It’s a mistake to assume that everything is hunky-dory between Japanese companies and their suppliers. In the Keiretsu structure, suppliers, while “independent” companies are bound to the banking part of the keiretsu and the customer. They can’t venture outside of the keiretsu pyramid without risking both a loss of credit and all their customers. Product design and cost are under the constant eye of the customer with constant pressure to improve quality and lower costs. As a result, the pressure is intense and profit margins are often exceptionally small. It’s actually a model of a corporate feudal system.

In fact, the current state of the relationship between domestic suppliers and the big 2.8 are the result of an inperfect attempt to replicate the keiretsu model. It has failed because the big 2.8 have focused primarily upon costs to the point of failing to consider the risks of having mission-critical suppliers go belly-up.

Life is good for Honda and Toyota and as a result, their suppliers are doing okay. But it’s not too much of a stretch to imagine Toyota and Honda facing tougher times ahead under which their suppliers could be facing bankuptcy as well.

Common sense really, but then again common sense isn’t common anymore.

So. Magna is hit on both sides of this problem, they support lower tier, probably by lending to them, and they in turn get hammered by detroit with downward spiraling prices and orders. and slowed payments. This is when there is no bankruptcy.

When there is, they get hit with write down of the amounts due them by lower tier, plus orders from upper tier snap to zero for affected product lines and then we stretch out collections from upper tier on past product.

The real problem is decades of bad product coming out of detroit. Reminds me of movie “on the beach” where doctor tells first dying evacuee that he is suffering from death, and the first to go; not everyone dies all at once at end of world. Magna will be among the last to go, they are strong, with worldwide ops. Plastech was among first, relying on Chrysler sales.

Now, that’s made you think, eh, Robert? ‘coz then Magna WOULD be one of the 2.801.

Of course, the fact that they even still might consider WANTING Chrysler and/or Jeep just absolutely proves that they DO inhabit the Twilight Zone.

na NA Na na, na NA Na na.

It’s short sighted and self-centered (and heck, it’s not THEIR government they are tinkering with), but it makes a kind of sense.

Bunter

As a supposedly healthy supplier, Magna does indeed stand to gain from this, but not if the D3 fail before they can switch. Asking for special bankruptcy rules would probably work in Magna’s favour

Did you miss it completely after you disembarked from the plane, when the white haired gentleman and his height-challenged sidekick welcomed you to Fantasy Island?