BusinessWeek Online via Yahoo!
The pain just keeps coming for the U.S. auto industry. This time, Toledo [Ohio] parts maker Dana filed for Chapter 11 bankruptcy protection, raising fears that the company will be unable to pay its suppliers for parts and keep delivering axles, frame pieces, and other components to Ford and GM.
Part way through this article is a very interesting discussion on how other recent automotive suppliers managed to make their way through Chapter 11. A kind of how-it’s-done, in case anyone else plans to go the same route.
Before filing for Chapter 11 last fall, Delphi paid many of its suppliers well in advance, Fitzgerald says. Delphi also established a list of 140 key suppliers — those who would cause major problems to the supply chain if they had liquidity problems — and paid their pre-petition debt.
Then Delphi guaranteed to pay up to 70% of the pre-petition debt for its remaining suppliers over two years. “Delphi is the model,” says Fitzgerald. “They did a miraculous job of protecting their suppliers.”
If Dana does the same, it has a better chance of continuing to deliver products to key customers like Ford and GM without interruption.