Checker Checks Out

by Ronnie Schreiber

Published: January 20th, 2009

Even before the debate over federal loans to the domestic automakers, a number of TTAC editorials pointed out that a bankruptcy by one of the The Big Three would lead to a C11 by the remaining two. Bankruptcy allows the abrogation of labor contracts; an automaker in Ch. 11 proceedings would be able to lower labor costs significantly, putting the other car makers at a competitive disadvantage. [ED: one of Ford’s SEC filing made that very point.] Parts provider Checker (no cabs since 1982) tried to negotiate wage concessions from its employees’ labor union. But even with bankruptcy hanging over their heads, the union wouldn’t make the needed concessions. And so Checker has become the eighth major US auto supplier that’s filed for bankruptcy in the past year.

The 87-year-old company has 246 employees, with assets of $24.5m and liabilities of $21.8m. In 2007, Checker posted net sales of $63.4m. The bankruptcy filing cited both competitive pressures re: labor costs and its customers’ decreased market shares. Checker sells stampings and welded assemblies to all three of the domestic automakers; the domestics have lost about five percent market share from 2007 to 2008. I suspect that the 35 percent decline in overall sales for their customers is a greater factor in Checker’s troubles than their decreased market share.

Critics of government assistance to the domestic automakers called its supporters chicken littles for predicting a cascade of supplier bankruptcies should any of the domestics be forced into Chapter 11 or 7. With at least a third of domestic auto suppliers already financially distressed, it may not even take a failure of one of the large automakers to start that cascade.

The same day that Checker filed, Lansing based automotive electronics supplier May & Scofield closed its doors after Bank of America foreclosed on its U.S. assets.

Ronnie Schreiber

Ronnie Schreiber edits Cars In Depth, the original 3D car site.

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2 of 14 comments

Obbop on Jan 21, 2009

I can envision many viewpoints and opinions regarding unions and worker's wages and management needing to create a profit and a multitude of other viewpoints and negatives and positives but looking at the economy and society etcetera at a huge macro-level and to condense a big bunch of stuff into one general subjective declarative rhetorical statement/question.... Why not just have the vast majority of Americans work and live at a a 2nd- or even 3rd-world level?

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TireGuy on Jan 21, 2009
Patrickj : January 20th, 2009 at 9:22 pm Their earlier choices have been very poor, but the choice of the UAW not to concede right now may be rational. If a company is beyond help, drowning them sooner rather than later leaves something in the pot to finance retirement plans and severance. That is giving up on the chance of turning around a company.

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