US Auto & Truck

Facing an Uncertain Future - Auto Suppliers Brace for Tough Times Ahead

It must be tough being an American based auto supplier these days. On the one hand the economy is going through a difficult patch forcing suppliers to lay off workers and cut back on capital plans. Yet, on the other hand current problems could become much worse as several significant customers are expected to scale back their businesses, perhaps even shutting down altogether.

With General Motors Corporation, Chrysler LLC, and the Ford Motor Company each struggling for survival and awaiting government assistance in the form of low cost loans, auto suppliers are finding themselves in a quandary - if Detroit's three major automakers go bankrupt, what will this do to their businesses? Importantly, will these same auto suppliers be able to weather the storm to continue supplying parts for the non-union automakers whose factories dot the US south?

According to a recently published article in the Wall Street Journal, auto supply companies are preparing for the worst. Many have already cut back on production, laid off workers, and have postponed capital improvement projects in a bid to conserve cash. Employing some 730,000 people, the nation's auto suppliers provide parts for a variety of American built cars including vehicles built for Toyota, Honda, BMW, Mercedes, Subaru, Hyundai and other foreign owned companies.

If even just one of the Big Three companies were to go under, the entire supply chain could be disrupted, possibly forcing massive layoffs and causing the bankruptcy of those suppliers who would lose business and cash. In the meantime, many companies are conserving cash by cutting back on the work week, extending seasonal shut downs, and implementing across the board salary reductions in a bid to stay afloat.

Many suppliers would love to cut their dependency on GM, Ford and Chrysler but with the entire market being down, that won't be an easy task. Even Toyota and Honda - considered by many to be the healthiest automakers in the world - have cut back production in a bid to save cash. With foreign automakers conserving money, the chances of shifting some of their business away from the Detroit Three is minimal at least for now.

How will all of this shake out? No one is certain. If the market has yet to hit bottom then additional bankruptcies of smaller auto parts suppliers is likely to occur and the probability of the collapse of one of the three Detroit automakers increases. In the end, the US car market will likely be much different with fewer manufacturers building cars and even fewer companies supplying them with parts.

Copyright 2008-2012 -- Matthew C. Keegan is the owner of a successful writing and marketing business based in North Carolina, USA. He manages several websites and is a contributing writer for Andy's Auto Sport, a retailer of quality Lamdo doors and ground effects.