Supplier Bankruptcy Risk Seen Still High in Auto Industry

Southfield, MI — September 8, 2008 — Lower industry volumes and the massive decline in truck and SUV sales have put as many as one-third of automotive suppliers in North America at risk of bankruptcy, according to the "Summer 2008 Automotive Industry Review" prepared by Grant Thornton Corporate Advisory and Restructuring Services.

At the same time, Grant Thornton believes that bankruptcy concerns for the Detroit Three domestic automakers are overblown, despite recent credit downgrades by the major debt rating agencies and news reports this week that the major U.S. auto companies will seek federal government loans to shore up their operations while they restructure.

"The magnitude of the decline in truck and SUV sales can be captured in two key events likely to unfold this year: the Toyota Camry ending the Ford F-Series' 26-year run as the best-selling vehicle line and Honda vaulting past truck-dependent Chrysler to become the number three automaker by annual U.S. sales," said Kimberly Rodriguez, principal of Grant Thornton Advisory Services Automotive Platform.

The report said at-risk suppliers feature one or more of the following qualities:

  • Heavily reliant on large SUV and truck volumes;
  • Located only in North America;
  • Concentrated on domestic OEM sales;
  • Have a significantly large SUV and truck platform part sourcing;
  • Exposed to increases in raw materials costs without ability to pass on to customer.

Chapter 11 Risk Low for OEMs

General Motors Ford

SAIC (Shanghai Automotive Industry Corp.) Tata Renault

Double-digit Declines in Dealer Ranks Possible