Plastech R.I.P.
How does a company with $1.3b in 2007 sales disappear by the second quarter of 2008? By trying to supply parts for the D3. The Detroit News reports that bankrupt parts supplier Plastech is extinct. The company will sell its manufacturing operations to Johnson Controls (JCI) and auction off the rest. Plastech will close plants in Ontario, Ohio, Indiana, Tennessee, Louisiana and Michigan, laying off some 1500 employees. Global Insight analyst Aaron Bragman says The Big 2.8 are "breathing a sigh of relief" at the decision: "they will be much happier to deal with JCI over Plastech." As to who will scarf-up Plastech's assets, Bragman expects a "Chinese or Russian buyer." "The root cause of these problems," says IRN's Merkle, "is that [the Big 2.8] will take a company out of business to squeeze 3 or 4 percent out of the price rather than looking at long-term interests." Look for more short term thinking as Chrysler works to slice 25 percent out of its supplier costs.
More by Edward Niedermeyer
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If you want to find likely companies to short, just see who does their work primarily in non-right to work states.
I think what is happening at Plastech is foreshadowing what will happen to Chrysler, just like in a novel.
Maybe Playskool could use some plastics production technology. Oh, wait. Theirs is better than Plastech's anyway. Never mind.
Hmmm, wife just interviewed someone from Magna who works in the division that supplies components to the big 2.8. I wonder if they think there is going to be a dramatic slowdown in business there? You think?