Vehicle and parts manufacturing jobs are concentrated in the Midwest and the South. Collectively, Michigan, Ohio, Indiana, Tennessee and Illinois have more than half the industry's jobs. Other states with sizable numbers include Kentucky, New York, California, Pennsylvania and North Carolina, according to the Bureau of Labor Statistics.
With such a wide base of suppliers, the effects of a big automaker failure could be felt throughout the country. "Suppliers have already been in a recession for several years now," said William Diehl, chief executive of BBK. He pointed out that many of the problems that have afflicted Ford, GM and Chrysler -- high gas prices, frozen credit markets and plummeting consumer confidence -- affect suppliers as well.
With up to 50% of suppliers "distressed" because of lack of access to new sources of financing and decreased sales, Diehl predicts a "huge increase in supplier liquidations and bankruptcy filings very soon."
That would create blow-back for automakers. In February, Plastech Engineered Products Inc. filed for bankruptcy protection. The Dearborn, Mich., molded plastic parts maker employed 7,600 people and had plants in eight states. Last year, it sold $1.4 billion worth of engine covers, grill panels, floor consoles and the like to carmakers, including $200 million in parts to Chrysler. When Plastech closed up shop, Chrysler was forced to immediately idle four plants, sending 10,500 employees home until the automaker could find a new supplier.
Most large suppliers sell parts to all three American automakers, plus European and Asian companies such as Toyota Motor Corp. that have plants in the U.S. So the failure of certain suppliers could cut off production beyond the Big Three.
"There are dozens and dozens of tiny suppliers that, if they fail, could shut down GM, Ford or even Honda," said Craig Fitzgerald of accounting and advisory firm Plante Moran. That possibility was highlighted in a recent report by the Center for Automotive Research, which predicted that the failure of a major carmaker could set off a spiraling chain of failures claiming 2.5 million jobs within a year.
Long the silent partners in the automotive world, suppliers are beginning to make noise to draw attention to their financial straits.
"Our national security is at stake," Tim Leuliette, chief executive of Dura Automotive Systems, wrote in a letter to President Bush and Treasury Secretary Henry M. Paulson on Thursday, urging government aid for GM, Ford and Chrysler.
Today, the industry's two largest trade groups are expected to send a letter to Congress, signed by nearly 100 companies, supporting federal help to automakers -- but urging that the money be spread around.
"Aid is necessary, but it should be provided for suppliers also," said Ann Wilson, senior vice president for government affairs at the Motor and Equipment Manufacturers Assn.
Even with significant help from Washington, some worry that depressed sales of vehicles will continue to push suppliers out of business.
"These companies are in a position where they can't take any more hits," said Kimberly Rodriguez, a principal in the automotive practice at consulting firm Grant Thornton. "A government bailout doesn't affect sales, and sales is what this industry needs."
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richard.simon@latimes.com
