Half of US auto parts manufacturers may file for bankruptcy protection

"American car consulting firm AT Kearney has issued an early warning that more than half of US auto parts manufacturers may file for bankruptcy protection this year, and at least 1 million employees are unemployed."

US government 5 billion emergency auto parts companies
Less than two weeks after the US government approved GM's second rescue fund, the US Treasury Department last year promised to provide auto parts companies with about $5 billion in financing support. At the same time, AT Kearney, an American automotive consultancy, issued an early warning that more than half of US auto parts manufacturers may file for bankruptcy protection this year, and at least 1 million employees are unemployed.

Precarious
According to AT Kearney's research, US auto parts suppliers are suffering from enemies: on the one hand, upstream automakers are cutting production; on the other hand, downstream companion companies are becoming more vulnerable. AT Kearney partner Harvey said: "Without government financial assistance, more than 50% of auto parts suppliers will go bankrupt."

AT Kearney estimates that about 35% of auto parts companies will go bankrupt, and a more pessimistic estimate is that more than 70% of auto parts suppliers will be liquidated. In either case, AT Kearney believes that the risk of bankruptcy of auto parts companies increased in 2010.

“Unlike the previous economic crisis, auto parts suppliers cannot use the funds obtained from company owners or capital markets to make up for the cash gap in their operations. In addition, credit insurance companies are withdrawing from deposit insurance business, and enterprises cannot realize working capital. Management,” said Thomas Kastele, managing director of Rothschild Investment Bank. “Many auto parts suppliers are asking their customers to use liquidity to pay, but not everyone can do that.”

In fact, not only in the United States, the financial situation of European auto parts suppliers is in jeopardy. According to forecasts released by Roland Berger International Management Consulting last week, the global automotive supplier's profit margin will reach an all-time low in 2009, and the EBIT margin will be reduced to about zero (2008 is 3%, 2007 is 5.4%).

Government shot
According to US media reports, the $5 billion financing plan is expected to take several weeks to begin, and will be supported by the US government's assistance programs for General Motors and Chrysler. The assistance is also targeted at the supply of these two major auto giants. Business. The plan will ensure that no matter what happens to the two major auto giants, suppliers will receive payment for the delivered product.

The U.S. Treasury Department also said that auto parts suppliers participating in the program can also sell accounts receivable to the government at a moderate discount to obtain liquidity and reverse the current tightening of credit in the entire supplier industry.

The US Treasury’s move is also helpless. Zhang Boshun, secretary general of the China Automobile Association's Market Trade Committee, said, "If GM or Chrysler goes bankrupt, the payment to the parts suppliers may not be paid, and these companies will suffer a lot."

The US government’s current assistance to the auto industry can be described as “all-round”. General Motors and Chrysler have received a $17.4 billion loan from the government at the end of last year, and are awaiting a government approval of a second $22 billion loan on March 31. However, this huge sum seems to be not enough. US President Barack Obama’s chief automotive consultant Steven Rottner said on March 20: “The two companies need to support funds that are significantly higher than their own requests, and I cannot deny this.”

Complex mentality
In the current "vigorous" campaign to save the auto industry, Ford Motor has neither applied for government aid, nor said it does not participate in the assistance activities for parts suppliers.

"Ford is trying not to ask for money from the US government. GM and Chrysler are also trying not to pay more because there are many conditions for US government assistance." Associate Professor of International Finance, School of Finance, Shanghai University of Finance and Economics, Tan Ruyong 3 In an interview with reporters on the 21st of the month, he said: "The government will participate in corporate management, and even the trend of nationalization. The enterprise is not willing to see this situation. There is no way to ask the government for assistance."

If you don't ask the government for assistance, how can you save yourself? Thomas Kastele prescribes prescriptions for CEOs and CFOs in automotive companies: first, to ensure the liquidity of short-term funds, and secondly to restructure the operating structure to reduce excess productivity in the market. There are many market segments in the automotive industry, and there is a large excess of productivity. This crisis provides an excellent opportunity for auto companies that are willing to take the initiative to implement enterprise integration and restructuring.