By Jeff Bennett Of DOW JONES NEWSWIRES DETROIT -(Dow Jones)- U.S. auto part suppliers, already strained financially by slumping demand, will take atypical steps in the coming weeks as they look to survive a brutal first quarter.
Suppliers will seek cash-on-delivery, attempt price increases and take such internal cost-cutting measurers as directing employees to work from home on Fridays, according to four supplier executives interviewed by Dow Jones Newswires.
Companies such as Visteon Corp. (VC), American Axle & Manufacturing Holding Corp. (AXL), Tenneco Inc. (TEN) and Lear Corp. (LEA) find themselves in a precarious spot after Ford Motor Co. (F), Chrysler LLC, General Motors Corp. (GM) and Toyota Motor Corp. (TM) all announced plans to drastically cut or idle production for the next month. Chrysler alone shut all 30 of its U.S. manufacturing facilities on Dec. 19 and won't re-open them until Jan. 19.
These last-minute plant idling announcements hit suppliers the hardest since most companies gear their output based on guidance provided by the auto makers weeks to months in advance. Analysts are expecting more companies, especially the smaller, privately held companies, to seek bankruptcy or just liquidate.
"We've been waiting for the floor to drop out and in January it will," said one supplier executive who asked not to be named because of the working relationships with the auto makers. "They make these production changes and then tell us to just deal with it."
Two executives said they are planning to stop production lines altogether and one has consolidated production from two plants into one. Business trips have also been canceled and employees told to use conference calls.
GM said it has already rebuffed requests for stricter payment terms from jittery parts makers. The auto maker has $6 billion to $8 billion in parts payments due at the start of January
"Suppliers, small ones and big ones, are suffering along with us," GM's Chief Financial Officer Fritz Henderson told Dow Jones Newswires Friday in an interview after the U.S. government announced plans to make available $17.4 billion in emergency funds to GM and Chrysler.
Most U.S. auto parts suppliers have gone through deep restructuring in recent years to deal with shrinking demand for their products and high costs. Parts manufacturers, several of which went through Chapter 11 reorganization, have sought to expand their customer and geographic footprints to reduce their reliance on the struggling Detroit auto makers.
The suppliers have been "quite responsible" in their cost cutting and production adjustment to date, said Kimberly Rodriguez, principal and global co-leader of Grant Thornton's automotive practice. "But how can you ask them to absorb these production volumes in the first quarter without liquidity support."
Rodriguez said she hopes the U.S government will lean on banks to free up the financing many of these companies need to continue operating. Without it, the suppliers will lean on the auto makers for financial help or be forced into bankruptcy.
Fitch Ratings on Monday cut its credit ratings on Tenneco, American Axle and ArvinMeritor Inc. (ARM) due to their exposure to GM. Fitch said the firms' ratings will be on watch for further downgrade "until the availability of longer-term federal assistance" for GM is clarified.
Visteon, Ford's former parts unit, had its issuer default rating cut to CC from CCC by Fitch, indicating that a default is probable. The rating remains on rating watch negative.
Shares of parts suppliers were down sharply Tuesday along with those of auto makers because of ongoing concerns about whether the federal bailout will prevent a wave of bankruptcies.
Shares of American Axle were down 8.1% at $2.17, while ArvinMeritor fell 6.4% to $2.94 and Lear was down 9% at $1.21. Shares of Visteon were down nearly 21% to 31 cents.
-By Jeff Bennett, Dow Jones Newswires; 248-204-5542; jeff.bennett@dowjones.com
(Sharon Terlep contributed to this report.)
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Publié le 23 Décembre 2008 Copyright © 2008 Dowjones