We’re starting to see rumblings of the cascade failure I wrote about previously.
Suppliers may go bankrupt because of the bankruptcy filings above. Suppliers may hold off on shipping parts without assurances they aren’t going to lose money in the bankruptcy. Either action idles assembly plants, cutting off the cash flow the car company needs to emerge from bankruptcy.
Yesterday, the Wall Street Journal wrote:
Troubled U.S. auto-parts suppliers were dealt a new blow Thursday when Chrysler LLC said it will temporarily idle most of its manufacturing during the bankruptcy process starting Monday.
Along with lost production, suppliers are at risk of having their payments from Chrysler disrupted as the auto maker’s finances are managed in bankruptcy court.
Two suppliers on Thursday refused to ship parts to Chrysler, forcing the auto maker to close a Warren, Mich., factory ahead of the planned shutdown, Vice Chairman Tom LaSorda said in a conference call with reporters.
Chrysler’s move threatens to push many suppliers closer to bankruptcy, and could ultimately lead to disruption in the flow of parts to healthier auto makers
I’m glad someone is paying attention to this danger.
Links: Chrysler Shutdown Could Push Parts Makers to the Brink – WSJ.com.