Some GM Suppliers Mull Shipment Halt - Sources
June 01 2009 - 10:54AM
Dow Jones News
Some of largest parts suppliers to General Motor Corp. (GM) may
halt shipments temporarily following its bankruptcy filing on
Monday.
Five suppliers, which make a variety of parts used in GM cars
and pickup trucks, are considering stopping shipments until GM
receives court confirmation to continue payments, according to six
people interviewed by Dow Jones Newswires. They asked that their
names not to be used since they don't officially speak for the
companies.
"Whether we go ahead and cancel product flow or not is something
we are still examining, but if GM assembly plants start going down
you will know why," said one supplier source. "We don't want to do
it, but we have to make sure that we are getting paid."
Any product disruption could force the closure of a GM assembly
plant. GM, unlike Chrysler LLC which filed for bankruptcy on April
30, is continuing to operate some of its plants during its
bankruptcy proceedings.
GM spokesman Dan Flores declined comment Monday. GM has said
that intends to quickly seek court permission to continue paying
its parts makers. A date has yet to be set.
The auto maker is expected to designate "essential" suppliers in
a court filing. Those suppliers would be funded from the additional
government funds being supplied by the U.S. and Canada.
GM's filing comes as many suppliers prepare their own bankruptcy
strategies or are gearing up to furlough employees for a longer
period of time, the people said.
"We have cut all we can so the only thing left is to tell our
people to stay home and keep our factories dark," someone at
another supplier said. "We have plants that are now going to be
down for the entire month of June."
Meanwhile, the financial stress intensified on some of the
already struggling auto parts makers.
Lear Corp. (LEA), a maker of automotive seats, said Monday it
won't make a semi-annual interest payment of about $38 million due
on June 1. The company said it will utilize its 30-day grace period
while it continues discussions regarding a capital restructuring
with its lenders and others.
Other companies that are expected to be hit by GM's filing
include American Axle & Manufacturing Holdings Inc. (AXL),
Shiloh industries Inc., Tenneco Inc. (TEN), TRW Automotive Holdings
Corp. (TRW) and ArvinMeritor Inc. (ARM).
Visteon Corp. (VSTN) and Metaldyne Corp., two auto parts makers,
filed for bankruptcy on Thursday.
CSM Worldwide automotive analyst Jim Gillette said about 50% of
the U.S. suppliers have equity and can survive.
"There is, however, the bottom 25% that are in deep trouble," he
said. "Half of those are basket cases and the only solution will be
liquidation or being acquired by another company."
Gillette said a "thinning out" of the supply capacity is needed
in the U.S. automotive sector.
"You can't have 15 interior trim suppliers bidding on the same
job and undercutting each other just to win the business," he said.
"The auto makers need to downsize and so does the supplier
industry."
The U.S. Treasury Department last month provided $3.5 billion in
supplier aid to GM and Chrysler. GM and Chrysler are using the
money to stabilize payments to suppliers.
Suppliers have asked for an additional $8 billion which is being
pushed by Michigan Gov. Jennifer Granholm and Sen. Debbie Stabenow,
D-Mich.
-By Jeff Bennett, Dow Jones Newswires;
jeff.bennett@dowjones.com; 248-204-5542