Thirty percent of supplier companies are six months or less from going out of business or going into Chapter 11 bankruptcies, keynote speaker Craig Fitzgerald, partner in the Plante & Moran accounting firm, told the annual strategic planning summit conducted by the Society of Automotive Analysts (SAA) in Detroit on Tuesday.
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According to The Car Connection (TCC) website, Fitzgerald, whose firm has more than 400 supplier clients, cited the cost-price squeeze flowing from Big Three automakers as an increasingly difficult challenge for these companies.
He reportedly said he expected General Motors, the United Auto Workers and top-volume supplier Delphi Corp to reach an eventual cost-relief agreement, averting a Delphi bankruptcy petition, “but among smaller suppliers, there’ll be a lot of bankruptcies in the next three to five years.”
According to TCC’s report, Fitzgerald added that steadily increasing healthcare and materials costs, the Big Three’s overcapacity, a surfeit of brands and lack of “gotta-have” models are problems for automakers and suppliers alike.
The veteran auto industry accountant reportedly did hold out hope for the domestic industry’s salvation, however, voicing praise for the turnarounds led at Chrysler Group by Dieter Zetsche and at Nissan by Carlos Ghosn.
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By GlobalData“What Carlos and Dieter did can be done at GM and Ford, which have the ability to do the same,” Fitzgerald said, according to The Car Connection. “But I seriously doubt they have the will to do so – and that’s why the industry is in such serious trouble.”
TCC noted that Michigan-based production consultant Laurie Harbour-Felax told the Automotive Industry Action Group (AIAG) meeting on Monday in Detroit that suppliers that fail to adopt lean and flexible manufacturing techniques are asking for failures in the changing automaking world.
The report noted that the keynote speaker for that conference, incoming CEO of Chrysler Group Thomas LaSorda, drew praise from SAA panelists on Tuesday for supplier upgrading initiatives which include the unique joint venture with two key Jeep suppliers inside an assembly plant in Toledo, Ohio.
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