Plastech Chapt. 11 Shuts Four Chrysler Plants; Supplier Revolt to Follow?
Not to be alarmist (much), but TTAC has been saying for some time that the collapse of Detroit's domestic supply chain could force one or more of the automakers into bankruptcy. On Friday, Chrysler canceled its contract with Plastech Engineered Products (PEP) of Auburn Hills, MI. Plastech immediately filed for bankruptcy and stopped shipping parts to Chrysler. USA Today reports that a lack of plastic parts has forced the American automaker to suspend operations at four U.S. assembly plants: Sterling Heights, Mich. (Sebring and Avenger); Newark, Del. (Durango and Aspen); Toledo, Ohio (Nitro and Liberty); and Belvidere, Ill. (Caliber, Compass, Patriot). While Chrysler should be able to reestablish parts production (e.g. engine covers, grill panels, moldings, metal stampings, door panels, floor consoles), we hear that Chrysler's been slow paying all its suppliers. If suppliers see this move as a sign of things to come, they might reach the point where they demand cash up front– tipping Chrysler into bankruptcy. Watch this space.
More by Robert Farago
Comments
Join the conversation
Radimus has the gist of this, it's part of Cerberus's overall plan (notice that they cancelled the contract FIRST, even before securing a replacement). Cerberus's remains a venture (vulture) capital firm, first and foremost. Bankruptcy is most assuredly in the cards.
Don't feel TOO bad for Plastech.... The best suppliers have been rapidly diversifying their customer base. There is quite a lot of non-Big 2.8 production in North America these days, and contrary to popular belief, you don't have to be part of the keiretsu to get in on the business. All the non-US based manufacturers place lots of business to suppliers with plants and engineering centers in the U.S. (though the HQs may be elsewhere). Given the rapidly dwindling leverage of Big 2.8 purchasing departments, their tactics are getting more and more extreme, and less and less effective. But any supplier with a clue has been busy wooing some new OEMs, and those OEM's are open to the discussions.
Okay, here is another crazy theory. The leaders of these supply companies should have been looking for other sources of income for a long time now. That way, they could have been able to force better terms on their customers. They have obviously not done this. Why were their leaders not more diligent in their duties? Simple, they were "made". They did not fear because they have so much personal cash, and carefully constructed employment contracts, that they just did not care. Perhaps they looked at all the hardwork involved in diversifying their companies, and instead decided it was best to just keep their options open, or be ready to retire early. Seems to me that the lack of loyalty to the company has come full circle. Nowadays, NO ONE has any loyalty to a company. Not the guys on top or bottom. Given the lack of loyalty, I would think that the stockholders and creditors will need too start figuring out a way to make the top dogs more "bought in", or they will continue to take hits from these sorts of failures. I worked for a company that made sure that someone at the top was personally liable in the event that a client company went bankrupt or failed to pay our fees. It worked to. Wave of the future?