GM aftershocks

From the Globe and Mail, today. Someone is starting to think about parts suppliers now.

The impact of GM’s Chapter 11 filing has already started rippling through the supply network. Several companies, including Lear Corp., Johnson Controls Inc., TRW Automotive Holdings Corp. and Magna International Inc., are among GM’s largest creditors. Lear, which makes seats, is owed $45-million and Monday said it won’t make a semi-annual interest payment of $38-million that was due June 1.

From further down in the article:

The parts industry has been reeling for months. Canadian parts suppliers have seen their production fall an average of 40 per cent in the past year or so and roughly 10,000 jobs have vanished.

Last week alone two major U.S. parts makers, Visteon Corp. and Metaldyne Corp., filed for bankruptcy protection, joining five others this year.

Yesterday I reproduced a list of suppliers owed money by GM. The conclusion is that these people will lose much, if not all, of that money. There are roughly $400 million (US) owed to parts suppliers. I thought that number was low, but today’s Globe article claims that, in advance of the court proceedings, many parts suppliers were paid up until the end of April (very rare for automotive, it would be more usual to have 75 to 90 days outstanding).

So we are left to ponder cascade effects. Another quote from the article

JPMorgan Chase & Co. analyst Peter Acciavatti said in a recent note that based on debt-trading levels, Lear, American Axle & Manufacturing Holdings Inc., Cooper-Standard Automotive Inc., and at least one other company “appear to be on the verge of bankruptcy.

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