Chrysler’s Chapter 11 bankruptcy protection announcement last week may cause more supplier bankruptcies and will continue to drag down the domestic automaker’s image, the Society of Automotive Analysts said.

“This situation is not as easy as it sounds,” said Laurie Harbour-Felax, SAA vice president and president of Harbour-Felax Group.

“Thirty to 60 days in bankruptcy will be challenging for everyone involved. It will be devastating to the supply base that is already dealing with nine weeks of shutdown for many plants at GM and now have all Chrysler plants down for 30 to 60 days minimum.

Unfortunately, we will be seeing many supplier bankruptcies following this announcement.”

Chrysler follows dozens of suppliers that are either still in bankruptcy or have recently emerged. The impact on the supplier community is expected to be as devastating as the impact on the already tarnished image of the domestic auto industry.

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“There has been so much discussion over the past several weeks about the possibility of bankruptcy for either Chrysler or GM that the two companies’ images may have already reached a low point,” said Tom Libby, SAA president. “That an actual bankruptcy has occurred may not incur that much more damage. Even so, Chrysler and Fiat need to move as fast as possible to emerge from bankruptcy and begin to rebuild.”

“Even though Chrysler and Fiat have reached an agreement there is much work to do,” said Michael Robinet, SAA board member and vice president of Global Vehicle Forecasts, CSM Worldwide. “Chrysler must make substantive changes. Rationalisation is critical for success in this competitive marketplace. It must efficiently pare its bloated dealer base and merge products and technologies with Fiat.”

Rebecca Lindland, SAA board member and director of automotive research for North and South America, HIS Global Insight added: “Questions remain about Chrysler’s short-term viability, and what bankruptcy itself will do to Chrysler’s sales, which were already down more than 40% in the first quarter of 2009.

“This could further undermine Chrysler sales, which could mean a lift for domestic competitor Ford, in particular. This may be the primary reason that Chrysler has shuttered its production for the duration of the bankruptcy, a highly unexpected move that has many people wondering about the ability of its suppliers to survive.

“It is also a big risk in assuming that the bankruptcy will indeed take no more than 30-60 days; if a contentious court fight emerges, the bankruptcy could drag on for much longer than this.”

IHS Global Insight anticipates minimal changes to its total industry light-vehicle sales forecast of 9.5m units for 2009 as a result of the Chrysler announcement.

Chrysler shutdown hits suppliers

Supplier ratings under review