General Motors will survive the current auto industry downturn without having to file for bankruptcy, but the number of auto industry suppliers could be cut in half, the chief executive of manufacturing advisory firm BBK has said.
Go deeper with GlobalData
“I don’t think they will file,” William Diehl told the Reuters Manufacturing Summit in Chicago.
“I think they will survive, and the question is, how will they get there? I am not an advocate of the filing, I think that is not the best way and I think they can accomplish it with the aid of government outside of Chapter 11.”
Diehl said he would not be surprised if the number of auto suppliers consolidated by half in the coming year. Suppliers created overcapacity when auto sales peaked at above 16m units a year, and capacity needs to be reduced to better reflect current reality, with as few as 10m vehicles sold this year.
US auto sales would eventually rebound to the 14m- 15m units range, but that recovery could take years, he added, according to a Reuters report.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalDataBBK has seen interest among private equity firms to lead the consolidation, but investors are cautious about jumping in too quickly.
“We’re already seeing what in the fourth quarter no one was talking about. What we’re seeing here, in the last even three weeks, is a lot of interest in the capital markets. There is going to be a lot of opportunity here in the manufacturing sector. We need to figure out how we play in it.”
Auto parts suppliers are the largest part of the US manufacturing base, and have been hit hard by the downturn in auto production and lack of access to credit. But government efforts to support big automakers like GM and Chrysler have not included aid for the suppliers, Diehl said.
The failure of suppliers could quickly affect other automakers, such as foreign transplants that manufacture in the United States, and customers in other industries, Diehl said.
Manufacturers’ prospects depend on the return of consumer confidence, but the companies that survive the downturn will come out stronger at the end, Diehl said.
“The auto industry is not going away. The manufacturing industry in the U.S. is not going away. We have great technology. We are in a right-sizing that has to happen and as we come out of that cycle the people that are going to survive should be well positioned for the up cycle if we can reduce capacity to meet demand today.”
