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Auto Suppliers Panic as Detroit Collapse Nears

Owed billions by GM and Chrysler, many near failure

By Rob Quinn, Newser Staff

Posted Dec 12, 2008 5:30 AM CST

(Newser) – The looming collapse of GM and Chrysler is sending shudders all the way down the supply chain, the New York Times reports. America's auto parts suppliers employ 600,000 people—more than twice as many as the Big Three automakers combined—but many suppliers are already stretched to the limit and will rapidly disappear if GM and Chrysler can't pay their bills.

If the suppliers go under, the effects would rapidly hit every auto plant in the US. Ford warns that the collapse of one of its rivals would affect its production within hours, but the credit squeeze means that suppliers can't carry cash-strapped Detroit any further. “In a normal recession, we could have gone to the capital markets, but the capital markets are closed to us,” said one major supply chief.

[Images (3)]

[Quotes (2)]

Dameon Hogan installs a dashboard into a Jeep Cherokee at an assembly plant in Detroit. Third-party suppliers make most of the 15,000 parts that go into a single car. (AP Photo/Paul Sancya )

Wanda McDuffie, of Lima, Ohio, inspects span rings, welds, and end yokes on new steering shafts at Dana Corporation's automotive parts manufacturing plant. (AP Photo by Kelli Cardinal)

Aaron Bogart, of Columbus Grove, Ohio, balances a driver shaft in the assembly line at Dana Corporation's automotive parts manufacturing plant in Lima, Ohio. (AP Photo by Kelli Cardinal)

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Everyone is stretched like a bungee cord. We are waiting to hit the bottom of the river and waiting to be slingshot back up, hopefully. - Tom Mullen, chief executive of a Michigan tool and die maker

I don’t think that suppliers will be able to get through the month without continued payments on their receivables.
- Neil De Koker, chief executive of Michigan-based trade group Original Equipment Suppliers Association

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Auto Suppliers Panic as Detroit Collapse Nears