on suppliers to cut prices. In the 2000s, OEM demands for supplier price cuts in the US forced a number of high-profile supplier bankruptcies. Since then, automakers have said that they would rather avoid putting suppliers out of business and maintained that long-term collaborative relationships are in the best interests of suppliers and OEMs.

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Spot leading innovative companies with GlobalData’s Innovation Scorecard

Innovation remains a necessity in a disruptive ecosystem, as continuous innovation allows companies to adapt, evolve, and grow through disruption. Using our in-house alternative datasets, we are excited to launch GlobalData’s Innovation Scorecard. This scorecard will allow clients to rank 3,500+ companies on their innovation activity, impact, and disruptive potential across geography, sector, and theme. The scorecard provides a data-driven framework to rank leading companies on the potential of their intellectual property (IP) portfolio. GlobalData’s Innovation Scorecard focuses not only on the activity of innovation in the organization but also on its impact and disruptive potential using the 3I framework: Intensity, Impact, and Ingenuity. The tool helps clients to identify the most innovative companies that are disruptive leaders and challengers and can create alpha for their portfolio using the insights driven by 19+ high-value KPIs. Download our report to find out more about this innovative tool. Key findings derived from this tool include:
  • Alphabet, Tencent, and Qualcomm are the top three innovative companies in the last 10 years
  • The scorecard finds Technology & Communications and Pharma & Healthcare as the two main sectors driving innovation
  • Loreal placed as ‘Disruptive Leader’ in the Consumer sector, while Revlon has been identified as a traditional laggard
  • Companies such as Etsy and H&M are challenging retail ‘Disruptive Leaders’ Amazon and Walmart
by GlobalData
Enter your details here to receive your free Report.

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