Checker Checks Out

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.