GM's First Challenge: Navigating The Battered Supplier Sector
10 Juillet 2009 - 6:36PM
Dow Jones News
One of the first hurdles General Motors Corp. (GMGMQ) faces
after exiting bankruptcy Friday will be dealing with a battered
supplier base littered with companies that are either in or close
to filing for Chapter 11.
Parts companies are the backbone of the automotive industry
around which the daily operation of assembly cars and pickup trucks
works. Any disruption in the flow of parts from any supplier can
shut down assembly plants within a matter of hours.
GM, which is planning to resume production as General Motors Co.
next week, surprised many industry analysts by exiting
reorganization in 40 days. But the quick exit brings no real relief
for its suppliers who have been cash-strapped for months amid plant
shutdowns by GM and Chrysler Group LLC.
Chrysler alone kept its plants down for almost two months during
its bankruptcy reorganization.
The new GM enters an environment where eight major suppliers
have filed for bankruptcy. Lear Corp. (LEAR), one of GM's biggest
automotive seat and interiors providers, filed for Chapter 11
earlier this week.
"Supplier health will be the wild card for the next 90 days, not
only for GM but all of the auto makers," said Mike Robinet, vice
president of global vehicle forecasts for CSM Worldwide.
"They are going to have to keep watch on them. If there is any
good news, the quick resolution by GM and Chrysler may help to
reduce the trepidation in the capital markets about the auto
industry."
Ford Motor Co. (F), which hasn't sought bankruptcy, sends teams
of financial advisors and engineers to multiple suppliers weekly to
help keep their operations running. Ford has also provided funding
to some of its suppliers including Visteon Corp. (VSTN)
"I think many suppliers have adapted quite well to a difficult
environment with very aggressive plans to exit bankruptcy
themselves and continue to be world class suppliers," GM Chief
Executive Officer Fritz Henderson said Friday. "Our biggest
challenge from a supply base continues to be supporting Delphi
Corp. in their emergence from bankruptcy."
Bids to buy Delphi's assets are due Friday. The front-runner is
considered the California equity firm Platinum Equity LLC. Platinum
negotiated with Delphi, GM and the Obama administration to buy the
majority of Delphi for $3.6 billion. U.S. Bankruptcy Judge Robert
Drain ruled that there must be a formal bidding process with all
offers due Friday.
While GM may be concentrating on Delphi, it also faces another
potential problem from American Axle & Manufacturing Holding
Corp. (AXL). The company, which equips almost all of GM's pickup
trucks with axles, received a waiver on loan terms earlier this
week and has until July 30 to renegotiate its terms. The supplier
had about $280 million in cash as of June 30.
American Axle alone shutdown 29 of GM's assembly, stamping and
transmission facilities last year when workers walked off the job
Feb. 26 over a wage and benefit dispute. GM shut its first plant
about 24-hours after the strike began.
-By Jeff Bennett; jeff.bennett@dowjones.com; 248-204-5542